Build Your Defences - How to Enter Sales Negotiations on the Front Foot

‘Let’s start contracts’ is often music to a salesperson’s ears as they envisage their long campaign to close a customer deal at its finale.

At this point, it’s easy to get complacent about the battle which lies ahead of a contractual close.

We’ve talked previously about how MEDDIC can help qualify the sales process, as well as prepare for customer conversations during the sales cycle.

When it comes to contractual conversations, this is when your diligent efforts working through the Dp – Decision Process - stage will reap rewards. Arming yourself with as much knowledge as possible about each step in the sales cycle is vital. This will ensure you go into procurement negotiations having built a strong defence based on value, ensuring plenty of arrows in your bow.

Mind the gap

The world is changing so fast these days. Due to all of the macro-economic challenges, budgets are typically recut on a rolling 3 month basis in line with new strategic objectives.

Once we are in the final stages of any deal, we need to be surgical and swift with our negotiations to ensure the game doesn’t change mid-flight.

However, delays are often caused by poor negotiation strategies at the end of a sales process, when we omit the preparation and ‘rush to dance’ with the customer on price.

Our preparations for these final steps are like building a castle with a set of defences. Failing to prepare for these sales negotiation meetings will seal a fate like the Dark Knight in Monty Python, enabling our customer to negotiate us down to the floor.

How to build your moat

The preparation starts with ensuring that you have a number of key milestones completed, before meeting with procurement:

1. Business Case Approved

Have you validated the value your solution will bring to the business (using: Identified Pain and Metrics) so you have the platform for a commercial negotiation based on value not price?

Procurement teams often say ‘we only have this budget’ or ‘it needs to be this price’ - using the fact that the business case needs to demonstrate a certain return. By confirming the business case before negotiations, the cost of the solution is already set and the procurement team can no longer use their pricing argument.

2. Vendor of Choice Confirmed

Next, confirm with your Champion that you are the vendor of choice and that you have been technically selected. Validating you are selected is critical before you speak with the customer’s procurement team.

Trying to jump-start procurement negotiations before you are certain that you are the chosen solution will waste a whole load of ‘arrows’ by starting, and ending, on the backfoot in a race to the bottom on deal terms.

ONLY when you have confirmation that you are the chosen vendor, should you move forward.

Those arrows you had in your bow by diligently working through every decision process in every department will be needed when you come up against the procurement team. Don’t waste them by skipping this step.

3. Prepare Your Tactics

Just as the sales team are trained in sales, the procurement team are trained in procurement negotiations.

It is their job to get the best possible deal for their company, and they will be incentivised as such.

It’s not personal. It IS professional, and it is advisable to start talking to them with as much information about acceptable outcomes in your arsenal as possible.

A great tactic for sales managers is to fully equip their team with a toolkit for such negotiations:

What does the best possible contract look like? To you / to the customer?
What does the least acceptable contract look like?
How far can the sales team negotiate on price?
What payment terms would be acceptable to negotiate to?
Is a multi-year contract incentivised in the team or not?
How much is a public case study worth to the business?

What value levers do you have for implementation (support packs, out-of-the-box templates, project start dates)?

By the sales team knowing what a ‘win’ looks like for the company, and how far they are able to go, they will be in a much stronger position on entering these discussions.

Also, always negotiate all elements of the deal together – don’t allow procurement to pick off individual elements.

4. Prepare with your Champion

“If only I had a way to find out what a win looks like for them”. Knowing what a win looks like to your customer is incredibly valuable information.

Why negotiate on price if this isn’t a deciding factor for your customer?

By this stage in the process, you should have a Champion who you have built a good working relationship with. Use them.

Take time to summarise the opportunity and reconfirm your value with your Champion:

What value is your solution bringing to the business (what pain are you solving)?
What criteria are critical to the business? (what is non-negotiable)
How will success be measured in the business? (how will everyone know it’s a win?)

Make sure you know what the wins are for the key stakeholders (your Champion, the Economic Buyer and the Procurement team). Use the business case summary with the procurement team to demonstrate the value that you are bringing to the business and use that to negotiate.

For example, your Champion may know that their company prefers a 60-day payment window, something you can easily extend to them without losing anything in return.

Or you may discover that time to deployment is top of the Economic Buyer’s wish list, so they won’t thank procurement for getting a ‘discount’ if the project start is delayed by 3 months! This would help if price is a top priority for you; knowing you can lead negotiations on deploying your software quickly means you can stand firm on your price without worry.

5. Avoid Incentives too early

If you have not confirmed that you are the vendor of choice and the business case is confirmed with funds available, do not use incentives to get your customer to sign now. By offering discounts, favourable payment terms or anything else under these circumstances, you are giving away your arrows for free with no guarantee of any reward.

Also, note that; incentives are not negotiations.

Final thoughts

Remember, negotiations are not a zero-sum game; one side doesn’t have to lose for the other to win.

There is always a win-win possible, we just have to work through the process to get there. That process naturally will include negotiation, so prepare yourself early, build your defences and be ready for battle or you may indeed end up like Monty Python’s Dark Knight.

If you are interested in new ideas, inspir’em sales meeting exercises and lesson plans are available to continue the development journey of your teams.

For more tips on applying MEDDIC in the real world - join our community at inspir’em today.