The VPN Negotiation Method

Before I was in Procurement I spent 10+ years in various Buying roles. I developed my VPN method which has served me brilliantly in every negotiation since.

In brief

V = Vision

Most common ground is found some time away in the future. Align on that long-term vision, work back from that and both parties will be determined to make it work.

P = Principles

Align the principles before you dive into the numbers. What are the three big things both parties need to achieve from the deal?Agree they are reasonable (challenge or seek to understand any that are not). Lay the foundations for agreement before you build any proposal.

N = Numbers.

I’m not talking the actual figures/ $values yet. But apples for apples alignment on the numbers that will be important for both sides.- length of term- current volumes- reporting metrics - predicted volumes Once you have a VPN in place, negotiating the actual deal will be painless. I promise. Negotiation is not one single thing. It’s the aggregation of many things done extremely well.

The VPN method in detail

This has worked wonders for me in every single negotiation I’ve led, since I developed the approach in 2005.

I’ve never hit major roadblocks since, have negotiated multi million pound deals, saved business millions year on year and developed strong strategic partnerships with the likes of Coca Cola, GlaxoSmithKline, Muller, Microsoft to name a few.

Here’s how if works and here’s how to use it to your own advantage:

V = Vision

Chris Voss, best selling author of ‘Never Split the Difference’ and ex US hostage negotiator, is one of the best out there.

In his interview with Lex Fridman earlier this year, Chris explains this brilliantly. You can watch and listen to the whole interview on Youtube here. Also available on Spotify.

The key point being that common ground is often difficult to find in the short term with an adversary or where you may be in a fall out position.

But when you begin to discuss a vision for the future, it’s far easier to find some common ground.

I’ll put this in really simple terms.

Imagine you’re negotiating with a child who doesn’t want to do his homework. Its’s not easy convincing him that the next hour sat in front of books or the computer will be valuable to him.

Now imagine asking him the question, “what grade do you want to achieve when you graduate”? He’s far more likely to align with your perspective and see the purpose in knuckling down.

Push that to an even longer-term vision, “what do you want to be when you grow up” / these are the grades you’ll need to have that option, and the child will be far more motivated and aligned with your perspective.

The analogy is limited of course.

In the business world, rarely does the relationship take on an ‘adult’ / ‘child’ dimension.

But the way it works is the same.

Here’s a checklist of questions to ask when your approaching a negotiation, and that will likely find common ground quickly.

1. “What are your growth ambitions for next year?”

2. “Where do we feature in your roadmap for next year?”

3. “Where would you like to see this partnership three years from now?”

4. “What are the greatest obstacles you see to achieving that success?”

5. “If we get through this negotiation, what do you then see us focusing on that we can win together?”

P = Principles

I’m not talking moral principles or core values here (although both play a part when it comes to delivering a reasonable deal).

It’s the key principles of the negotiation you are aligning.

I just delivered this ahead of a negotiation last Thursday. It’s the core elements of an agreement that both parties believe are fair and reasonable but that are important to one or both sides.

For example, your core negotiation principles could be:

• A year on year increase that doesn’t exceed inflation

• A rebate mechanism that rewards volume growth

• A length of term that offers the right level of stability to enable forward planning

• Conversely flexibility to exit the deal quickly with a termination for convenience clauses.

• A service credit mechanism to protect the business if there is downtime (Saas) or something goes wrong

The list can be endless but I strongly suggest picking the top 3. The rest can be ironed out later on in the detailed proposal stage or when the contract is fine tuned.

The reason I suggest a top 3 is that the purpose of outlining the principles is to quickly address any elephants in the room.

If something feels unreasonable for example, this is your chance to challenge or seek further understanding.

DO NOT move into proposal (detail) stage until you’ve aligned those core principles. Get a verbal commitment from both sides that each of the top 3 principles are fair and reasonable.

Then move into…

N = Numbers

Note - I’m not talking actual deal details yet.

My VPN method is a way of reaching alignment ahead of getting into any proposals.

Numbers are so often the route of misalignment, for no other reason than there’s a misinterpretation that scuppers understanding of what’s needed.

Sometimes there’s even an inaccuracy that causes one party to feel a deal proposal is reasonable despite the fact it is way off the other person’s expectations.

It’s crucial both parties have a common understanding of the numbers that matter and that the data being used is the same for both sides.

Here’s a checklist of the key questions to ask before either side develops a proposal

1. What is our common understanding of the volumes this year?

2. What is our common understanding of the predicted forecast for next year?"

3. What is our growth ambition for next year?

4. Which metrics/ KPIs are most important for this deal?

5. What charging mechanism works best for us? (e.g. fixed fee, variable fee, per unit price, price per hours etc…)

How do you kick off with the VPN method?

Do not pass go until you’ve met with the other party to agree the VPN.

I always advocate one quick 15-30 min meeting (involve stakeholders at this point too to help verify and validate).

Do not finish the meeting until you’ve got agreement on all elements of the VPN.

Then follow up in writing to confirm the VPN ahead of any proposal being made.

Note - this method works just as well if you are on the sales side as it does on the buying side.

Good Luck in your next negotiation! (as if luck ever had anything to do with it!)