The art of negotiation: how to compromise without compromising your business

So, do we have a deal? You’ve delivered your pitch to a prospect and all the signs look promising. But now comes the tricky part. They’re ready to come on board with your business — so long as the price is right. Here’s our guide to the art of negotiation: 

An element of back and forth over things like price, timing and what’s included in the deal is necessary if you’re to reach an agreement that all parties are happy with. This applies across the board, whether you’re catering for your first big event, designing an app for a brand, or discussing the terms of a plumbing installation.

It’s quite natural to feel outside of your comfort zone when negotiating for the first time. Particularly when dealing with one of your first clients, the temptation to say ‘yes’ to whatever’s on the table might be almost irresistible — which is hardly surprising, given the hard work you’ve put in to get you this far. This is where negotiation skills must come in. Crucially, you need to be clear on what your own position is, and know enough about the other party to anticipate what their position is likely to be. It’s about exploring common ground to reach a deal that makes good business sense.

Much of the art of negotiation is linked to the preparation you put in before you actually come to the table. Here, we’ll illustrate what’s required to help you come away with a deal that’s right for your business.

Understand what the client is looking for

In many industries, it’s normal practice for the new client to outline their requirements for the salesperson to consider before they can come back with a detailed proposal (i.e. the pitch). If there’s any ambiguity here, seek clarification on precisely what‘s needed. Failure to do so could mean that you fail to deliver a pitch that’s deemed acceptable by the client. From a negotiation point of view, it could also mean that you inadvertently agree to terms that do not properly reflect what’s going to be required — in terms of timescale, or materials to be purchased, for instance.

As part of this, it can also be worth your while to try and identify and suggest additional product or service features to add to your offering. Choose things that will benefit the client, even if they haven’t yet realised it themselves. For this, it’s important to do your research. If it’s a business client, this might involve looking carefully at the company’s website and social pages. Learn as much as possible about what type of activities they are engaged in and where their priorities lie.  

Clarify your bottom line

Think of your bottom line as a protective measure for your business. If the terms offered by the other party are less attractive to you than your bottom line offer, then accepting what’s on the table means you’d be giving away too much and receiving too little.

You can usually calculate your bottom line when you are in the process of putting together your pitch. Pricing each component of the job is essential; if you are going provide a set price for the job, make sure you have included a breakdown of all the different elements. For an hourly rate, make sure that rate is a true reflection of all costs to the business of carrying out the work — being especially careful not to forget overheads.

Likewise, be absolutely clear on the time you’ll need to complete the job before you enter into a negotiation. Make sure your bottom line time estimate does not mean that you won’t meet your other business commitments.

Define your optimal terms

Your optimal terms are your best case scenario; and should comprise the offer you will put to the client at the beginning of the negotiation. While it’s true that you should go in high at the beginning in anticipation of being knocked down, this is not the same as plucking a figure from the air.

Your optimal terms must be supported by evidence, however. For instance, if your optimal hourly rate is higher than some of your competitors, you’ll need to provide justification for this. List the reasons why your work necessitates an uplift — because of the extra element of craftsmanship, for instance, or because you’ll be able to offer more personal service and support. Make sure that these reasons are reflected in your pitch. If the other party queries the difference between your offer and the rates charged by competitors, you can then refer directly to what makes your offering stand out.

Define your BATNA

BATNA is a negotiation theory terms that stands for ‘Best Alternative To a Negotiated Agreement’. So, in the case of a sales negotiation, failure to reach an agreement on a big contract might mean that you free up more time to add value on an existing contract — or to commit to marketing, or a new product range.

Defining your BATNA is an important psychological tool that works for your own benefit. It helps you to realise that it’s not the end of the world if you don’t reach the right agreement, and can stop you from getting caught up and agreeing to terms that are below the bottom line.

Deliver a counter-offer

When given an alternative offer, try countering this first of all by offering something you know will be valued by the client, but that does not compromise the value of the contract to you. So, instead of agreeing to a lower fee, you might suggest providing additional one-on-one staff training, for instance.

Sensing how important the contract is to you, the other party might take up a ‘take it or leave it’, hardball approach. If this is the case, try coolly reminding the client how your figures were reached, highlighting the benefits of your pitch offering. Remember that the other side has a business need for your product or service. Likewise, you have your own business priorities, and once you have established that you are unable to accept a particular deal, knowing when to walk away is also important.

A sales negotiation tends to be the end point of a pitch, and once concluded, it should mark the beginning of will hopefully be a valuable partnership. You’ve reached terms that both parties are happy with — and now it’s about maintaining a good working relationship. Effective client communication is key: you can learn more about this through browsing our Help Centre.

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