Leadership

Renegotiating in Hard Times

By Peter Galuszka

Updated on: January 23, 2009 / 2:41 PM EST / MoneyWatch

In these deeply recessionary times, everything is up for renegotiation.

Businesses, especially small ones, are being hit with such severe credit limits and requirements, usually unfairly, so just about anything is on the table regarding suppliers, vendors, wholesalers and so on.

Time-worn adages that a man's or woman's word is his or her bond is subject to review. "Most of us grew up knowing that once you agree to something, you don't back out of it," Bill Bartmann, an Oklahoma business consultant, told the Wall Street Journal. "That rule doesn't apply any more."

A few examples:

Cash-rich companies are able to do things others aren't, such as renegotiate leases for warehouse storage space.
Buyers who pay within a few days of delivery can get discounts of 1 to 5 percent.
Business executives who have good, solid records can entrench for harder times during the rest of 2009 by asking for across-the-board discounts from vendors. If they have good reputations and pay on time, they may be surprised what others are willing to do.
Some companies have worked out deals whereby a company in the same industry will take on some of the firm's employees giving it a cost savings in exchange for becoming that firm's sole supplier.

Unfortunately, many CEOs can't persuade banks to get back to normal lending. With many financial institutions these days, it doesn't matter how good your credit record is. Particularly notorious are business credit card lenders who have been beating up on routine, good customers because they are panicky about what else the recession will bring.

Not only is that behavior unfair and irrational, it will push diminished companies to find other ways of financing. When good times return, the credit card lenders might find that all their junk mail marketing for new cards goes ignored.