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Sales negotiation is the act of cooperating with a prospect to finalize the terms (price, contract duration, etc.) of a deal. Typically, it occurs when you’re closing a deal, involves a series of conversations, and produces a sales contract that both parties gladly agree to sign. To streamline negotiations and increase their closing rates, the best negotiators follow a repeatable process and have a set of prepared answers to draw from when prospects push back.
At the end of the lead nurturing phase, prospects may want to make alterations to your presented deal. They may take issue with your scope of work, price, payment terms, contract length, or another detail. Sales negotiation is how you deal with this pushback, offering concessions and coming to a mutually beneficial agreement. In complex, high-priced sales, this can take days or weeks. In simple, low-cost deals, negotiation might happen in one meeting.
The average sales negotiation process is ten steps, spread over three overarching phases:
It helps to come armed to a sales negotiation, not with a baseball bat (scare tactics rarely work) but with a toolbox of effective responses to the most common requests such as “we want you to lower the price,” as well as tried-and-true tactics you can deploy to your advantage such as using a positive tone or making fair trades.
Note that because each party is trying to secure their desires, there’s often tension in a negotiation. But as long as both parties are understanding, professional, and reasonable, the negotiations should result in not only a closed deal, but also a stronger relationship. The tough conversations, compromises, and sacrifices all work to bring you and your client closer together.
Although every negotiation will be different, there are four details of a sales agreement that prospects commonly want to negotiate. These are the service or product scope, price of your product or service, payment terms, and contract duration and termination. Let’s take a closer look at each detail below.
Sometimes prospects will want you to do more work than you originally offer without paying more. For example, a prospect might ask a financial consultant to throw in two extra hours of consultation time per month. A product buyer might ask a car salesperson to add on a free accessory. Be careful about giving in to these requests, especially if you’re offering an ongoing service. Additional unpaid work adds up and can cause resentment later on.
It’s common for prospects to ask you to lower the price of your product or service. They may say “Can we get a discount?” or “If you lower the price 10% we’ll accept the deal.” It’s important to resist simply giving into these requests, as lowering prices hurts revenue and the perception of the value of your solution. Instead, find other concessions you can offer, like a shorter contract period, or ask them for something in return for lowering the price, like a longer contract period.
After price, the next most commonly negotiated details are payment terms, such as professional fees, processing fees, accepted payment methods, and time between invoice and payment. A prospect might ask you to change from net-15 (payment 15 days after the invoice is sent) to net-30 terms. Altering any of the terms in this category usually won’t hurt your business, but clients care about them, so they can be great material for making concessions.
Prospects may want to shorten the contract duration or change the terms for termination to get out of a deal should it turn sour. As a salesperson, though, it’s in your best interest to try to extend the contract duration and have termination terms in place that ensure you’ll have notice before a cancellation. Generally, offering warranties or other forms of assurance are good ways to keep the duration as it is. You could also raise the overall price in return for a shorter term.
While these are details that the prospect may want to alter, remember that they’re also potential levers you can pull to forge a compromise or get what you want. We’ll talk more about how to properly negotiate these details later on in the article.
There’s an ideal process you can follow to lead a successful negotiation with a prospect, beginning with getting a verbal agreement and sending a proposal. Next, set a meeting to discuss terms and conditions and prepare for it. In the meeting, open it on a light note, listen to their requests and compromise, and confirm the agreement. After you’ve agreed upon terms, craft and send a sales contract and follow up until you’ve officially closed the deal.
Negotiation technically begins once the prospect confirms they’d like to move forward with finalizing the deal. They may say “Can you send a proposal?,” “We’re ready to buy,” or something else indicating that they see the value in your solution and are ready to flesh out the terms of the agreement. They may do this after a presentation, after a demo, or after you ask for the sale.
After receiving this serious yet non–legally binding agreement to do business together, secure next steps by telling them you’ll send over a sales proposal outlining the most critical terms and conditions of the deal. Then, get time on their calendar to review the proposal, preferably upwards of 30 minutes, especially if you have a lot still to cover. This ensures that they’ll look it over shortly. The upcoming meeting marks the start of negotiations.
Based on your prospect’s needs, create a written business proposal that outlines the basics of your offering, such as the scope of work, any deliverables, pricing, payment terms, length of the partnership, and any other conditions you think the prospect might push back on. Sending a proposal before the meeting gives the prospect a chance to think hard about the deal and arrive prepared with requests, thereby reducing the number of back-and-forths in the negotiation.
Additionally, it gives you a foundation of an agreement that you and your prospect can edit together, with pen in hand, during the meeting. It also ensures that the prospect knows exactly what they’re agreeing to buy. Note that you’ll likely create or use a more comprehensive sales contract later on, after you’ve hashed out these big-picture details like price and scope of work.
After creating the proposal, send it as an attachment to an email to the prospect. Use the body of the email to remind them of the upcoming meeting and to outline what you’ll cover in the negotiation-focused meeting. In communication with prospects, refer to this meeting as a “proposal review meeting.” While you should be prepared for a negotiation discussion, and should schedule in time for it in the agenda, you don’t want to encourage prospects to do it.
Stating the meeting’s agenda signals to prospects that you’re the one leading the negotiation. Make sure the agenda includes any topics you need to discuss to finalize the deal. For example, while you might have given them the basics of how your service works at this point, you might have neglected the details of product implementation. These are topics that must be discussed, and that might require negotiation in order for buyers to feel ready to sign a contract.
Here’s an example of an effective email and negotiation-meeting agenda:
We’re looking forward to meeting with you Tuesday, March 4, at 2 pm EST to review the attached proposal for our Content Marketing Golden Package, which you and I agreed would be the best fit to help you accomplish your goals.
Here’s a proposed agenda for the 45-minute meeting:
Please let us know if this agenda works for you or if you’d like to make any additions or suggestions. Again, we’re excited about the meeting and the opportunity to work with you.
Preparation is essential if you want to produce a satisfactory outcome for your business and the prospect while avoiding giving in to too many of the prospect's requests or demands. Preparation consists of five key action items: knowing your offer’s value, determining your Best Alternative to a Negotiated Agreement (BATNA), defining limits for concessions, having responses to common requests, and getting support from your manager if you need approvals.
Here’s how to do the four negotiation preparation steps:
Once you’ve prepared for the meeting, you’ll be better at judging the value of the offers your prospect makes, and the costs of the concessions they ask for. You’ll know when you need to put your foot down and say no deal, and when it’s okay to accept their terms.
Begin the meeting with some light small talk to set a friendly atmosphere and then remind them of today’s agenda. Next, review the major sections of the business proposal, such as the scope of work, deliverables, implementation process, pricing, payment terms, and other aspects of the agreement you need to exhaustively explain to the prospect. After that, open the floor up for negotiation — ask them if that all sounds good, then prepare to field their requests.
Now that you’ve given the prospect a detailed overview of your terms, they’ll start to make requests for changes to the agreement, perhaps about pricing, payment terms, scope of work, or something else. It’s your job to facilitate cooperation here. When they make requests, listen, show understanding for their request, and then decide if it’s something you can or cannot give based on your BATNA and concession limits that you set in the preparation stage (step four).
Here are some tactics for effectively navigating the bargaining step of sales negotiations:
Remember to stay calm and confident throughout the negotiation talks, even when a prospect asks you to make a change to the agreement which feels almost insulting. Losing your cool and arguing is just going to put the prospect on the defensive and chill communication and cooperation toward a mutually beneficial agreement. If you feel yourself getting heated, take a sip of water or count to three in your head before speaking.
The bargaining phase may extend past one call and into multiple meetings as both parties run concessions by their team or managers and come back with new ideas for how to work together. Sometimes parties will have to take some time, even days, to mull over a term, or to run the numbers, before coming back with an answer.
A good way to end is to respond to one of their requests by saying “If I can get you X, will you sign this by the end of today?” If they say yes, you can go get approval from management if you need it, or simply confirm the agreement’s terms over the call. At this point, the close is largely secured.
During the meeting, once you feel that you and the prospect have discussed and agreed on all the major terms of the agreement, go ahead and summarize the terms of the deal and ask them if they can confirm the agreement — e.g., “We’ve agreed on points A, B, and C. We’re giving you the X that you wanted. Are we ready to put this into writing?”
If they give you the green light, inform them of next steps. Typically, this will be for you to write a sales contract that, along with putting into writing what you’ve agreed upon, will cover the relevant legal aspects of the deal. Tell the prospect when they can expect the contract, and set a deadline for when the prospect will finish reviewing and signing the contract.
After the call, create a sales contract with the following essential sections: identification of parties, description of product or service, payment terms, delivery terms, contract duration and termination, and governing law. Also, include lines for signatures, and make sure the language reflects what you and your prospect agreed on during your negotiation meeting. Depending on your situation, you might also want to include other clauses like confidentiality or severability.
Most salespeople will have a boilerplate contract that they can tweak to fit the needs of this deal, as well as a legal team who will make sure the contract is good to go. If you don’t have access to these, read our article on how to write a sales contract, and consider using a service like LegalZoom for an affordable legal consultation regarding your document. Lastly, send the contract using esignature software so the prospect can sign it digitally.
At this point, the client or their legal team might want to change some of the legal clauses and provisions of the contract. With contract management software or a shared document file, they can make requests or suggestions digitally on the document, and you and your team can see these suggestions and collaborate about whether or not to accept them from your computers.
Sometimes, more calls will be necessary to negotiate the legal minutiae, but most often the requested changes are acceptable. After you or the legal teams sort this out, continue following up with the prospect until they’ve signed the document, sending an email every three days after the established deadline has passed reminding them that you’re available to answer questions and provide support. If all goes well, this will end with a signed contract and a new customer.
A strong, repeatable negotiation process will help you improve your closing rates and more effectively secure the terms you want. Come to negotiations ready with approaches to answering common requests and you’ll be even more set up for success.
There are some common negotiation requests you’ll hear from prospects, each one aligning with one of the four most regularly negotiated details: scope of work, price, payment terms, and contract duration and length. For each prospect request, we give you multiple ways to respond — investigate, trade, concede, or reject. You can use the responses verbatim or tweak to fit your negotiation style.
Negotiation Detail: Product or Service Scope
When responding to this request, first estimate the cost to your business of accepting the request. If you need to learn more about why they want X, investigate further to see if there’s a way you can convince them that your service as it stands is enough. If it’s reasonable, think of something of equivalent value they can give you in return and use the trade response below. If it’s too high or so outside of standard operations to even entertain, use the “reject” statement.
Expand the below for some approaches for responding to this negotiation request:
If you don’t want to reject a request for more work, but as it stands their request is asking too much, consider countering and then offering a trade equal to that counter. For example, if they asked for one hour of weekly consultation time, you could say you can offer 30 minutes, provided that they introduce you to someone you want to meet in their network.
Negotiation Detail: Price
To deal with a request to lower your price, it’s best to take a firm approach and remind the prospect of the value you’re set to offer them. Try to put the return on investment into monetary terms so they can more easily justify paying the price. If that doesn’t work, investigate to see why they might need to reduce the price, then adjust accordingly, either offering a trade (if the discount is in a reasonable range), offering a different concession, or rejecting the request.
Here are some responses to use when faced with this request in negotiations:
The problem with giving prospects discounts is that it makes you come across as weak and your product as lower in value than you’ve promised. Always try to at least get something in return for a price drop. Better yet, convince them of why the solution is worth the money and make them empathize with your inability to lower the price by explaining all the sub-costs and work that goes into providing such valuable products or services.
Negotiation Detail: Payment Terms
It’s common for prospects to ask for more time between receipt of the invoice and payment. If this request is fine with you and will cause no foreseeable cash flow problems, trade something for it. If you really need payment ASAP to keep operations going, offer a different concession or reject the request by giving them a satisfying reason for saying no.
Below are the three examples of ways to respond to this negotiation request:
If the payment timeline is no big deal for you, a trade isn't working, and the deal looks like it’s on shaky ground, consider giving into their demands and chalking it up to you doing them a favor because you’re excited about the partnership. While it’s important to be assertive in negotiations, letting a little thing slide now and then won’t damage your reputation as a business-savvy professional.
Negotiation Detail: Contract Duration and Termination
When a prospect asks you if they can have a shorter contract, it’s a sign that they view the deal as slightly risky, and are trying to reduce that risk. Investigating here is your best option. Try to understand why they want this. You might find that they had a bad experience in the past and all they need is a bit of encouragement and proof that you won’t do the same to them. If they stand firm and you’re open to the concession, offer a trade. If it’s unfeasible, explain why.
Here are some example responses to this negotiation question about contract duration:
In this case, if you reject the request, you can lighten the blow by offering the prospect a warranty or guarantee that protects them from the risk that looms large in their imagination.
Remember that your first response or approach to a request won’t always be the final one. Negotiations involve a lot of back and forth, with both parties offering ideas about how to move forward in a way that satisfies both parties. Therefore, it’s critical that you’re patient with the prospect and open-minded to their ideas.
There are some tips you can follow to negotiate a sale as effectively as possible, including bringing a partner, having a positive attitude, and following up even after losing a deal. Let’s look at each tactic a bit more in-depth.
Even when it looks like you and your prospect aren’t going to be able to come to an agreement over a certain issue, it’s important to exude confidence that you’ll figure something out. Stay positive and remind the prospect that you’re not going to let the obstacle stop you so easily. This will show them that you’re treating this like an exercise in teamwork, and they’ll be more likely to stick around through the rough patches without giving up.
It’s easy to get flustered in a negotiation. The prospect might ask for something you didn't expect or challenge a term you thought was a sure thing. At moments like these, it’s nice to know that you can space out without halting the forward momentum of the negotiation. Your partner can take over, and you can do the same for them if they draw a blank. That’s the benefit of having two people, each with their own unique share of knowledge, in the same room.
If a negotiation fails and the prospect walks away, follow-up with them afterward and ask why they didn’t accept the deal — e.g., “To help us improve our business offering, I was wondering if you’d share why you didn’t take the deal?” You might find that what they wanted was something you could definitely provide but just forgot to offer in the negotiations. Following up like this is a safeguard against losing deals because of miscommunication.
For more tips on negotiating, check out our list of top negotiation tactics, all sourced from sales professionals and business owners. You’ll find advice on how to prepare for a negotiation, execute the negotiation, and wrap it up.
The major difference between objection handling and negotiating is that objection handling situations occur at various points of a sale, even during the initial cold call, whereas sales negotiation happens at the end of the closing phase. Further, objection handling is the act of using rebuttals to relieve a prospect’s concerns about your business or solution, and negotiating is the process of working with a prospect to agree on the final terms and conditions of the deal.
Sales negotiation requires tact, patience, and excellent communication skills. It’s a sales skill that is best improved by doing, so go easy on yourself if you make a mistake, and after every negotiation take some time to reflect on what you did well and what you need to work on. To see where negotiation fits into the overarching closing phase of a sale, and also learn some techniques for closing deals, read our article on how to close the sale.