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The power of No in a sales negotiation

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PJohns

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Dec 11, 2019
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We’ve learned this the hard and expensive way.

When we first started we were developing custom software for clients. We wanted to get money coming in and so we were afraid of saying no.

What did that lead to? A lot of bad deals. By being so willing to say yes we were ground down on price and we allowed for bloated specs that we struggled to bring in on time.

On one deal it cost us $50k and we were in the red for the year because of multiple projects being bad deals.

Long term this was not going to work so we worked and worked to get through those bad deals and then learn, and not repeat the mistakes we made that got us into the hole.

No comes into it

So we’re negotiating with a prospect and he’s listing off the things he wants. It’s a lot of stuff that his app will do, really it's too much.

Now here’s where we differed from our previous approach instead of saying yes to everything and trying to come up with how we could do it we ripped apart his most excessive desires and explained why they wouldn’t work and certainly couldn’t be done in the time frame he wanted. We said no.

We were not the only people that he was talking to but when we said no he didn’t up and leave, it wasn’t the end of the conversation but the beginning.
A little digression now but useful to note; don’t just say no, be quiet and listen to and never negotiate with yourself.

The prospect could talk about a lower price he’s getting from an alternative supplier, just be quiet and don’t negotiate down from your list price. In your silence he’ll keep talking and realise he’s not going to get anything from it and move on from that. You haven’t engaged and made it into a big thing and you’ve closed off that line of questioning which is not where you want to be.

Silence is powerful because it stops you from saying something that might disadvantage you, it helps you keep in control of your emotions and therefore think, let the other guy talk and talk and make a mistake or give away some useful piece of information.

We continue talking to the prospect and whittling down his specs list to something that makes more sense and isn’t pie in the sky I want everything under the sun, as well as being achievable by his deadline.

Lastly, we make it abundantly clear you want more stuff, you pay more. You want to go faster then you have to cut and have a leaner app.

So the meeting ends and a couple of weeks later we make the deal and it’s a good deal for him but also for us. We make a profit on it and a little while later we asked him why he went with us, afterall a large part of our meeting and negotiation was us saying no to him.


He told us that’s why he went with us that we were willing to tell him the truth and that therefore he could trust us, that was worth the premium over the alternatives he had who were a bunch of yes men.

Since learning to and actually saying no we’ve gone from the red into the black and our surplus has been invested into developing RealtimeCRM which helps small business and sales teams track and manage their opportunities.

If we had stuck with our old ways of thinking, that only yes leads to making deals we’d be dead in the water and RealtimeCRM would not exist. We haven’t made a loss on a deal since and we wished we realised earlier the power of saying no and being quiet when negotiating because it would have saved us a shed load of trouble.

Some of you might be afraid of saying no and losing a deal, look think about losing $50k on every deal and then think about saying no, which hurts you more. Don’t look at saying no as the end but the beginning, the base from which to start the discussion. If you don’t signal your belief in your value proposition the person you’re negotiating with certainly won’t.

It signals self confidence and where you won’t retreat from. If you start from yes you might have just given away time or money and every time you come to negotiate with that same prospect they’ll expect that same starting place, and believe me they won’t thank you for it and will push further. Hold the line and say no you’ll be much better off.
 

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Stargazer

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Good job.

Think of Institutions that have respect.

There is usually a bar that has to be met. There is no negotiation on entry.

They say No more than they say Yes.

Oxford, Cambridge, US Marine Corp, Para's you get the gist. :)

Know who you are. Know what you can and can't do. And make sure you do it damn well.

Don't just say Yes.

Respect and referrals will increase with in your industry.

Dan
 

Paleo

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Seems like everybody who starts a business has the experience of a lot of awful customers and bad deals early on. I certainly did. It's totally understandable because you are desperate to get traction by getting any sort of customers and revenue. I think of it as just the tuition you are paying for your education in the business.
The successful people do what you did, which is learn quickly which customers and deals you want and which you don't. Some people never learn probably because they they don't understand or even know their numbers, and don't know how to construct a viable business model. They grind along for years barely making it and eventually shut down. This is a common scenario in my industry.
I turn down customers for my (recurring service) business regularly. I know which customers will bring a high margin, which will bring average, which a bit less than average, and which are low margin and unacceptable. I have an ideal customer avatar and don't stray too far from it. Avoiding bad accounts also has the advantage of major efficiency gains in operations and marketing. This allows you to get even more of the good customers and serve them better.
 

CrazyFire

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On one deal it cost us $50k and we were in the red for the year because of multiple projects being bad deals.
I so feel you. Im there for the last year as well. Now it's getting better, but I cant express how much I agree with what you wrote here. Any tips for a fellow software developer of how to create a successful lead generation system? Still struggling figuring this out.
 

Dark Water

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Tying into what you said, I've read Tim Ferriss' Tribe of Mentors where he interviews 100+ top performers from various fields and asks them a few questions out of a pool. One of the questions frequently asked is this: “In the last five years, what new belief, behavior, or habit has most improved your life?”

If memory serves me right, the vast majority of them answered that with "learning to say no". It tied in heavily to business but many also talked about their future and not frivolously tying up time. In 2 weeks from now, are you going to be wanting to do that thing at that particular time which you set up today?
 

Jon L

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I do custom software as well, and have had the exact same experience. Clients appreciate honesty. They know that people need to make a living, and would prefer that people they contract with are profitable - that way, they'll be around to support them later on.

A guy I know that runs a successful software dev shop has a video that talks about client's unrealistic expectations about price. "Off by a zero" is the title of it. In his experience, clients' expectations of what it takes to build software if off by a factor of 10. For clients that have no previous experience with software developers, this is definitely true. I've even run into people that are off by a factor of 100.

The thing with all of it is that if you focus your client on what they truly need, they can get what they want for a price and delivery timeline that's realistic.
 

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