Sales Negotiation – Know when to let go

Most B2B sales people in New Zealand are not selling a proprietary product or service and are therefore operating within a competitive marketplace, which increasingly means that their customers are focused on extracting value from them as suppliers during contract negotiations.

There are many aspects to a negotiation, but one of the most fundamental factors of a successful negotiation is to know what your walkaway point is.

Each party will have a walkaway point; the customer will have one and you as a supplier need to enter into a negotiation being very clear on what yours is.

The walkaway point is your line in the sand, the point where the customer is asking for something during the negotiations, that you (as a representative of your company) are not willing or able to give them and instead are left with the only option of walking away from the negotiation.

This isn’t just about the price of the product or service; it’s also the aspects of the supply agreement that is of importance to you as a supplier and them as a customer.

Examples may include; delivery frequency, performance guarantees or payment terms.

These are all dependent on your business, your customer and your industry.

Most sales people will enter into negotiations not knowing what their walkaway point is, which means they walk into a game of Poker, not knowing what cards they are playing with, but only how much money they could win/lose.

I don’t gamble, but if I did, I’d like to know what hand I was playing with.

Wouldn’t you?

Well this article is aimed at helping salespeople understand the benefits of having a walkaway point and the importance of planning their walkway point in a negotiation, all with the ultimate goal of giving them greater control during contract discussions.

To make it easier to remember and because I am old school, I have conveniently labelled these under the acronym C.R.A.V.E.

 

Confidence, Respect, Aim, Value, Efficiency

 

Confidence

If you’re sitting across the negotiating table from the customer not knowing what you can agree to, or what your company is not willing to trade, then you are not empowered to make decisions.

As a sales person, if you are not empowered to come to an agreement with a customer without going back and forth seeking approval for a customer’s latest demand, then that means your business doesn’t have confidence in you, your customer will lose confidence in your capability to make a decision and you will in turn lose self-confidence in your ability.

When you enter into a negotiation where you’re not 100% confident in your position, then you’re not in a position of control.

Having a predetermined walkaway point will give you greater confidence when playing your hand.

Respect

This could easily be swapped out for reputation, but in essence I’m talking about the impact of not having a walkaway point defined prior to a negotiation on the perception of you as a sales person, with both your customer and within your own business.

Many sales people (quite rightly) take ownership of a sales negotiation, but they fail to engage key stakeholders in their own business on discussions around what the walkaway point should be; they ‘go it alone’.

This approach is risky on two fronts;

1) If you don’t secure the deal because the customer wanted to go past a predetermined walkaway point (which you haven’t communicated internally), you are then seen as having personally failed to win the deal.  If you engaged others to be part of the discussion, any decision was based on agreed business strategy, as opposed to a personal salesperson failing.

2) If you secure the deal without going to your walkaway point (which again you haven’t communicated), the extra value you’ve negotiated or not given up is not recognised by your business and heightens the risk of you unfairly being seen as ‘having given away the farm’.

From the perspective of the customer; New Zealand being the small market it is and with many sales/procurement people staying within industry, the chances are that your paths with the person you are negotiating with will cross again in the future.

Having a walkaway point (win or lose) will indirectly show that you’re a professional and demonstrates that you had a limit to being pushed and didn’t just roll over to secure any deal; you have set a precedent for the next negotiation.

Aim

I know that as a salesperson you want to win, but some new business is more hassle than its worth in the long run.

It’s important to understand the aim or purpose of winning this particular deal other than just the dollars.

Perhaps it’s strategically important to the business, as it will mean access to another sector or open doors to other product or service offerings.

The walkaway point helps you and your business truly define the purpose of the negotiation, which will clarify whether this is a deal you, need to win, or just want to win.     

The perception is that sales people like doing any monetary deals, when the reality is that good sales people like to know the deal they are doing actually means something to the company they are working for, other than just the dollars it brings in – Recognition

Isn’t it better to know what this is before the negotiation, rather than afterwards?

I do, as I feel it will make you hungrier to succeed.

Value

Probably the most obvious reason to have a walkaway point in the first place prior to any negotiation, is to know what the value of any deal is worth to your company.

Not just the profit your company will make by winning the business, but also the cost to your business in not winning the deal.

If you know what value you want to achieve at a minimum to make it worthwhile business, factoring in all the other variables such as risk, cost to service and projected growth etc. then you are in a clearer headspace going into a negotiation.

Many companies try and keep their sales people in the dark around what their company walkaway point is and will add a buffer into the walkaway point, worried that the sales person will go directly to that point and relying on the opportunity to submit a revised counter offer.

The problem there is that if you as a salesperson aren’t going into a deal knowing what your company knows, then you not united and are thus weaker in the negotiation.

You and your company must have done the due diligence on the value in the walkaway point and be transparent on the approach in the negotiation.

United you stand, divided you fall.

Efficiency

The last of the 5 important reasons to have a walkaway point in a negotiation is efficiency; efficiency of your own, your company’s and your customer’s resources.

Rather than negotiating on the back foot and in a reactive manner, you should have done all the planning or upfront investment beforehand, so that you aren’t wasting energy, time or money on relaying requests for approval from management, more information from customers or pricing updates from Finance.

Don’t be the ball between your business’ and the customer’s racquet.

Planning and preparation may indeed take time, but at least you can do it at your pace, without the emotional and time pressures that occur during contract negotiations.

You’ll take better control of the game.

If you have a walkaway point ready beforehand, then you’ll waste less of the most valuable resource you have as a sales person which is energy.

 

So to summarise;

Knowing your walkaway point before beginning negotiations and being aligned with your own business on the what, why and when, will keep the pressure on the other party and give you some much needed control at the negotiating table.

As a real B2B sales person, you should C.R.A.V.E. a walkaway point prior to any negotiation.

Many thanks again for reading this article.

See you next week.

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