When we are in discussion with a prospect and setting forth our value proposition, expertise, experiences, etc., the question becomes: At what point do we show our hand? We often think that we should wait, look for clues or sometimes just come right out and ask: What’s your budget? Are you looking for the best quality, a quick completion or do you plan to go with the cheapest option?
Show your hand first
If you want to come out on top, consider being first — no dancing around — setting the starting point for the discussion.
For example, we might quote a price of $10,000 for an engagement. Although there are other parameters involved, the negotiations will start here, knowing that we may need to come down on the price. If your prospect expects to pay $5,000, however, you may be able to negotiate an extra thousand or two, but you’re never going to get the $10,000 you feel you deserve.
What if they aren’t willing to pay more than $5,000? Will you accept the work and still be able to make a reasonable profit? If you aren’t willing to do the work for the $5,000, what is the difference if you have scared them away?
I am learning — and maybe chose to ignore this fact — divergence is a huge time waster. If a prospect is not willing to pay a fair price, why spend one more minute trying to land them as a client? Even if you lose the deal, you still come out on top because you haven’t invested much time trying to win their business.
Stop playing the range game
I also think it’s a mistake to play the range game, which asks prospects to tell you the range they’re willing to spend or offer them a range they can expect to spend.
Using the example above: If we quote a range of $5,000 to $10,000, the prospect believes they are getting the work for $5,000 and we think we are doing the work for $10,000. From that moment on, no one is happy.
Avoid seller’s remorse
How often have you entered into a deal that you later regretted? When you try to read a prospect’s mind or wait for the person to reveal what he or she expects, you, invariably, end up doing more work for free or at a discounted rate. This just in: You are not going to make it using this old negotiation strategy.
This be-first approach should result in the ability to reasonably increase prices and filter out prospects. Why should we spend time and money fretting over proposals for people who can’t afford or didn’t see the value in our services? No more playing internal guessing games or trying to figure out what price my prospects want.
When it comes to successful negotiations, the single most important matter isn’t what your prospect is thinking, it’s how fast can you get your number on the table. The person who goes first wins. Period.
Elliot N. Dinkin is the president and CEO of Cowden Associates Inc. Elliot’s strategic approach assists clients in the development of a total compensation benefit package that controls costs, adds efficiencies and enables the employer to attract, retain, motivate and keep employees engaged while meeting company objectives. Through his guidance, employers become more competitive by creating total compensation packages verses viewing benefits in silos.