Whether it’s a complex business acquisition or a simple sales agreement, your negotiation skills will be critical to a successful outcome. While it isn’t a battle, it is something you can win by building and maintaining a solid position throughout the process, which is as much about understanding the human brain as it is about creating a good deal for both parties. Here, four entrepreneurs share the secrets of how they go about closing deals.
Create a sense of higher value
Michael Maven, founder of sales growth firm TopGrowthExperts.com, uses the comparison method to close deals. He explains: “If you are currently offering a single $100,000 option, switch it to two or three options or tiered levels, for example, a Bronze $100,000, Gold $160,000 and Platinum $200,000 package. Now, the comparison method kicks in. The Bronze $100,000 option sounds like a lot, but not when you compare it to the Gold and Platinum options.”
Maven’s Gold offering is everything in Bronze plus added extras. Platinum is Bronze plus Gold plus added extras, making the $100,000 price seem much more reasonable by comparison. “Many times, people will take the Platinum package, and a previous client always took the Platinum package on offer, no matter what,” adds Maven.
He also advocates pricing with unusual numbers; for example, instead of $100,000, the price might be $99,801 or $100,471 etc. “It makes the price seem specifically made of components and not just picked out of the air,” he says.
Give to gain
In the last four years, Andrey Yashunsky, cofounder of global technology and investment corporation Prytek, has completed over 250 deals totaling $700 million. The business comprises several firms that provide managed services to international companies. His approach to deal-making, he explains, is based on principles of Judaism, where you gain if you know how to give. He says this has enabled him to acquire the expertise and leadership skills of 20 top-tier managing directors who are now helping to build what is on track to be a billion-dollar enterprise within the next few years.
He says: “Deals need to be structured so everyone is motivated to play their part. I place fundamentals above any tactics, and the most important thing is to convince the other party that a future together is better than a future without one another.”
Also critical to the deal is knowing who he is speaking to, for example, the age and personal interests of the other party and what motivates those in different age groups. “Taking an active and genuine interest in their position, stance, and stage of life makes a tremendous difference because you empathize and understand their situation,” says Yashunsky.
The ethos of Prytek was always to move away from an investment industry where capital gains speculation stands above long-term value creation and create a global corporation that acknowledged the vested interests of the 20 international entrepreneurs involved.
“These are all companies and leaders that I sought to acquire over the years before bringing them into the Prytek family because of their achievements, qualities, abilities and drive,” says Yashunsky. “In recognition of their value and skills, I created deals that involved cash and stock with a strong emphasis on everyone growing together. Deals must be structured to motivate everyone to play their part.”
Define your red lines
Boris Diakonov, co-founder of business account app ANNA, enters a negotiation assuming both sides want to find a win-win partnership solution. He says: “I normally say, ‘I’m going to tell you what I will need to achieve from this deal and what my red lines are. Please share your needs and your red lines, and let’s try to find the best solution together.’
“The first time I said this was while negotiating pricing with a strategic partner, and we were stuck. It immediately changed the atmosphere; on the one hand, we had vulnerability and, on the other, clear boundaries. We quickly found a solution that would work for us both. Now, I use this tactic all the time.”
Know when to stay quiet
Before she became an independent book publisher, Debbie Jenkins ran a digital marketing agency. “I was young and naive, and we’d had a lot of success, not because of our great products or excellent negotiating skills, but because we were in the right place at the right time with the right idea. We were taking orders, not generating business.”
Then, everything started to become more complex. There were more competitors, potential clients had more options, and they were more educated. Jenkins recalls being in one sales meeting with three heads of divisions.
She says: “We were pitching a large website design project. It involved a highly technical website, allowing each division head to have their own intranet. It was all going well until one of them said: ‘We don’t need our own intranet; we’ll just piggyback.’ That would have meant a 25% drop in the value of the sale.”
Jenkins knew that she could have reiterated all the points and gone back through all the benefits to try to persuade him, but instead, she stayed silent and said nothing for what felt like an eternity.
“Finally, he said: ‘Yeah, but that would be stupid,’ and then described all the benefits our solution would bring him,” she says. “He persuaded everyone in the meeting for me. I learned that I don’t need to fill every gap in the conversation. Once I’ve pitched, I can just shut up and let the smart client decide.”