This curated column is authored by Ashwin Ramasamy, Founder, ContractIQ
Negotiation is an activity that involves numbers, psychology, grit, intelligence, earnestness and gut feel.
When you put numbers and gut feel in the same sentence, you know whatever you cook can lead to a radioactive isotope that can burn the kitchen and the next few blocks.
This is why you get an uncomfortable, twitchy feeling in your belly when you are in for a negotiation meeting.
For little over a month, we’ve been observing an interesting deal that was brewing in the ContractIQ marketplace. The customer is a battle-hardened businessman with a thriving textile business and he wanted to build a mobile point of sale system. On the vendor side, we had the CEO who is an engineer turned sales guy, who is nice to a fault that he won’t confront. They were bidding to build this mobile point of sale system.
We brought this vendor into this transaction and the CEO was running through the deal.
Authority to decide? Check.
Real Need? Check.
When you check all the four qualification criteria, it’s overbearing on the sales guy, because if you lose, you are really leaving money on the table (in the worst case, for your direct competitor). No pressure, right?
The difference between a seasoned sales guy and a reluctant one is in how the former intuitively knows which skill to summon up at what point in the negotiation cycle.
In the specific deal, the value of the single contract would have been close to $75K according to the vendor. The real value would have been close to $100K (in our opinion). The vendor executive was aggressive in the estimation. The customer’s perceived value of the software to be built, was $40K. To be precise, it’s not the value but what the customer was willing to pay. Fast forward a few intense meetings, the deal fell through, because the vendor walked away.
It sounds like a very rational decision to make. There was a huge gulf between the price expectations on either side. It was clearly a hard one to bridge. That aside, even at the expected price, the deal is aggressive which means profitability could take a hit anyway. The sales guy dodged a bullet. But there is more to it that what meets the eye.
The business owner was firm at the price he expected but was willing to meet and discuss. They met. In every meeting, the vendor exec pushed for reduced work and the business owner pushed for what he thought was a sustainable product and there was little breakthrough on either side. The business owner wanted to meet again to discuss.
For a lazy observer, it looks like we are in a deadlock, but if you observe what was happening, the spoken words indicated a deadlock, but the customer had not yet walked away. He was still making the effort to meet and discuss, even as he was firm in his ask.
Sales negotiations are hard and it’s doubly so for an technical CEO because they are used to deterministic answers. Sales cues are sum total of what’s spoken and what’s unspoken. Often the unspoken is the truth.
The deadlock was on the numbers. But if there had been enough display of earnestness and situational intelligence, they both could have figured a way out — like say, an upfront fee of $40K for the product development and an apportioned revenue-linked fee till the vendor makes the remaining. That’s a reasonable risk to take, because the customer had a viable business with cash flow and a ready customer base to sell the product to.
Sales ‘song and dance’ is exhilarating or overwhelming depending on who you are. But it’s not avoidable. If the vendor had the staying power or the grit to own the deal, he could have made himself available for one more meeting.
Earnest attempts to figure out alternate payment models, risk-sharing approaches or simply by spending more time with each other would have added incremental trust.
The vendor exec, however, overwhelmed by the situation shot an email (a week after avoiding a meeting by simply not responding) saying that they cannot move forward as the budget did not meet the expectations.
He was right. The budget did not meet the expectation and hence there was no deal. But sales profession is full of stories where deadmeat situations have been turned into wins by persistent and smart efforts of seasoned sales guys.
Had the response to the call for a meeting been a meeting, it could have been the day of reckoning for that deal. Had it at least been an immediate phone call to decline the meeting, with a sincere effort to explain the futility, it would have been a conversation with non-zero probability of the buyer getting the seller’s constraints on pricing. Had it at least been a phone call (instead of an email) after a week of radio silence, it would have kept the door open for another deal on a later date.
We like to avoid being pushed to a corner. I liken sales negotiations to turkish oil wresling. Both the participants drip with olive oil and they fight like their life depends on that match. They literally push the other to a corner but they also wriggle out when pushed, because they have a drippy skin.
In negotiations, you have to wear a drippy skin. You’ll be pushed to corners. The way you wriggle is not science. Sometimes numbers come to your rescue. Sometimes it’s intelligence. But you can’t do without earnestness and staying power.
So what do seasoned sales guys do, to win negotiations?
1. They take the mantle and drive the conversation.
2. They provide well thought out options. Options are volleys and they serve it one at a time, at their order of preference.
3. At the end of every conversation, they leave some work for the other side and they get them to react.
4. They maintain strategic silence, if there is no reaction. But they are super-responsive to reactions.
5. They trust their gut to decide when to break the silence or let the other side drive. But they do it intently, knowing fully well.
6. If they have to accede, they make it clear that they are walking away this time, if the deal is not done.
If you are a rookie sales guy, the first and simplest lesson you can put to practice is this — Don’t be the first one to say ‘No’, because that’s not the outcome you are optimizing for.
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