6 Common Sales Negotiation Mistakes & How to Avoid Them
If just getting to the sales negotiation stage of the sales process feels like a marathon, what does it take to cross the goal line with terms and pricing that everyone agrees on? There are plenty of missteps, pitfalls and trap-doors that salespeople have to navigate and be aware of when it comes to running a successful sales negotiation. Here are six common sales negotiation mistakes made by staffing professionals and how to avoid them.
6 Common Sales Negotiation Mistakes and How to Avoid Them
1. Failure to Prepare
Going into a sales negotiation unprepared is a recipe for disaster. If you want to walk out of your negotiation with poor and unfavorable terms such as reduced pricing and take a cut out of your commissions, not preparing is the shortest and easiest path. For most salespeople, it’s hard to stay focused and think clearly when on the hot seat, especially when operating without a clearly defined sales negotiation plan. To ensure you’re properly prepared to negotiate, salespeople should make the following decisions prior to any negotiation:
- What do you want vs. what do you need?
- What is it you’re asking for from your client? You are asking for something, right?
- What concessions are you will to make?
- At what point will you walk away from the deal? If you’re not prepared to walk away, you’re not prepared to negotiate.
Repeat the exercise only do it from the perspective of the customer. Think about what it is they might want from you. What elements of the deal might they perceive as risky and how might you mitigate those risks? What do you have to offer them that they want? On which negotiation topics do you think the customer may have some flexibility and which do you think they have no flexibility? The point of the exercise is for the salesperson to anticipate the client’s needs and overall objective which will aid in coming up with a win-win agreement. Finally, you should also prepare for and develop strategies and rebuttals for their anticipated objections.
2. Never Negotiate Before the Buyer Can Commit
A common sales negotiation mistake is trying to negotiate too early in the sales process, before the client or candidate can commit to mutually agreed upon terms. A common example of this is with contract-to-hire job orders in which the client asks the sales rep to commit to the candidate’s first year salary (at the time of submittal), before the candidate has even interviewed.
You don’t want to give up any leverage or weaken your position this early in the process. What if your candidate knocks the socks of the client in the interview and the client decides they’re so good they would pay the candidate 20% more than the agreed upon salary? Because the salesperson already committed to a lesser salary so early in the process, the sales rep is now prematurely leaving money on the table.
It's not uncommon for hiring managers to ask about hourly rates, salary, fees, contract terms and possible discounts when taking the job order or submitting a candidate, so you shouldn't evade their questions. However, don’t feel that you must commit to anything until you know you the client can commit. Until the client can agree and commit to the terms being offered in the negotiation, there is nothing to negotiate.
To be clear, by “committing” the customer should be committing verbally on the phone in the conversation followed up with a written agreement within 24 hours. You might say something like: "This discussion is a little premature -- let's focus on seeing if the candidate is a good fit before we get into the weeds on salary and conversion fees." Or, "How do you feel about tabling this conversation until after the interviews? Once we learn more about how the candidate can impact your team and project we can establish a fair and equitable salary."
3. Let the Customer Talk, Don’t Dominate the Conversation
For most salespeople, negotiations make them nervous and this is often manifested in restlessness, twitching body movements, unnecessary chit-chat and sharing too much information which often weaken the salesperson’s position. Talking too much is an unmistakable sign of nervousness -- and if the buyer can tell you’re anxious, they’ll be more aggressive, kind of like a shark smelling blood in the water. With sales negotiations, the salesperson gains leverage by saying less. The key is to stay calm and in control during sales negotiations. I have found through my experience that sales reps who ramble nervously end up making unnecessary concessions. Perhaps this is more psychological as most salespeople are overly concerned with being “liked” by the client. They fear by asking for a concession the client will no longer like them which of course is complete nonsense. The point is, if you spend most of your time listening to the client-rather than talking-you will be far less likely to make unnecessary concessions. Most important of all, by letting your customer do the talking you will gain deeper insight into what they’re thinking, what is important to them and why those things are important to them. Gaining insight from the customer will allow you to position a win-win solution.
Speaking of making unnecessary concessions ...
4. Never Give Anything Without Getting Something in Return
Salespeople who agree to their customer’s demands are weak, right? Wrong. Most if not all negotiations require concessions on both sides. Agreeing to a client concession doesn’t make the salesperson weak. However, negotiations are supposed to be win-win. There is no winner or loser in a successful negotiation, so the salesperson shouldn’t give anything without getting something of equal value in return.
For example, if your client agrees to hire your candidate but only if you reduce the already mutually agreed upon bill rate by $5.00 per hour, the salesperson should only comply to do this if they get something in return. Remember any reduction in your bill rate (without reducing your costs) represents a transfer of profit from your company and your personal pocket to your customer’s pocket. Therefore, salespeople must prepare for negotiations in advance and plan for what they will ask from their client in return for making a concession.
5. Make Your Customer Feel Like They’re Winning
Not only should salespeople be prepared to concede on some client requests, but they should actually “build in” a couple “wins” for the prospect. Nobody wants to feel like they lost a negotiation. After a negotiation both the buyer and the seller want to feel good, like they won something. Salespeople should try to create a few points or offer a few items of value which will make the prospect feel like they've won something.
Finally, don’t think of your customer as your opponent, remember that they’re your partner. This is the time to be collaborative, not competitive, which will make finding a win-win solution much easier.
6. Don’t Expect the Buyer to Take the Next Step
Once an agreement is reached it is up to the salesperson-not the customer-to have a system in place to get the contract signed and invoice sent out. Ideally the verbal agreement and formal execution of the contract would happen simultaneously to avoid any delays. The longer you wait to get the contract signed the more likely it is the buyer will change their mind about the exact terms. To avoid putting your deal in danger, get the contract signed ASAP. If you’re having this conversation in person, make sure you are prepared so that the contract can be signed by both parties on the spot. If the conversation takes place over the phone than you can and should do a screen share in which you share the contract with the client via Docusign (or other automated contract management software) and they watch you sign and you watch the client sign. In some cases, you may need your manager, owner or legal team to look over the terms before signing which is why those parties should be invited to the negotiation in advance. Again, we want to avoid any delays.
By avoiding these six common sales negotiation mistakes, both you and the prospect can walk away from the negotiation table feeling victorious.
About Dan Fisher
Dan Fisher is founder and owner of Menemsha Group, a provider of sales enablement solutions dedicated to helping IT staffing firms improve win rates, shorten their sales cycle, and increase revenue per sales rep. Since launching Menemsha Group in 2008, Dan has consulted with over 200 IT staffing firms and has invested over 5000 hours coaching IT staffing sales reps. He’s authored is his own proprietary sales methodology and has previously spoken at Staffing World, TechServe Alliance and Bullhorn Live 2012. Prior to launching Menemsha Group, Dan spent 16 years in the IT industry running local, regional and national sales teams. Dan worked for Kelly Services, Oracle Corporation and Alliance Consulting. Dan currently resides in Boston, Ma.