Why we don’t negotiate, and neither should you
I used to struggle a lot with rate negotiation. I’d get on a call with a company, it would go well with a fit for what we offer, then they’d come back with an email like the one above.
Startup founders are hustlers, and nobody likes getting ripped off — so it makes sense for companies to ask for discounts.
Only issue is — we don’t discount our rates. We offer lower priced leads at high volumes, and the price goes down when users get on higher packages for lead generation — but the prices on our site our fixed.
In this post I want to break down why we don’t do discounts, and why you shouldn’t either. This is especially useful if you’re running a sales team selling SaaS.
The main takeaway you’ll get from this post is that even though it seems like in the moment discounting will close a deal for you, that’s a myth.
An extra $200 — $300 a month isn’t going to move the needle at an enterprise level, and you shouldn’t want to do business with the type of clients where it will.
So, without further ado…
Why people ask for discounts, and how to counter
People ask for discounts for a few reasons:
1) There’s too much risk
Was on a call with a company that runs a coworking space. They were looking for startups to help fill the space, and I was pitching them lead gen and outreach from InspireBeats.
After the pitch he dropped the “do you have a free trial or can you do this on commission only?” line.
He asked because in commercial real estate, you usually find tenants through brokers — those are real estate agents that put in all the work to find clients and only get paid when they make a sale.
He saw risk in what we do because in his mind, he had dozens of brokers out in the area constantly looking to find clients.
There are a bunch of downsides to going this route, the main one is if you’re relying on commission only sales people, there’s no incentive for them to try if deals take longer than a certain amount of time to close.
What that means is commission only sales will close fewer projects and, for these guys, find less tenants.
So we negotiated a bit, I found out he was spending a couple grand a month on google ads, and we pulled lead generation out of the PPC budget. Simple fix.
If your clients ask for risk based discounts, the easiest pushback you can give is to explain the value again — get them to see that there’s an actual need for what you offer and maintain your rates.
While risk based negotiation is semi-legit; the next reason is ultra common with funded startup founders and something you’ll run into when pitching to large enterprises with no access to the CEO:
2) They want to say they tried to negotiate
Enterprise companies are some of the easiest clients to handle once you close them. They are usually hands off if your product does what it says and will let you be. The sales cycle — breaking into the enterprise — is a huge headache.
Let’s say you’re using InspireBeats for lead gen, so your calendar is full of enterprise meetings. After talking to the decision maker, and usually a day or two before the promised close date they’ll try to negotiate with you.
The person trying to negotiate here sees the price on your site — if you have one listed — and wants to be able to tell their bosses that they saved the company $X a year by negotiating.
Consultants are also professional negotiators, and will do the same thing.
The tough part about this ask is you usually do have to give something, but it doesn’t have to be a price reduction.
To get over this pushback, tack on a couple free addons like an extra 5 hours of phone support per month, more integrations or something that doesn’t cost you any extra as a business owner. Bonus points if you can put a dollar value on this free addon to make them feel better.
This way, they end up with a good story to put on the resume and you end up charging full price.
If none of the above is true, you might be dealing with somebody desperate, meaning…
3) They don’t have the money
These are the absolute worst clients to deal with and I recommend qualifying early in the sales process and avoiding them at all cost.
In SaaS — these guys are sometimes hard to pick out early, but a telltale sign is how excited they are to try out your service on the call. They keep throwing use cases at you and saying they’ll whitelabel you to their clients.
Keep in mind that’s just a warning sign, we started working with an agency yesterday that had all these signs and ended up signing the same day, but it’s something to keep in mind.
In this case, defend your rates to the grave. If your product costs $900 a month, say something like:
“Thanks and we’re excited as well. However we can’t come down on the price right now. Happy to start you out on the lowest package at $900 a month.”
IF they have the money, this will work and they’ll buy. If not, they’ll go away and you won’t have to deal with a refund. Win win.
Use this post as an excuse to defend your prices. Try it the next time someone pushes back and see if you can identify which of those three mindsets they’re coming from.
This post was originally published on http://inspirebeats.com/blog/why-we-dont-negotiate-and-neither-should-you/