The Chutzpah of "Commercial Terms"
Ask any fresh engineer who wants to make it in Sales & Marketing, his or her 'opinion' on Commercial Terms. And the chances are there that he or she will look wary all of a sudden. A look which without saying anything conveys all the ridicule in the world on your chutzpah. When I first started working, my General Manager (a gentleman indeed) tried to explain it to me. He said "Ok-imagine you are in this restaurant and you want to have some fried chicken, the chicken is the technical part and the bill is the commercial part"! Do you understand? Well I didn't -I thought what's engineering has to do with a chicken tangri kebab. But I said "right sir.. I do" .Mr Ghosh looked skeptical but left it at that.
Today if he asks me I would say " Commercial Terms! It's the all in all of what I do" for a living. (But unfortunately, it appears that he has gone to never never land-so my repartee will have to wait)
Have you ever come across the word "techno-commercial"? You must have. "Commercial terms" is the commercial part of your proposal, quotation, offer, Tender etc. which is equally important as the technical, if not more so.
Let us suppose that you have talked in detail with the decision maker and both of you have come to a conclusion that you are going on for a sale. How do you proceed now? You submit a proposal. You start by stating in it the inputs from the customer. Then, you state the discussions i.e. a summary of the system which your customer wants to buy so that the input conditions match (you have already written down the inputs) . You state your price. Is that it? No friends, I'm sorry to say that that's not it.
Your proposal will as effective as a "one-eyed french speaking, laughing hyena" for selling, as there is plenty of information missing. The following are just a few areas of information missing.
- Price basis : The prices that you mentioned are with included transportation costs?
- Delivery: You propose to deliver the material in what time period? Immediately.. in 1 month? After three months?
- Payment Terms: How do you want your customer to pay you. Do you want an advance? If so can you give a bank guarantee for that amount. How about the rest? Do you want the balance on a C.O.D basis or through Letter of Credit. Etc etc...
- What happens in case of delay i.e. You delay the material delivery or the customer delays to pay you.
- Validity : Say the customer calls you up or the customer’s purchase department. places the order after a year, can you accept it? Of course not but have you mentioned the validity of your offer anywhere in your original proposal. Validity should be always mentioned. Some people think that a proposal should be like a telegram, but I always like to be clear in all aspects.
All these points regarding the sale and which you propose to your client to be applied against the sale are called Commercial Terms. Remember, you sell only when you get your money. Say you have sold three high priced machines (total price 10 million Euro) but all of them have inherent credit for a year. Then start hunting for a new job, as you'll get the pink slip, without fail.
Your commercial terms should be so thorough and you should know them like the back of your hand. With one reading, you should know what conditions govern the sale. Your success or failure depends upon commercial comprehension as well. COMMERCIAL TERMS should arouse in you the same interest as the technical system you are selling. If they do not, then either develop it or get the hell out selling, dude!
The commercial terms section is the area where you can use your experience and make your offer the most attractive. Here, there are no guidelines and how you do so depends from case to case and your experience. For high value capital equipment, commercial terms generally vary from client to client.
So we have more or less finished commercial terms,
See you next time then friends
And till then,
Love
Bilbo
