How to manage negotiation as a small business

Phil Rothwell explores how to deal with the demands of buyers in the early stages of your business.

Customers are complex animals and it took me a while to realise that the so-called ’buying signals’ they display when pursuing purchases are numerous and varied. They can be cruel as well, perfectly happy to broker deals that make them look masterful and you look like a chump. That’s why negotiation is a key sales skill, which requires training and practice to master. Here are my top tips for raising your game.

Beware opening gambits

The range of behaviours buyers can exhibit is bewildering. In my experience of selling, the norm is for people to be price-sensitive, but reasonable and open to sensible discussion about services and costs. It would be going too far to say that people love to embrace the so-called ’win-win’ ideal, but most people are smart enough to realise that if one party gets rooked it probably means the relationship won’t work for long.

Not all, however. I was once called by a guy who spent the first five minutes of the call telling me what a woeful bunch of losers we were and if I wanted to be his supplier, I’d ‘have to do a lot better than that’. I was young and inexperienced and it took me a good hour or so to ask myself the question, ‘if this man hates me so much, why is he talking to me?’ The answer was that he didn’t hate me at all, it was simply the opening gambit of a negotiation that lasted several days.

Beware opening gambits, they come in many forms, but often sounds something like this: ‘We liked you proposal, but you will need to reduce your price by 15 per cent if you want to get onto the shortlist’. The key thing is to realise that what they are saying probably isn’t true and remember, that if they didn’t want you on the shortlist, they wouldn’t have bothered calling.

Never offer something for nothing

Knowing that your customer may well be posturing is good, but it doesn’t necessarily solve the problem of how to respond. Negotiations are fundamentally about power and control; professional buyers will try to put pressure on you to see how you respond. They want to see how desperate you are for the business and how much leverage they have. It is essential that you don’t simply acquiesce to their demands.

This is easier to achieve than you imagine. When you submit a proposal you have effectively mapped a series of deliverables against prices. From there on in, you must establish the principle that any reduction in price needs to be matched by either a reduction in what is being delivered or some value the buyer can offer. Not to do so, in fact, suggests that you have overpriced your quotation.

Defer to authority

When I was young, I foolishly imagined that if I had the power to make all of the decisions, everything would progress more smoothly. The truth is almost the opposite. One difficult aspect of negotiation is that although ultimate success demands you maintain a reasonable relationship with the customer, the process can be quite confrontational.

A good way to deal with this is to include people in your team who aren’t involved in the process.

In smaller businesses, this is usually business partners and other directors. Doing so gives you the ability to say no to your customer when the pressure is really on. Saying, ‘I’m sorry, but the board will never agree to that’, is a great way to bat back significant issues without causing a meltdown. Even more importantly, it also means you have someone outside the negotiation, with a more objective view, who can call it to a close if things start to run away from you.

Resist the quivering quill

Right at the end of the process, often as the order is about to be emailed, it’s not uncommon for buyers to make one final bid for extra value. They know that you will have already closed the deal in your head and may even wait to the last day of the month to add to the brutality. In some sectors, verbal indications of an intention to buy count for nothing.

This is the point to show some steel. The best response is to simply remind them that you believe the proposal represents a fair price for the services they need, and wait. Remember, by walking away they will have lost as much time as you have.

Be encouraged

Even as I write this, I am painfully aware of the times I have got it wrong. From time to time, we all do. Avoid making the same mistakes twice. Finally, don’t be afraid to walk away from a deal you don’t like. As I have said many times before on this blog, a ‘no deal’ is better than a ‘bad deal’.

Further reading on negotiation

Phil

Alexandrea Conroy

Phil Rothwell is founder and CEO of digital marketing agency EcomEvolve.

Related Topics

Negotiation

Leave a comment