Know What You Want Before You Get to the Table
The following is adapted from The Painless Negotiation by Steve Thompson.
I have long contended that not enough attention is given to the internal negotiation, the one where you work out with the appropriate stakeholders within your company the specific deal levers you should bring to the negotiation table along with the priorities and limits of each of those levers. Instead, sellers’ internal negotiations almost always get in the way of the external negotiation. They usually take place near the end of a sales cycle, often in a reactive and panic-filled atmosphere, and as a result they tend to be contentious, challenging, and counterproductive to closing a great deal. This is precisely what savvy procurement professionals are counting on. They want you to spend time and energy negotiating against your own company, leaving little time and energy for negotiation with them.
What is the internal negotiation really about? To answer that question, l’ll reference my first value question: “Based on the outcomes important to each side, which deal levers would constitute a great deal if we were to reach agreement?” As a quick review, a great deal accomplishes the following:
- It brings high value to the customer because it meets their buying objectives and supports their desired outcomes.
- It brings high value to you, the seller, because it meets your sales objectives and supports your account/business strategy.
- It contains the key deal levers that allow both sides to ultimately deliver the outcomes and value.
Determining a great deal begins with three straightforward steps. First, based on the outcomes important to both sides, make a list of the deal levers that should be in the deal. Next, because not every lever is of equal importance in a given deal, prioritize those deal levers. Start by considering higher-priority levers that must stay in the deal for you to achieve your sales goal. Then identify the lower-priority levers you would be willing to trade away to obtain something of greater value. This is how most successful business deals are negotiated, but it only works if you have carefully considered and prioritized all the levers in the deal. Failing that, you will not be prepared to trade effectively.
Finally, world-class organizations deliberately involve internal stakeholders early in the sales cycle to collaboratively define clear upper and lower limits for each lever. You can think of a limit as a kind of “guardrail,” a barrier designed to keep each lever “in its lane,” preventing you from trading away too much of any given item. For example:
- Discount: Offer 25%, but if pressed we’ll go up to 35%.
- Quantity: Ask for an initial order of 1,500 units. If the customer objects, we will take a minimum volume of 1,000.
- Close: August 31 preferred close. If the client delays, we will honor the remaining portions of the deal only until September 30.
Sit down with your internal stakeholders as early in the sales cycle as possible and determine the limits on all your deal levers. You can always revise the values as the deal evolves and new information becomes available. This is the essence of your internal negotiation — sorting out what you and your company really want (or need) and what you’re willing to accept well before the heightened emotions and tensions of the formal negotiation at the end of a sales campaign. If you do not conduct your internal negotiation this way, it will almost certainly conflict with the external negotiation with the customer, usually in an atmosphere of panic at the end of the sales cycle (likely at the end of a quarter) — something I see all too often.
What’s more, a key mark of world-class organizations is that they empower their sales reps to negotiate any deal, provided the deal levers are within internally agreed limits. Eliminating the start-stop cadence of tactical negotiating, with the inevitable harried calls or flights back to HQ for permission, can significantly compress the time needed to negotiate and close deals. It also drives up the quality of those deals, which is good for the sales rep, good for the business, and good for the customer — a rare triple win!
Defining deal levers and limits ahead of time gives everyone a clear view of the target they are trying to hit, preparing your selling organization to negotiate the right way in pursuit of a great deal. Conversely, if you have failed to work with internal stakeholders to establish clear levers and limits, then what will you be prepared to accept? In my experience, sales organizations (especially those without enough sales pipeline) will take just about anything. When you aim low, where do you expect to hit? Whatever your answer, think even lower — right about foot level!
For more advice on negotiation, you can find The Painless Negotiation on Amazon.
Steve Thompson is Managing Partner at Value Lifecycle™, which helps companies position, negotiate, and close critical business deals. In the past twenty-plus years, he has worked on more than $17 billion in B2B deals (for sellers and buyers) in dozens of industries. He previously worked in senior operations, sales, and executive management at Westinghouse, Black & Decker, and DuPont. Steve also served as a nuclear submarine officer in the US Navy.