Negotiate & Close the Deal (Startup Founder Sales Series, Part 12)

December 28, 2020 Mark Birch

Negotiate and Close

Have you heard of the 11th hour close? These are war stories told by account executives to regale their colleagues with epic tales of getting a big contract signed against all odds. I have heard many of these stories told and retold during annual sales kickoffs, and they generally involve some variation of needing one last signature, but no one knows where to track down the signer, who is most likely on vacation.

While there is usually a grain of truth to these stories, the reality is far less entertaining. The majority of deals are closed well before the quarter or year end. The best sales reps make sure not to leave deals unsigned till the very last hour.

The negotiations for sales deals start much earlier than you might expect as a startup founder. There are no boardroom theatrics or tense multi-hour sessions meant to hammer out a deal. The process is much more mundane. Negotiation happens throughout the sale over the course of many calls, meetings, and conversations, starting with the first discovery call.

Let’s back up a moment. At Amazon, one of our leadership principles is customer obsession. This means we always start with the needs of the customer first and work backward to deliver the most appropriate solution. Doing so allows us to better align with our customers to help them solve problems faster and deliver results. Thinking backwards can also help you as a startup founder to better navigate and consistently close deals. It starts with establishing the value of your solution and the impact it has in solving a problem for your customer. This requires input from your prospect as well as their own data or financial numbers to support the benefit of the solution.

This is exactly what the discovery call accomplishes. Many founders and sales people think of discovery as a one time event that happens after a lead is initially qualified. In fact, discovery is an ongoing activity, as I shared in my post on having more effective sales meetings:

“Every sales conversation with a prospect is a negotiation.”

Negotiation is simply a series of agreements that lead to mutually valuable outcomes. Even if you are not consciously thinking of a conversation as a negotiation, each party of the conversation is sizing up the other and visualizing some result in their minds. As a founder wearing the sales hat for the first time, it is important to acknowledge this dynamic and prepare for three negotiations that occur in the sale.

The Three-Negotiation Framework

The first negotiation is to agree on the problem and impact. This is the foundation of all negotiation, as this establishes the value your solution provides and whether it is worth buying. The discovery call is doing just that, setting the stage for the problem you are solving for your prospect by confirming that the problem and impact from your PRIM qualifying questions are accurate and valid. The bulk of a good discovery call is to dig deeper on problem and impact to ask “why” behind the problem.

In selling, we often jump ahead and make assumptions to fill in our own understanding. Asking why helps bring clarity and fills in the gaps of understanding the customer situation. Asking “why,” however, can put people on the defensive, so use “how” or “what” instead to create a more collaborative setting for a productive discovery call. For example, you might ask, “What about this project is important to you?” or “How would changing that thing address the issue?”

The second negotiation is to agree on the value your solution provides in solving the problem. In short, you want to get agreement on money and what your prospect is willing to pay. This is where the anchor of value and impact plays a huge role in supporting your pricing.

For anchors to work, you first need to disarm objections. Labeling their objections, restating them using phrase starting with “it seems / feels / looks like…,” and allowing your prospect the space to clarify their thinking spurs on more collaborative thinking. Then your anchor can enable you to pivot from price to other exchanges of value such as more support hours, implementation help, or other value added offer.

The third negotiation is to secure decision buy-in. This is where the most pushback occurs since decision makers have many competing priorities and interests swaying their thinking. The best question to ask when you run across stubborn requests is to ask, “How am I supposed to do that?” The effect of this question is to turn the tables back on the prospect to propose a solution. If a counteroffer is presented, you can respond with a polite “I’m sorry, that just doesn’t work for me” or “I’m sorry, but I’m afraid I just can’t do that” until you reach an offer that is acceptable.

You might wonder about negotiating the legal agreement. There are many pitfalls and mistakes that can happen in crafting a contract. However, the three negotiations framework above establishes your anchor. If you have secured agreement on value, money, and have buy-in from decision makers, then finalizing an agreement tends to be more of a formality.

Why? Because your anchor allows you to bargain from a position of power. Your prospect needs the solution and is investing resources to purchase it. This does not mean you can ignore all demands made during contract reviews, but you do not have to cave in either. Use the “how am I supposed to do that” question discussed earlier to navigate around the more stubborn points of contention, which lowers the guard of your prospect and allows for collaboration.

Do keep in mind that the legal review process can take several weeks depending on the size of company and the complexity of the deal. The best way to speed along the process at the contracts stage is to be as responsive as possible and keeping your champion and key stakeholders updated on the contract status and critical points of disagreements. Remember your champion wants the deal to happen, so use your internal supporters to provide guidance and leverage.

Negotiating and closing does not have to result in stress and agony. If you follow the advice here, you can be certain that once you have started to work on the contract, you are most likely on your way to a deal. Having closed many deals myself, I learned to never let emotions of difficult negotiations cloud my thinking. Slow it down, take a pause, and listen with an empathic ear.

If you find the tips in this post helpful, I recommend you read “Never Split the Difference.” The book goes into much greater depth on strategies and tactics you can use to negotiate with success. While this post is the last of my startup founder sales series, please return next week as I conclude with a summary of the key points from this series and share two closing thoughts on making your sales efforts repeatable.

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