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How to enter sales negotiations on the front foot

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“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 ahead of a contractual close.

We’ve previously discussed how MEDDIC can help qualify the sales process and prepare for customer conversations during the sales cycle. 

Regarding contractual conversations, your diligent efforts working through the Dp—Decision process—stage will reap the 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 with a solid value-based defence, providing plenty of arrows in your quiver. 

 

You’re building a castle that you’ll need to defend

The world is changing so fast these days. Due to all the macroeconomic challenges, budgets are typically recut every three months on a rolling basis in line with new objectives.

Once we are in the final stages of any deal, we must 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. Especially 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 several critical 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,” because the business case needs to demonstrate a certain return. By confirming the business case before negotiations, the cost of the solution has already been socialised with the decision makers, making it difficult for the procurement team to use pricing as their main argument.  

 

  1. Vendor of choice confirmed

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

Trying to jump-start procurement negotiations before you are sure you are the chosen solution will waste a lot of “arrows” by starting and ending on the back foot in a race to the bottom on deal terms. 

You should move forward only when you have confirmation that you are the chosen vendor. 

Those arrows you saved 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. 

 

  1. 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 to ensure this. 

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.

An excellent 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 the 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)?

The sales team will be in a much stronger position to enter these discussions if they know what a “win” looks like for the company and how far they may go. 

Also, all elements of the deal should always be negotiated together. Don’t allow procurement to pick off individual elements.

 

  1. Prepare with your Champion

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

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

By this stage, you should have a Champion with whom you have built a good working relationship. 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 the wins 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 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, which you can easily extend to the customer without losing anything in return. 

Or you may discover that time to deployment is at the 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 three months. This would help if price is your top priority; knowing you can lead negotiations on deploying your software quickly means you can stand firm on your price without worry.

 

  1. Avoid incentives too early

If you have yet to confirm 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 without guaranteeing any reward.

Also, note that incentives are not negotiations. 

 

Build strong

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

By working through the process, a win-win situation is always possible. That process naturally will include negotiation, so prepare yourself early, build your defences, and be ready for battle, or you may end up like Monty Python’s Dark Knight.

 


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