#149 - Playbook: The Negotiation Playbook

Foreign, Everybody. And welcome to this playbook episode of 30 Minutes to Presidents Club. My name is Armand Farouk, and I'm here with my co host, Nick Sigelski. And today we have a revisited version, an expanded version of the negotiation playbook that we did way back when, in the early times of 30 mpc. And the reason for this, folks, is especially when times are a little bit tougher, when the market's down, when the economy's crashing, you get pressured on price way, way, way more. But here's the thing. While the variables can be radically different in an economic downturn, the key mechanics of how you negotiate are really the same. And so we're going to be talking a lot about how you go back to the fundamentals. And sure, you might be at a 20% discount instead of a 15, but we're going to talk about how you make sure that you don't give away the whole farm. Nick, why should people listen?

Well, you don't want to give away the whole farm, Armand. You want to keep the bacon, you want to keep the eggs, you want to keep the toast. Do you grow toast on a farm? I don't know, but let's get into this thing.

Alrighty, folks, so the way this is going to be carved up is we're going to talk about things you need to look for before a negotiation starts. Then we're going to say, hey, when you give price, how do you give price? Then once you give price, if they ask for a discount, how do you handle that and go back to discovery? Once you've gone into proper discovery, then you can start to align on a path forward. And then the final fun part is we'll talk about how you use options at the end, if you get past a first cut to stop the bleeding and finish negotiations once and fast. All right, so first of all, let's talk about what you need to look for before the negotiation starts. So neither Nick nor I love bant, okay? But it's one easy way to remember how de risked or not de risked a deal you have is it's also a good proxy for understanding how much leverage you have in a deal. Okay? And the key thing here, folks, is you should actually enter a sales cycle where you should enter a negotiation. And you should know based on the conversations you've had so far, if you're going to have to discount or not. And that leverage is defined by a couple things. So let's start with the B part of Bant, which is budget. Okay? The first thing that I would look for is is this previously budgeted for or are you having to find budget? If they already know they're going to buy something, okay, you have much more leverage. The other part of B is are they competing with other quotes as well? If you are the only competitor that has met their requirements and it's budgeted for, you better not be discounting very much. The second piece of it is the A which is authority, which is power. If I am single threaded, this person can kill my deal and it can go down very, very quiet. But if I'm across the organization and up in the organization and I know there are multiple people pushing for us, I know that I have leverage in the sense that I don't have to discount because someone else isn't going to be happy if they don't end up going with me as their vendor of choice. The third part is need and this one is probably the most obvious of them all. But the bigger the problem, the more defensibility you have on price. And the last part is T, which is timeline. In other words, you shouldn't have to discount if you know you are a vendor of choice. It's a big problem. You're threaded to power and you know they have to do something about it tomorrow because they're launching a product or because they're trying to close their year or whatever other milestone it is. Okay, but if you're selling a product that is like a nice to have or there's no clear timeline for it, or they could do it this month, next month, next quarter. Now you may have to actually use commercial terms to create artificial timeline and again that will continue to reduce your leverage. So it's a simple framework, it's banned. But if your greens across the board that probably means you could find yourself in a no discount deal. If your reds and yellows across the board you might be stretching into that 30, 40, 40% range. In a market like this, part of.

Your preparation for that negotiation is you don't need a 47 point negotiation checklist where you're, you're doing hours of negotiation prep, but anytime you're walking into a call where you know there's going to be some negotiation, you should be doing a quick pulse check using band to understand is this one where I can hold really really firm or is this one where I'm going to need to bend a little bit? Because that's how you're going to then put proceed and navigate that negotiation doesn't have to be a long belabor plan, but any plan is better than no plan. So you show up on the meeting, you've got your nice polo shirt on, customer comes on, you're going through price. Let's talk about how we deliver pricing to a customer, because that's actually part of when the negotiation really starts. The way that you share commercial terms with the customer impacts downstream the rest of the negotiation. And so you have to make sure you deliver pricing in a way that is extremely clear and. And confident and that the customer understands. So one of the things you want to avoid, however, is getting into pricing way too early in the sales process. If you're on your first meeting with the customer and they start asking you about pricing information, you may choose to say, hey, there's a lot of complexity to how we put together the quotes. It would actually be far easier for me to give you an accurate picture of what this will cost in a conversation or two, or after we have the demo, or after I understand A, B and C from you. The idea is early, when you're trying to understand more about the problem and the gap of where they are and where they want to get to. You don't want to get into an extended conversation about pricing on your first call with a customer. Now, when you get to the place, when you're delivering pricing to the customer, there's a couple keys here. One, when delivering prices, explain the structure of the pricing before getting into the number. You might need to explain, hey, here's the product mix of what you're getting. Here's the billing terms of how we bill you. Here's the agreement length. You want to get all of the commercial stuff on the table and then give the pricing information. If you try to do it backwards, what ends up happening is they get fixated on the number and they miss all of the other information. So share the critical information, share the number, and then do the thing that's hard for me, which is shut up.

So eventually you give price to these folks and you've stayed silent. And there are some times when people will just say, okay, great, sounds good. And in that case, we're not really going to plan for that much today, folks. What you want to do is you want to not make an object for it, and you want to make it seem as business as usual. And all you want to do is slowly prod and poke about the deal process and say, like, awesome. Who do we typically need to get this in front of? Are there any other blockers that you see us from moving forward, et cetera? But usually that is not the pleasant reaction you get. Usually the reaction you'll get is, holy cow, that is way more expensive than I thought it was going to be. In other words, they are going to try to get a rise out of you and they're going to try to rattle you. And in return, what you need to do is you need to put it back on them and you need to act surprise and make it clear that their ask is the one that actually needs to be checked. Nick, what are some of the ways that I can actually do that?

Well, if you're on a zoom, don't forget the power of your facial expression here. You should look concerned. You should be posturing and portraying that you're. You're concerned here. You must have messed something up. If they thought this was going to be so much less expensive. And this has never happened before. You're going to be confused, right? Oh, my gosh. Like, I don't even know how they got to this number. The idea here is you are showing them with your face and your tone of words that, wow, I must have really screwed something up. I don't even know how we got to this place. And so I'm acting surprised, but also confused and concerned and a little bit worried because, well, gosh, if this is where they're at now, I'm going to push them away. And so this transitions to the next piece where I start to push them away. And I might say things along the lines of, gosh, I must have really screwed something up. Armand, if that is really where you guys need this to be, I might actually recommend that you work with competitor X or that you find an option where you guys take a little bit more of the work in house to get this thing solved, because we're not going to be able to get over there. And what I'm doing is I am pushing the customer away. If they are really needing this thing to be half as expensive as what my thing costs, we shouldn't work together. And I want to tell them that right away, because now what I do is I get them to come back to the table and take a step forward. Whoa, whoa, whoa, whoa. Nick. Like, hold on. Like, let's talk about this. The intent here. Push them away. And if they come back to the table, let's start to do some discovery. Remember, the customer came into this zoom interaction expecting a quick and efficient negotiation. And you are not going to give that to them. You are going to drag this thing out and make them work if they get any sort of discount. And you do that by rerouting Their negotiation. Ask back to a discovery call, and you're going to discover, hey, maybe you should go with the other competitor. Oh, no, you don't want to do that. Well, help me understand, like, where do you feel like this thing needs to be? One of the other things you can do is they've asked you for a price discount. They've said we can't do that. Now ask, what other reservations or concerns do you have around working with us? Because I need to understand the full picture of what's stopping them working with us. And it's probably not just the pricing. There might be billing terms or might be other things. And I explain to the customer, I need to understand the entirety of what you feel like isn't aligned with what you need so that I can start to weigh those things and figure out if we even have a path forward.

All right? And so at this point, I've gotten the full ask, and if it's miles apart, what you need to do is, to Nick's point, you've pushed them away and tried to get them to consider another solution, but now what I need to do is I need to get them to actually step back into a reasonable negotiation. Before I even negotiate, my favorite way to do this is to pull them up. And so what you'll say is, look, I just know we're so far off Based on the 17 things you asked for, at this point, I can't even go back to my CEO or my sales manager or my VP of sales with an ask like this, right? Like, I just. I just. I know what can get approved, and I'm. I'm willing to work with you, but I just know we're too far off. So I guess, like, on that basis, is it. Is it fair to say, like, I. I shouldn't even go back and. And make a request, knowing that this isn't going to work. And almost always you'll get a response that sounds like, this sounds like, well, maybe you can do your best, right? Or let us know what you can do. And what that shows to me is they're actually willing to play ball, and they were just anchoring us lower. And now I need to turn the tables back on offense in the negotiation where I need to start saying, like, look, no, I'm not going to, like, go to my CEO and shoot in the dark, right? What I need from you is, look, this is what the process looks like. I've never seen a discount like this before. I've never seen a request like this before. I think you'd be an awesome customer. Between you, me, and the wall, we've got some room here and we can work on some stuff. But I'm going to have to put something on my CEO's desk and on finance's desk that literally says, the customer told me that this gets it done. Because if I come back to you and they ask for something else, they're going to be like, get it out of here. This isn't the right deal for us. And so what I need you to tell me is you told me X, Y, Z were important to you. Right. What I need you to come forward with is what can we actually go towards? And it's not going to be a 50% discount. And now you need to get them to take that step forward. And for the first time, this should happen 10, 15 minutes into the call for the first time. Now we are actually negotiating, but we are negotiating with them taking a step forward first, not with you taking a step forward.

I want to add to what you said there, Armand, which is when the customer asks me for my best price, you don't have the authority to give them. That is what you're doing. When you say you have to go to your CFO or your CEO, you're saying, the other person at my org makes the decision. And when I go back to them, if I go back to them two or three or four times, I'm going to lose a ton of face at my organization. And so I need to know in one clear cut from you, customer, where you need to be. The worst thing that you can do is walk off that negotiation call with the ask being from the customer, give me your best price. But because you're going to come back and you're going to have no idea if that actually gets it done. And that makes it easy for them. Your job is to make it painful for them. The key here is drag this part of the conversation out.

All right, so at this point, we've dragged it out, and it's finally time to start aligning on a path forward. Okay? So once they start to come forward with more reasonable asks, usually I'll be like, okay, before we even talk about any of this stuff, like, let's talk about what. What needs to happen to even make this case. We talked about, like, we need to have an option that you and I agree upon, gets it done in one cut. Okay? But the other thing is, naturally, my team is going to want to know that this is going to get done at the end of the month or the end of the Quarter. Right. And what that means is you and I have discussed that XYZ people need to sign off on it. We need to get through legal. It's going to take us this long, yada, yada, yada. In other words, if today is the first of the month, can you and I commit to a full signature by the end of the month? Because if not, then we shouldn't even make this case right now. Right. And what you need to do is lock in the access to power that you need to get the legal reviews that you need to finish, the security reviews you need to finish, and the ultimate signature date before you give anything upfront. And the reason for this is this gives you the right to later on to rescind a discount if they slip on the timeline that you agreed upon before giving the discount. But if you say, great, I can give you a 30% discount, could you do this by the end of the month? You have zero leverage whatsoever. So always make sure that you get that first before giving anything. Otherwise you're going to have a deal slip and then you're going to give a prospect a terrible taste in their mouth because you tried to take away a discount that you never even got them to agree to a timeline on. So, Nick, I've gotten commitment on when the deal can be signed, who signs off on it, legal, the contract date, et cetera. And they're like, yes, I can get this done. Great. Now we need to start agreeing on what a proposal should actually look like. Nick, how do I go about formulating the proposal back?

So one of the things that we've done a lot during this imaginary negotiation we're talking through is we've given the customer a look behind the curtain of the, hey, here's how we negotiate in my company. I go back to my cfo, and one of the things that a lot of sellers neglect to do is share with the buyer the things that they care about. If you are in a negotiation and the only thing that you're negotiating on is what the customer has asked for, you're actually just giving concessions. You're not really negotiating. And so it's on you to share the things that matter to your company. And so what you should do is make a list of what are the things that your company cares about in a negotiation. It might be timing. Your operations team needs to plan for when new deals are going to come in so that they can implement and onboard those customers. It might be the total number of licenses they buy. If they move from buying 100 licenses to 200 licenses. Chances are there's an economy of scale and you could give them a better unit price for those things. It might be billing terms. Maybe your company wants to get all the cash up front so that they can deploy that cash and do things as a business. Whatever the things that matter to your company are, tell the customer that. And so you say, Armand, any time that somebody is asking for a commercial concession related to the license price, which is what you've asked for, here are the three things that we care about and then explain like I just did, timing, volume, payment terms, I think we might be able to do something with the license price that you're asking for. I don't know if we can get it exactly to the number that you're asking for. But based on those three things that we really care about, is there one in particular you think we should talk about where you think your side might be able to have some movement on. And now what you've gotten them to do is you've gotten them to take a step forward on the things that they can affect. It is not a good use of your effort to push them hard on timing if that's absolutely not something that they can touch. And so understand where they can affect. And now you can start negotiating on that plane. They want a lower license price. You want upfront billing terms. How should we think about now, Armand, once we've started to align with the customer, conceding things or negotiating items.

So there needs to be a cost to negotiation. Okay. And so if you just start giving away price constantly, all that's going to happen is a customer is going to realize there's no cost to me asking for more. Well, why can't it be a 25% or a 30% or a 35% discount? And so the reason that Nick described, you need to create multiple planes in a negotiation is because it's sort of like whack a mole if they want a lower price. What I'm going to ask for in return is a longer term. If they're going to ask for more licenses, right. I might ask for them to include more teams in the deal, whatever it might be. And so what you need to do is not give unilateral concessions. Every time you give something, you need to get something or take something away in return. Okay. The other thing is you need to start to taper your negotiations, okay. And so oftentimes you'll start with the thing that is most important to them. Right? So let's say, for example, it's Price, you might start and you say, okay, if pricing is at 50k, right now, you're asking for 25k. You. You might say something like, I can get a four in front of that. Cool. And they'll say like, oh, that's going to be really, really tough. But what about the other things? And the key thing is you can start to change and taper what you can give, and you can start to say like, look, that's all I can do on pricing. But you mentioned Y and Z were pretty important to you, right? Maybe we can bundle getting this thing around like 40k in line with getting you net 90 billing terms. Do you think that gets us closer? And so you can make yourself seem tapped out on the asks that ultimately hit your pocket and pivot the negotiation to smaller incremental gives until ultimately the negotiation screeches to a halt. Now, there's one last piece that happens here, folks, is sometimes you get into longer negotiations and what you actually end up having to do is you do the first cut, but then you need to go through one more round of cuts with procurement, for instance. And oftentimes a great way to get through it in one final cut is via options. Nick, walk us through how you might construct options in a negotiation.

Part of the reason that you're constructing options in the first place is it's really tough just to sit there and fight and hold the line. You end up butting heads with the prospect or with procurement. And when you give them options, hey, here are three different path forwards. You accomplish two things. One, you actually give autonomy to the other person. They no longer feel boxed in. They can pick door A, B and C, and they're in control. Any of those options they are in control with. But the beautiful thing about this is because you have constructed those options, you're not allowing them to go through doors D, E, and F. In fact, those doors don't even exist. So one way that you might do this is you might say, okay, Armand, the license price will be $100 a user if you buy 100 licenses, but we can get that down to $90 a user if you buy 130 licenses. And if you really want to get the lowest license price, if you get 200 users, we can get it down to $65 a user. And now what you've done is you've asked them to make a decision around what's most important. And is it the total cost of this thing, or is it going to be the absolute license price? You've given them control, but you're also controlling the options that they have. It's like when you go to a Japanese restaurant, Armand, and you try to order a cheeseburger and they say, that's not on the menu. You're not upset about that because that wasn't one of the options presented on the menu. You control the menu, the customer feels happy, and you move to getting a deal done.

Alrighty, folks, and the last piece here. You've now at this point identified a proposal that you think can work for your champion or whoever you're negotiating with, or you've presented options that are palatable and you have a sense of which one they like. Okay, do not drop the baby at the finish line. A lot of times people will go back and what they don't realize is the negotiation wasn't actually done or they didn't make the cut that actually gets the deal done. Or because you went back too quickly, people realized they could ask you for another favor. Right? And so unless they explicitly said this 100% gets it done, I will be signing this contract at the end of the month. There's nothing that will stop it. Power doesn't need to sign off. Finance doesn't need to sign off. Only I need to sign off. What I always recommend doing is get a written commitment from your prospect in return. What that sounds like is, I'm going to say, nick, it sounds like this would get it done. Right. You mentioned, I think we should be good. Can we go and run this option by finance and buy your boss your CMO before I go to my CEO? And the reason for that is this is a really big ask, and I need to know my CEO is going to ask, has their exact team or their finance team signed off on this? And if I can go to them knowing that your team is 100% inked it, I promise you it will give this a much more likely chance of this deal actually getting done. So can you send me an email at the end of the day once you've gotten the green light internally? And that is how you formally, formally, formally lock up your deal. All right, folks, so beginning to end. We talked about finding the leverage in the deal, making sure that it's been budgeted for you, have Power's eyes on it. There's a big problem you're solving. You got to make sure that your timeline is locked up. Otherwise you're going to have to use commercial concessions to possibly create timeline. From there, you give pricing and you stop talking. And most of the negotiation is actually discovery. It's acting surprised. It's understanding why they thought they deserved a discount in the first place. And then it's illuminating the gap between you and the competitors. And then from there, you're slowing down and building up how big of an ask it is to get a discount. And then you're asking them to give you the full request from their side and prioritizing what's important to them and then finalizing your deal by not making unilateral concessions and giving them options to create a cost to negotiation that ultimately drag a deal to the finish line. All right, that's it. Nick, how could people help us out here?

Well, if you listen to this episode, chances are you're not going to be throwing as much of your commission check into the trash can. And so you might want to help your teammates out and say, hey, folks, I'm not throwing my commission check away because I listened to this negotiation playbook episode. You might want to give it a listen to. So share this with your team. Thanks for listening. We'll see you next week on 30 minutes to President's Club.