How To Negotiate Final Terms

Last Updated May 4, 2007 4:13 PM EDT

Q: When is a close not a close?

A: When there’s still some negotiating to be done.

Theoretically, a close means a handshake and a done deal, but in practice, a close often signals an intent to buy -- providing you can work out the final terms.  And here's one of those cases where the devil is truly in the det...ails.

Most sales pros hate negotiating final terms. In their minds, they've already won the sale and don't want to see it  disappear at that last minute. As a result, many a sales pro turns suddenly into a “doofer”, a person who gathers up customer demands and runs back to headquarters to see what the company can “do for” the customer.

A while back, I was discussing the "doofer" phenomenon with sales guru Randall Murphy, president of the professional development firm Acclivus Corporation. Based on that conversation, here are six rules for making sure that final negotiations don't derail the deal:

  • Rule #1. Establish your credibility throughout the sales cycle. From the beginning of the sales process, constantly search for ways to enhance your legitimacy by helping the customer to clarify needs, define solutions and winnow those down to the single best one. As you help the customer focus, you add value to the customer’s decision-making process, helping the customer to value your ongoing contribution.  That, in turn, will make it more difficult for the customer to walk away from the final deal if the terms aren't exactly what the customer would like. 
  • Rule #2. Develop at least three additional customer contacts before negotiating. When you're negotiating, you need to know not just what's important to your primary contact, but to the entirety of the customer's firm. Having multiple contacts helps you develop a deeper insight into the wider needs of the customer organization, and allows you to better understand what's really negotiable and what's not. However, develop these contacts long before you’re at the point of negotiating.  If you wait too long, your primary contact is likely to see your sudden interest in additional contacts as an attempt to bypass your customer's authority to negotiate.
  • Rule #3. Eliminate the competition before closing. During negotiations, customers sometimes threaten to go to a competitor. That's only a reasonable gambit if you’ve been foolish enough to negotiate before you’ve removed the competition from the picture. Think of the moving a sale towards negotiation as the process of eliminating the customer’s options.  At the beginning of the sales cycle, the customer is open to multiple solutions, but over time it's your job to convince the customer that your offering is the only one that can adequately meet the customer’s needs.  Don't negotiate until you've gotten confirmation that the customer has no acceptable alternative.  
  • Rule #4. Remember that it’s a negotiation, not a competition. It’s both common and easy to think of negotiating as a win-lose proposition, where concessions are viewed as a victory for the opposite site and the emphasis is on winning at all costs. However, competitive negotiations always end up with hard feelings and a weaker relationship.  Instead, think of negotiating as a way to align the goals of two organizations so that the final deal moves both agendas forward. This is more than just compromise; it’s deciding, prior to negotiating, that the relationship is important enough that it’s worth the extra effort of find a way for both sides to win.
  • Rule #5. Don’t be afraid to put the relationship at risk. Customers will sometimes take negotiating positions that, if written into the final deal, would simply not make any sense for your firm. When this happens, you’d be crazy to give in, even if standing firm might kill the deal.  Think of it this way: if you cut a deal that's unprofitablefor your firm, it’s only a matter of time before the relationship goes south. For example, a salesperson who gives massive discounts will only have an angry customer when that customer is eventually (and inevitably) told that he’ll have to pay full price in the future.
  • Rule #6. Never give in to last minute demands. Those little “gotchas” that appear magically after you think you’ve negotiated the final deal range from merely irritating (“can we pay 30 days later?”) to the disastrous (“my boss wants an additional 25% discount.”) While such demands sound like real deal-killers, most of the time the customer is merely testing you to see whether the negotiated deal is fair. If you give in to a last-minute demand, you’re telling the customer that you were about to give them a lousy deal.  Your credibility will suffer and the customer will never trust you again.  If you stand your ground, though, the customer will be relieved and take it as evidence that they've already negotiated the best deal possible.