Why are we so uncomfortable negotiating for our small businesses or professional services?
It’s probably because we live in a culture where the price is the price, and we’re not used to haggling or even questioning price.
But when you are in business, you have to get used to that. Outside of a retail store, most things are negotiable, especially when it comes to business products and services.
If you’re trying to win over a new client without going in the hole on your pricing, or if you’re lining up a new supplier, these negotiation tips will come in handy:
- Know Your Bottom Line. Always go into a negotiation with a good sense of what is acceptable — and not — to you. What is the highest amount you can budget to pay? Or what is the lowest price you would accept if you are the seller? Knowing that helps you set your starting point for negotiations, and lets you enter discussions with a plan and a guideline. Also, consider non-financial points. There may be elements of a deal that are deal breakers (such as length of commitment, or quality of services provided). Money isn’t everything in business.
- Identify the Other Side’s Needs. You not only need to know your own bottom line, but try to find out what’s REALLY important to the other side. What are their needs? What are their deal breakers? To figure this out requires back and forth discussion. How much discussion depends on how complex and large the deal is — it may be a little or a lot. Don’t assume. Probe. Ask questions such as “What questions do you have for me?” and then listen closely for the other side to signal what’s important to them. Or you could get even more pointed by asking, “What would it take to make this deal today?”
- Be Willing to Negotiate for Volume or a Long-term Relationship. If the other side can commit to multiple products or sign a multi-month agreement, that has value if you are the buyer. You may be able to lock in lower prices and avoid price increases. Or if you’re the one quoting the price, a long-term commitment may be worth giving a discount for, because you are assured of a certain level of volume. After all, a bird in the hand, as the saying goes.
- Decide if You Even Want to Compete on Price, if You Are the Seller. Many small businesses don’t. So if you have a potential customer who refuses to pay what you know you’re worth, this isn’t the customer you want in the first place. Focus on those that appreciate the quality you deliver at the price you charge.
- Offer Limited Features to Fit the Budget. Let’s say a potential client for your social media marketing firm says his absolute budget is $500 a month. You charge double that, but you want this client.
Consider offering fewer services at his price point. He’ll do one of three things:
- Be happy that you can help him within his budget
- Want more and find the money to pay you for it
- Go somewhere else
He’s most likely to do one of the first two items, so you get a new client without sacrificing the value of your time:
- Offer Multiple Price Points to De-Risk for the First-Time Buyer. If you are the seller and you sell high-ticket services, you will probably want to offer something at a lower price for first time buyers. After all, they are taking a risk. Give them something small and lower-priced to buy, and it may make it easier for the buyer to say “yes.”
- Don’t Devalue Your Worth. If business has been slow, it can be tempting to take on lower-paying projects or discount your products heavily. Sometimes this is unavoidable, but before you cut your value down, consider the long-term repercussions: if you’re signing on a client for several months or years, how will the deep discount affect your company when business picks up? Negotiation isn’t about allowing yourself to be beaten down to the point that you resent the other side.
- Approach Negotiation With an Open Mind. Negotiating with a customer isn’t about one person “winning.” It’s about two parties finding common ground so that the two feel like they are getting what they want. If you approach it as an antagonistic situation when one side has to lose, it doesn’t present a good foundation for recurring or follow-on business.
Be confident when negotiating, and you’ll end up with more success. Go out of your way to meet the other side halfway so that you both have that sense of accomplishment in the transaction. This will help your business relationship moving forward blossom.