Risk is a Price Point – SSSU!

Last week I made the point that risk is a price point. The corollary of this is that, if someone asks you to increase the risk you take on (for example, by increasing your limitation of liability), you should increase your price correspondingly. 

You just wait for this to happen and then react accordingly, but a better approach is to set it up from the start.

If you are a seller, every proposal which includes a price should also contain the Sales-Side Set Up (SSSU). What’s the SSSU? It’s a statement along these lines.

In putting together the pricing and other commercial terms set out in this proposal, we have made the assumption that our standard terms and conditions (set out here: url) will apply.

We are happy to discuss changes to our terms and conditions, but please bear in mind that changes to our standard terms and conditions are likely to result in changes to our pricing and commercial terms.

The point of the SSSU is to create an explicit linkage between your terms and conditions and the price you are proposing, so that any change to your terms and conditions has an impact on the price.

So, for example, if the other side says “I don’t want your standard 100% cap on liability, I want a 300% cap”, you can respond “Yes, that’s no problem, we will increase our price by 5% [or whatever is appropriate] to allow for that”.

In other words, instead of an absurd negotiation (see last week’s Oh Lawdy!), the SSSU gives you a solid basis on which to stick to, or adjust, your position (as appropriate).

Obviously the other side won’t like it, and will do their best to poo-poo it, but they won’t be able to undermine your logic and will (secretly) recognise its validity.

Nine times out of ten, they will stick to the original price.