How to Leverage Suppliers’ Fiscal Year End in IT Deals

Updated: Aug 18, 2021

One of the most important things to know before you enter negotiations is an IT vendor’s fiscal year end (FYE) date. Business performance is measured on a fiscal cycle, and the pressure to report positive fiscal revenue, sales, and earnings is the driving force behind all business activities.

As deal makers, you can use this knowledge to your advantage. We know that sales reps (the revenue engine of the company) are compensated on fiscal quarters and fiscal year-end sales. When approaching these deadlines, sales reps are much more likely to be flexible in deal negotiations, and more willing to include favorable terms to win over any last-minute business to meet their quotas. This provides enormous buying power to those buyers who know how to use these dates in their negotiation.

Today’s sales teams rely on detailed playbooks for winning sales and maximize costs every year, which include strategies, tactics, algorithms, and your buying history. So, simply “buying around a fiscal year date” is no longer an effective strategy. Customers must be methodical and creative to properly motivate a sales rep to achieve the discounts and concessions they seek. Below, we’ll discuss how to harness FYE information to gain more competitive deals. Specifically, we will answer:

  • Why is a fiscal year sometimes different from the calendar year end?

  • Where can you find a supplier’s fiscal year end information?

  • What are the best tactics to leverage these dates in my next deal?

Most public companies operate under the calendar year (Jan 1- Dec 31), but some have fiscal years that deviate from it. There are many reasons a company might choose to do this: they may have increased activity during the winter holiday season, for example, and it’s too difficult to complete an accurate final accounting during such a busy period. Because of this, they may opt to end the fiscal year on January 31st, or some other date. Others elect to have their fiscal year end after their busiest time of the year – a common tactic which ensures that performance over the fiscal year indicates growth.

For public companies, FYE information is easily obtainable. The dates can be pulled from websites that provide stock pricing, earnings per share (EPS) and annual revenue expectations, such as those of WSJ or Bloomberg. It’s trickier to gather the data about private companies because they are not obligated to disclose it. However, some private companies submit IPOs (current or past), or acquire other public entities, which requires that financial data, including FYE, be submitted to the Securities and Exchange Commission (SEC). Customers can use the SEC Company Search Page to search for any documents ever submitted to the SEC, which would include FYE and other financial information. Searching for press releases about the supplier’s financial performance can also yield FYE data. Sometimes they mention the company’s FYE, or it can be inferred based on when the release was issued (i.e., if a press release on year end performance was published on 1/22, it’s logical to assume that the supplier’s FYE was 12/31).

***For an easy reference guide to many of the top IT suppliers’ FYEs, ClearEdge created the following graphic, sorted chronologically.

Tech Vendor Fiscal Year Ends for leveraging negotiations in IT deals

It need not be a year end to motivate a supplier. Key quarter ends can also serve as motivators for sales reps, as their commission and quotas are usually based on a quarterly schedule. The year-end will hold the most weight for these sales reps, but if that is not an option for your deal, you still have three other dates to use in negotiations.

Because it is widely known that one of the keys to a competitive deal is to execute around fiscal dates, sales reps will act as if a proposal offered at that time, it is “the best that can be offered,” often misleading buyers into thinking they cannot push for additional concessions. Therefore, the best strategy is to use the FYE date to either accelerate or decelerate your deal timeline.

As a buyer, you want the element of surprise on your side. Surprise will throw the sales rep off their planned strategy, force them to pivot, and offer the best deal possible to ensure they don’t lose your business. To this end, here are two examples of how to use acceleration or deceleration in a deal timeline:

Accelerate the Deal Around FYE

Let’s say you have a planned Salesforce purchase, to be executed in February of 2021. You have already been in contact with your sales rep, who believes you have no plans to buy any earlier than February. As a savvy deal leader, you know that Salesforce’s fiscal year end is 1/31. With this information, you can present an alternate option to your sales rep: you may be able to convince your organization to buy early or accelerate the deal to January if certain requests are met by Salesforce (i.e., pricing concessions, contract redlines, etc.).

This tactic will motivate the sales rep because (1) they did not forecast this deal to fall within this FYE, and, (2) it will provide net new revenue to count towards their quota - which they may or may not have achieved yet.

Decelerate the Deal Around FYE

To illustrate the use of deceleration, let’s say you’re planning to buy Salesforce licenses in January 2021, though there is no urgency to execute this deal. You can inform the sales rep that at the current pricing, the deal exceeds your budget, and therefore you need to postpone it.

This tactic will motivate the sales rep because the deal was in the forecast for their upcoming FYE, and you’re tearing it away. To meet quota, the sales rep will now either (1) scramble to find additional last-minute business from other customers, or (2) come up with a better offer to keep your deal in this fiscal year. Most of the time, the latter option is the path of least resistance for the sales rep, and why deceleration consistently works well if you’re able to delay a purchase.

The FYE can be a very useful tool in negotiations, but only if you have buying power on your side and can convey a viable and compelling message to your sales rep. Together, these factors provide significant leverage over the supplier during negotiations. To learn more about how to build and maintain deal leverage, watch our webinar on the Leverage Management Maturity Model (LM3) methodology by filling out the form below.

ClearEdge’s Francis Gagliano and Fabienne Dessalines contributed to this article.

This blog post was inspired by the introductory webinar on Leverage Management. You can access the full recording to this webinar below.