- A successful sales contract negotiation is built on trust and transparency between the seller and buyer. Relationship-building doesn’t start at the negotiation table, though — it begins at the outset of the sales process.
- Hesitations happen. If a buyer asks for a discount, use the request as an opportunity to solve other problems through an upsell or increased commitment period. If they ask for an extended opt-out period, pause and assess the root of their concerns. Somewhere along the way, miscommunication about the value of your product or service took place.
- Look out for when the give-and-take of negotiation becomes one-sided. If one party is only demanding rather than giving, it might be time to walk away.
So, you’re nearing the finish line of the sales process. When your prospect has a contract in hand, it’s time for the age-old tug of war: negotiation.
A strong sales contract negotiation can result in a win for both the buyer and salesperson. Or it can be a grueling process that shortchanges one party.
How can you negotiate effectively in a way that not only closes the deal but actually strengthens your relationship with your buyer? The team at Contractbook knows a thing or two about starting and finishing a negotiation well.
Ollie Whitfield, Demand Generation Team Lead at VanillaSoft, facilitated a Growth Month conversation with Contractbook’s VP of Strategy, Alex Irschenberger, and Head of Global Revenue Operations, Michael Canty.
Alex and Michael shared the good, the bad, and the challenging aspects of sales contract negotiations. Read on to learn how honesty and transparency lead to better relationships, better give and take, and better deals.
The mark of a successful negotiation
What’s the hallmark of a successful negotiation? According to Alex, it starts with laying the groundwork long before the negotiation begins.
“Negotiations often reflect the trust level and the transparency you have between the parties,” Alex says. “The more transparency and the more trust you have … the more smooth the negotiation will go.”
Building trust with a prospect starts from your first meeting with them — long before they have a contract in hand. In fact, the negotiation actually begins when you start building value and demonstrating how your product drives results, Michael points out.
Displaying honesty and transparency from day one of the sales process lets potential buyers know they can count on you until they sign on the dotted line. These qualities set you up for negotiation success.
Another benefit of transparency is that it can result in a smoother approval process for your buyer — and a shorter sales cycle for you.
“The easier it is for your prospect to understand what you’re sending to them, the less likelihood … [of needing] to involve legal, too many managers, or operational people,” Alex explains. Additional internal involvement can complicate and prolong the decision-making process.
Alex recommends diligence in creating everything from your general terms and order forms to data processing agreements. “There’s a suite of things that your prospect needs to consider,” he says. “Building that up in a super transparent, easily digestible way will get you a long way.”
Harnessing hesitations to close the deal
For even the most seasoned salesperson, it can be trying to navigate two common (and frustrating) buyer requests during sales contract negotiations: discounts and extended opt-out periods.
Alex and Michael have guidance for each of these potential hurdles, but once again, it all comes back to trust.
When a buyer requests a discount, Alex first acknowledges that this desire is human nature — and often tells them he would ask for a discount in their position as well.
Building on the existing relationship, he explains to the customer that an immediate discount would place distrust in their pricing model. “If I could just give you a 50% discount right now, how would you ever trust anything we’re doing?” he asks, adding: “But that doesn’t mean I don’t think we should meet each other.”
Alex recommends, beyond the go-to approach of trading a discount in exchange for a case study or marketing materials, trying for a higher contract value by adding more to the deal. For instance, return to a problem the buyer mentioned during discovery that you could solve by bundling with another product or including another solution in the price.
Alternatively, leverage their discount request to extend their commitment period. If you’re selling a subscription, for example, offer two months free in exchange for a 24-month contract. “The objection may not be to the price, generally speaking. It’s the price for what is being given,” Alex says.
What if a buyer asks for a longer opt-out period? If they’re asking for more wiggle room to cancel, Michael’s first step is to pause and understand why.
“If there is a request for a six-month opt-out or [they say,] ‘we only want to try this for a quarter,’ something broke down well before we got to the negotiation table,” Michael says. “There was a lack of understanding that we didn’t create around the value of the offering and the solution.”
In that case, the salesperson needs to work with the prospect to understand their hesitancy and reset expectations.
By zeroing in on their concerns, you pursue the greater good of your company — and of the Customer Success team members who will onboard the client.
“A lot of times, when somebody’s asking for an opt-out or shortened terms, it’s an issue of perceived value and comfort with the solution,” Michael advises.
Before moving forward with the negotiation, “we need to stop and really understand what the root of that is,” he adds.
Steering clear of “commission breath”
One of the quickest ways to set yourself up for sales contract negotiation failure is by letting end-of-quarter heat get to you.
If a buyer can sense that one deal will make or break your quarter — what Alex and sales expert Josh Braun call “commission breath” — they’ll know they have the upper hand and can push you until the deal is signed. But this kind of quarterly pressure is the nature of the sales cycle.
So how can you avoid commission breath?
Focus on your foundation of honesty. If a customer drags out the process and you’ve built a relationship with them, ask them straightforwardly to share their timeline.
“If you think you’re fooling a prospect, you should just go outside, take a deep breath and then get your reality straight because you’re not fooling anyone,” Alex says. “They know what you’re doing. So be honest with them, and you’ll get honest responses.”
Knowing when to walk away
For even the most skilled negotiators, some deals reach a point when it’s time to throw in the towel. And it’s important to know when that moment comes.
“[Negotiating] needs to be an exercise of mutual give and take,” Michael says. If a prospect asks for a discount, bundle, or extended opt-out period, the salesperson should get something in exchange for those requests — and know what their cutoff price point is.
So when should you walk away?
Michael says that it’s when the prospect participates only in the “take” part of the give and take exercise. And there’s a good reason for his stance: “If you think they’re bad in negotiation, I promise you they’re going to be bad customers. They are going to give you trouble.”
Mutual respect is an essential element of effective negotiation. When it’s absent, you’ll fight an uphill battle at every step.
But meeting your prospects as people — and expecting their respect in return — leads to results that benefit your organization and the buyer in the long run.