Negotiation Ninja Says: in the end game closing, forget your chess skills and play poker May 2, 2014Posted by Bernard Lunn in Deal-making, Enterprise Sales.
Tags: closers, closing, enterprise sales, negotiation
This is post # 7 in a serialized book called Enterprise Sales for the Digital Age. You can get value from each post in isolation, but if you really need to understand enterprise sales, it is worth reading the whole series. You can buy an improved version, neatly printed and bound, for $6 from Amazon.
I have used the analogy that enterprise sales is like chess with a beginning (get leads), middle (prove fit to requirements) and end (close the contract). In the closing phase, the game becomes more like poker where, as James Bond says in Casino Royale, “you don’t play your cards, you play the person sitting opposite you”.
“Closers” are rightly prized. Weak closers “snatch defeat from the jaws of victory”. They give up a great technical/functional advantage to let a strong closer from a competitor snatch the deal.
There are so many books, courses, seminars and theories about negotiation. Much of it “does not stick”, because in the heat of the moment you need to make instant decisions. This is where experience and an aptitude for negotiating count. However one way for negotiation tips to stick in the mind is to relate them as stories, particularly stories where somebody screwed up really badly or did something clever to gain advantage in a difficult situation. These are the Negotiation Ninja Says tales.
#1: Negotiation Ninja Says “don’t throw away the cards that have no value to you”.
As a sales rookie I was reviewing the key issues before a major contract negotiation. With my boss, I made a list of a) showstopper issues and b) “not a big issue for us” clauses.
During the meeting one of the “not a big issue for us” items came up. My boss said;
“Hmm, that is difficult. Do you mind if my colleague and I step out of the meeting to discuss this?”.
I walked out thinking WTF; why make so much fuss about a clause that did not matter to us? When we were alone my boss said:
“So what do you think will happen in the cricket today?”
We spent 10 minutes talking about cricket. The idea was simply to make them sweat about a point we were willing to concede so that we could trade it for something we wanted.
# 2: Negotiation Ninja Says “test how nervous they are with something silly”.
A few days before signing a deal, we were deep in the legal weeds. We were a tiny startup being acquired by a behemoth. We had a lot at stake, so we were nervous.
There was a ridiculous amount of legal Due Diligence stuff. One question was “have you told your spouses about this deal and are they in agreement?” This must have come from some earlier deal where a spouse had created a post-acquisition legal problem. In our case, our spouses just wanted us to close the deal so that we could pay bills and take a holiday.
My partner said:
“Actually we might have a problem there. I have not told my wife about this deal”.
He was not trying to be clever, he was just tired and cranky and wanted some fun.
Even though this was on a conference call, the tension on their side was obvious. The message was clear – the buyer was just as tense as we were, they wanted this deal to close as badly as we did.
In hindsight, we should have done this testing of their nerves a bit earlier. Not too much earlier when everybody is calm (because less is at stake at that stage) but early enough that it could be used to gain some negotiating leverage. The frayed nerves, the raised voices, the table-thumping, these are all signs that a deal is closing. You know that you are stressed. Find low risk ways to test how much they are stressed, to see how much leverage you have.
# 3. Negotiation Ninja Says after high or lowballing, use the blind pig stare and offer a mint
I had given the prospective buyer our price. I was highballing, had set a high price. He just looked at me. Did not say anything. Gave me no reaction at all. Just kept on looking at me. I call this the “blind pig stare”. This made me nervous. The inner “monkey mind” was saying “OMG, I blew it, set the price too high”. The temptation to fill the silence was intense. The temptation was to say something like “it’s all negotiable of course”. I was not a rookie at that stage. I took a deep breath. I took out a mint and offered him one. Normal politeness made him say “thanks”. The tension was broken, we started talking, found common ground and closed a deal.
# 4. Negotiation Ninja Says “on the signing day, don’t blow it by talking about anything more substantive than the weather.
It was signing day, scheduled for 9am. There was nothing more to do, just go there and sign. The two bound documents were in front of us. I said something that prompted the buyer to ask me a question. I did not have an immediate response, needed to check with somebody. He said “let’s reschedule signing to 9am tomorrow”. Later that day something happened that was totally “out of left field”, beyond any of our control. The deal was not signed the next day. In fact, it never got signed. The moral – on signing day never talk about anything more substantive than the weather.
# 5. Find somebody to be the bad guy or volunteer for the job.
Deals can fall apart on price. Despite all the kumbaya win/win negotation talk, price is still one thing where the buyer wants low and the seller wants high. Sometimes you just have to dig in your heels and say no, to walk away from the negotiation. That bruises the relationship. Somebody on the team has to be the bad guy. That usually falls down to a VP Sales type person. You want the sales executive to maintain a warm relationship and you want the CEO/Founder to do the same. You are all agreed on the strategy and the risks of losing the deal, the only question is who will be the bad guy? This is tougher for young startups with a flat management structure. Make sure that any VP Sales you hire understands that occasionally being that bad guy is part of the job description.
# 6. Once you start a bluff, any sign of weakness blows the whole deal
The company was one week away from not making payroll. There was one mega deal in negotiation. We had set a high price. In negotiations, the Founder/CEO refused to budge one inch. I knew what was at stake and knew that giving say a 20% discount (on license fees which were 100% gross margin) would have enabled the company to survive. When he was asked why he refused to budge he responded “If I had shown the slightest sign of weakness the deal would not have closed. They had to see us as the best, most powerful vendor in the market or they would have got nervous about our ability to survive”. The deal closed and the company went on to great fame and fortune.
This is poker in its purest form.
Once after that, with similarly high stakes, I have had to take the same stance. It worked. It does not always work; but what definitely does not work, the sign of a weak poker player, is starting off betting high, acting super confident, then later in the same hand pulling back and “going all wobbly”.