There are hundreds of books on how to negotiate. You can spend a year reading them all to become a great negotiator. Or you can do the one thing that will give you the upper hand in every negotiation: be willing to walk away.
I spoke about this during my negotiation workshop at the Heureka Conference in Berlin earlier this month:
Before you walk into any negotiation, you need to know at what price you'll walk away from the deal. Before you start negotiating with anyone, ask yourself:
"At what point will I walk away from this? Where isn't this a good deal anymore? Where do I draw the line in the sand that I won't cross?"
It always surprises me how few people set their price in advance. It makes life a lot easier and will turn you into a much more effective negotiator.
Simple, but hard
This sounds almost too simplistic, right? Can something so plain really be the key to working out better deals?
I believe it is. You don't need to be a fancy rhetorics, clever, persuasive tricks or complex strategies to be a great negotiator. Just know at which point you'll walk away.
Don't take my word it. Give it a try. You'll find that while this is easy in theory it's hard to practice.
It's hard to manage your emotional investment into any given negotiation in which you're involved. Fears of losing out will whisper into your ear. Your insecurities will weaken your resolve. Doubts will try to break you.
The hardest person you'll ever negotiate with is not some slick Wall Street dealmaker - it's you! There's an "anxious little teenager area" in your brain that's really good at inspiring you to make stupid choices, and the higher the stakes, the louder and more forceful it will become.
Win-win, win-lose & real life
Some people walk into every negotiation trying to get everything they can out of a deal. They don't care if it ruins the other side or makes them unhappy. They just want as much as they can get.
If you don't know the price at which you're willing to walk away, these people can eat you for lunch.
Trying to reach a 100% win-win is noble in intention, but nothing in life is really absolutely balanced. The scale is always tipped in one direction - and you want it to be yours. Just a bit.
What's the real goal of any negotiation?
Any negotiation you engage in should ideally lead to a long-lasting, profitable relationship between you and the other party. Avoid one-time transactions. You can't do this if you're screwing the other side over. Both parties need to get more good out of the deal than they put into it.
What happens when you're not willing to walk away
If you don't establish your price before engaging in a negotiation, it can wear you down and cause you to make concessions you shouldn't make. If you don't draw a clear line in the sand before you enter the deal, it's too easy to talk yourself into accepting lousy terms just to close this deal.
"It's just an exception."
One of the most common justifications I see sales reps bring up for closing lousy deals is that this is an exceptional customer. Don't make exceptions. That's why you draw a line in the sand.
If you want to close a deal offering one customer better terms, then you need to redraw the line for every customer. This becomes even more important as your sales team grows and your sales process scales - managing dozens of people who all bring you exceptional deals is a big mess you don't want to deal with. It's just not worth it.
How Close landed it's first big enterprise customer (without trying)
Shortly after we launched our sales software, we drew our line in the sand and nade a decision:
"We're not going to do any enterprise sales, and we're not going to engage in complex sales cycles with big customers. We'll treat all our customers equal, whether they're a huge corporation or a tiny startup."
There was a reason for this: we knew how enterprise sales worked, and we didn't want to play that game.
Guess what happened soon thereafter?
Huge startup told us they wanted to have their sales team use our software. We liked this company, respected the founders and the product.
But we know that a company that size could be trouble. Remember, we had drawn a line in the sand. So we asked them: "Well, are you sure that this software will fulfill all your needs? It seems that for such a large organization, there are better solutions than ours."
Huge startup: "No, no, we love your software! It's perfect. We want to buy it!"
"But we won't offer you any fancy customizations. We've got our product roadmap and will stick to it. So if you have any pressing feature requests, we'll, of course, listen to that, but we won't focus our engineering resources on building stuff for you."
Huge startup: "No, that's ok, it's perfect as it is now! This is going to be great, and you guys can use our logo and we'll be a great reference customer, BLA BLA BLA."
A few days later, huge startup speaks with us again: "You know what, before we buy, there's this tiny little thing. Just this one feature. It's nothing. You'll have to do this anyways. We're just helping you to do this at the right time, which is now. Right? We need you to do this little addition to your product."
"No. Sorry, as we've said, we're not going to prioritize your feature requests over our product roadmap."
Huge startup: "Well, ok... but, we need this other little thing. You really need to do this. Otherwise, we can't buy."
"That's a great idea. We totally hear what you said. It's a great idea, it's on our roadmap, it's something we want to do down the line, Q3, Q4, it's just not a priority right now, but thank you very much, we'll discuss it with the team, but right now, this is the product."
Huge startup: "Listen, this is a tiny feature request. We love your product. But we can't buy if you don't give us this."
We went through several rounds of this. They requested a feature that was required to make the deal happen. We kept saying no. They threatened to pull out of the deal. We wished them good luck.
Now internally we weren't as cool as that. We were scared of losing this giant, delicious deal right in front of us.
But we had drawn our line in the sand.
At some point, they said: "Ok, we're willing to make this happen, even though you've not committed to building any of the features we want. But your pricing is ridiculous. We're not going to pay that. Just think about how many seats we'll add, that's a ton of money even after a 50% discount."
And they were right. It would have been a ton of money. Some people on our team were very tempted to take it, even at a huge discount.
But... line in the sand.
We were profitable. Our company was growing fast. We didn't need this deal to survive and thrive.
So we told them: "This is the best price we can offer." (This was our standard pricing for customers of their size). "I know you want 50%, but we can't do this, it wouldn't be fair to our other customers. You take it, or you leave it, and if you leave it hopefully down the line we are going to be able to work together."
They didn't buy.
We had lost the deal.
At least that's what we thought.
A couple of days, we get a notification. Huge startup had entered their credit card and bought all the seats they wanted to buy.
"We're not going to buy if you don't X, Y, and Z."
Some prospects will try to pressure you by dangling a carrot in front of your face, and then pulling it away, telling you:
"I'll buy, but only if you do this and that for me. And if you don't jump through this hoop and that hoop, we're not going to buy."
If you're faced with that, look at the line you drew in the sand. Do you have to cross it to make the deal happen? If the answer is yes, just walk away.
"If you make these changes, we'll send you a check."
Zach Holman shared a great story on his early days at Github.
An enterprise prospect liked their product but wanted some extra features. They sent Zach an email:
"If you go ahead and make those changes, we’ll come on board and send you a check for $75,000."
He's written about the anxiety it had caused him to say no to their request.
And the surprise when they responded:
"Cool, no problem. My boss made me ask that. We’ll have a check in the mail later today."
But even if they'd not have bought at that time, it would probably have been the right choice.
"While all of their needs combined wouldn’t take more than a day or two of development time, most of them were requests that were pretty obvious we didn’t want to add to our product. [...] everything you add to your product dilutes everything else." - Zach Holman
When are you willing to walk away?
Answer that question before any negotiation you engage in. It'll help you to stand on firm ground even with parties more powerful and well-versed in advanced negotiation techniques.