500 Startups Growth Handbook

Negotiate the Sale

How you do it

- Depending on your prior experience negotiating deals, this will eitherseem like the most intimidating step in all of B2B sales or the easiest.
- To set up your negotiation you’ll first need to figure out what the terms of your deal will be. You might not know all of these things right off the bat, but you’ll want to start somewhere. When in doubt, go back to some of the things you learned from the sales interviews. What terms are helpful to the client?ow many seats solve the pain point?tc.
- What are the terms of your deal?
  - Contract amount, length, users/seats, usage are all up for negotiation
- You’ll also need to figure out what medium you will use to create a customer. Will they sign a contract? Will they just authorize terms of service and put a credit card into your web app? Will they pay up front? Will they make a commitment for the year, but pay monthly via credit card on your app orr will they pay monthly based on volume? These details need to be worked out by you first, and then agreed to by the prospect.

Common Mistakes Founders Make

- The biggest pitfall is not setting up a clear action plan (like the next steps above),then setting expectations terms for the deal.
- If you don’t actually negotiate the deal first, then the client doesn’t know what they are getting, what they are paying, and when it is happening. Which also means that you also don’t know these things either (so no forecast, no revenue, and no plans for renewal).
- If you are one of the founders who thinks negotiating deals will be the hardest thing about the sales process, it is likely then you will be tempted to not establish clear next steps or firm agreements for closing the sale. It’s a new muscle for you, so you will be weak the first few times you do it. It’s fair to role play this with a friend or fellow founder. Also when you’re learning how to negotiate deals you should pay attention to every sales interaction you have on the client side (like negotiating to set up bank terms or with a sales rep from your web host) because you’ll want to observe the stages in the negotiation and how the deal is sealed.
- One hedge against a soft close is repeating back to the prospect all of the points agreed upon. Doing this over email with bullet points is best, but ask for a response to this email. “Send the notes and say if you agree these are the terms then I will work on the next steps.”

Examples

Similar to the demo, how much time you can spend on negotiation is directly correlated to how much upside potential there is in winning the deal. Take cloud storage tools like Dropbox Plus (https://www.dropbox.com/plans).For a team of five, it costs about $750 per year. This probably won’t cover the cost of your time to negotiate this deal. However, the same plan for a team of 100 might be well worth it.

Related Keywords

Negotiating a sale, negotiating a contract, Setting Customer Expectations