Monday Mornings with Madison

The Art of Negotiating Business Deals

Word Count:  1,565 

Estimated Read Time:  6  min.

One of the most challenging parts of working with a new client is finalizing the business agreement.  This is the process in which the parties hammer out the details of the contract.  The bigger the deal, the more complex the agreement.  And negotiating the final terms of a complex deal can have its challenges.  In those situations, a sales professional might find himself in a position where the customer holds all the cards.  The salesperson may have invested a lot of time and effort in developing the opportunity.  He may have even promised his boss that a commitment was imminent.  The salesperson may feel boxed in and the customer may think he can dictate the terms.  That’s a losing proposition for the salesperson and his company, even if they land the deal.  Business deals that start out very lopsided – a win-lose proposition – don’t bode well for a good long-term business relationship.

The goal in any negotiation should be to achieve a win-win outcome.   That may sound cliché and idealistic, but it is the secret to long-term success.  But if the sales professional starts negotiating from a weak position, it will be hard to hammer out a win-win contract.  To chisel out a win-win agreement, a sales professional must garner some negotiating power and then use smart negotiation strategies during the process to close the deal.

Balancing Power before the Negotiation Begins

Tip #1 – Thwart competitive threats.

Every business is vulnerable to competitive threats.  For example, a competitor may take a loss in order to bring a cheaper product or service to consumers. This is something that, on the face of it, is something beyond a salesperson’s control. But a savvy sales professional is not totally helpless.  The first step in thwarting such a threat is to analyze the competition’s reason for this strategy, and then make a plan as to how to deal with it.  A smart salesperson will identify his company’s unique selling proposition.  He could possibly try to form a partnership to overcome that competitive advantage and then use that information to convince the customer that his product or service is the only one that can adequately fulfill the customer’s needs.

Tip #2 – Develop multiple contacts inside the customer’s firm.

Today’s most successful salespeople know that their job is to learn their customer’s business inside out and offer solutions to the real problems they face.  While a salesperson wants to be their customer’s only (or primary) contact at the company, a salesperson should not have only one contact at the customer’s firm.  Having more than one contact (optimally at least three) in a customer’s firm can provide perspective in the solution-building process.  Having several contacts can also provide information about the motivations and politics inside the customer’s firm.

Tip #3 – Be a knowledgeable resource to the customer.

A customer can’t know everything about his own company, much less every competitor and its services or the overall market.  Being an “outsider” gives a salesperson the ability to see situations more objectively.  Indeed, one of the most valuable things a salesperson can offer a client is expertise and objectivity.  It is important for a salesperson to show he can see beyond the obvious and can offer a big-picture perspective.

Tip #4 – Be consistent in presenting and reinforcing the brand.

While a sales presentation needs to be customized to the customer and his needs, a sales presentation should also be consistent from a branding and messaging perspective.  While that may sound contradictory, it isn’t.  While remaining aware of the strengths and limitations of a company’s product or services, a sales professional should state the company’s position and message clearly.  Adhere to the firm’s policies and procedures, and be willing to explain why they make sense.

Tip #5 – Offer a solution that matches the customer’s needs.

A salesperson’s value to a customer skyrockets when he helps the customer to crystallize needs and visualize the right solution.  That means being both flexible and creative in offering ways to meet those needs.  For example, if the client doesn’t want to deal with various customer service reps, offer to have a single-point of contact.

Use Smart Strategies during the Negotiation

Once it is time to sit down at the negotiating table, there are strategies to help facilitate the process, in order to achieve a win-win agreement.

1. Do research.

A smart salesperson will do his due diligence when heading into negotiations.  The person with more information usually has more leverage. For example, if a landlord knows that a tenant’s lease is up and they must move soon, the landlord has more leverage than the tenant. The landlord might then insist on a higher price in order to close right away and prepare the property for immediate occupancy.  Even personal information about the parties – such as hobbies shared — can affect the ability to create a more collaborative atmosphere. 

2. Take the lead.

Another negotiation strategy is to control the agenda:  the location, timing, topics, and pace of negotiation sometimes creates an advantage.  For instance, it is widely accepted that whomever drafts the agreement – whether it is a lease agreement, a contract of sale, or a production agreement — is in the driver’s seat.  By controlling the agenda, the salesperson is also the one who decides which topics are discussed and the order in which they are addressed.  A variation on taking control is to adopt a passive approach.  By seeming to act as a moderator for the negotiations or summarizing where things stand, the sales professional gets to frame the issues and thus generally has more control over how the issues are addressed.

3.  Know thy priorities.

Contract negotiations usually are focused on revenue and risks.  Obviously, certain revenue and risks are more important than others.  That’s where it pays to prioritize.  If the three most important features in real estate are location, location, location… then the three most important factors in a negotiation are prioritization, prioritization, prioritization.  A savvy sales professional must know the company’s top priorities in the deal and how other priorities rank below that.  This helps him stay focused on what matters and avoids getting bogged down with details.

4. Negotiate in segments.

Negotiations can disintegrate if the parties take an “all or nothing” approach.  That’s when one party is forced to agree to all of the terms of the other party in order to strike a deal.  It is a strategy that can feel overwhelming.  To avoid this type of roadblock, a negotiation can be divided into segments or sections.  By compartmentalizing the parts of the deal, and reaching an agreement on each part separately, the process is broken into a series of solutions.  The negotiation can make progress toward the final goal of a finished deal.  If one area stalls, go on to the next and circle back to any thorny issues at the end.

5.  Take the “what’s fair” approach.

With this approach, a sales professional for a company may indicate to a client that his requests are simply in line with industry standards or current market prices. This approach removes any obligation to justify terms or negotiate them.  By asking for “standard deal terms,” the responsibility is placed back on the client to justify why an exception should be made in this situation.  It also pushes the client to make concessions elsewhere to balance out the deal.

6.  Ask questions.

One strategy a savvy negotiator will use is to ask questions if the client takes a hard line on certain issues.  Questions open the issue to discussion and dialogue, while demands and lines in the sand close down communication.

7. Remove emotion from the negotiation.

Another effective strategy is to separate the people from the issues.  This is achieved by removing emotion from the negotiation.  Parties are asked to look beyond the negotiation to objectively see the real interests or influences affecting each side.  The sales professional and the client both agree to generate options in a problem-solving approach and eliminate conflict by sticking to objective answers.

8.  Make concessions.

A smart sales professional will make sure the client feels they’ve made a good deal at the end of the negotiation process. Any offers made should always have enough leeway to be able to give the client some concessions.  The goal is to meet the client half way.  Thus, a savvy sales professional should never reveal his absolute bottom line at the start of a negotiation.  By leaving room for concessions and further negotiation, the client will feel he’s won something.  A salesperson may be a bit surprised to find the client is willing to give more than the company was willing to accept.

9. Stick to the facts.

The most successful negotiators separate facts from feelings. They don’t allow personality issues or communication styles to drag down the negotiations. They avoid using language such as “I believe” or “I think” in order to keep “self” out of the equation. Instead, the focus is on factual statements such as:  “If we agree to this schedule, both parties assume some of the risk.

10. End on a positive note.

A smart sales professional will look for opportunities to say, “I see your point” or “You’re right about that” or “I totally agree” throughout the negotiation, and especially at the end.   Small points of agreement help reinforce a collaborative tone going forward.

Quote of the Week

“Explain the value and justify the cost – People don’t mind paying; they just don’t like to overpay.” Charles Murray, Selling with Ease

 

 

© 2017, Written by Keren Peters-Atkinson, CMO, Madison Commercial Real Estate Services. All rights reserved.

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