Negotiating With the Bean Counters

This post focuses on dealing with the business and financial people in your prospective company (i.e. the bean counters). You’ve been working with the key technical people all along by following the preceding posts in this series. Those technical contacts helped you get your foot in the door and develop a practical and affordable solution and accepted your proposal the day it was delivered. But they seem to always lose their clout at this layer in the sales funnel to the powers that be.

Negotiation layer of the sales funnel

No matter how hard you work to uncover all the right people in the buying process up front, a bean counter always seems to slither in on you at the last minute. You go from the euphoric high of getting ready to close a major deal, to the basement low of realizing you might have to start over from scratch again.

The problem here isn’t the bean counters per-se. Rather the problem is what they seem to stand for. They typically don’t care how technically eloquent your solution is. Their measure of success is simple. They’ll tell you ROI this and ROA that and payback this and lifetime costs that. But I’m convinced that they get rewarded by a more basic and simple formula.

quoted price – negotiated price = saved dollars

They want to be able to tell their bosses that they “saved” the company $25,000 on this deal. And they did it by beating down their supplier; not by re-scoping the statement of work – that would be way too much work.

Negotiation Tactics

Negotiation by itself is not a dirty word. In fact it’s a necessary part to any healthy relationship. I often negotiate with my wife about where to eat dinner on Friday night – although I never seem to win that one.

I’m going to break up the strategies based upon where you are in the sales cycle even if some of the strategies get repeated for different cycles. This way you’ll know the most appropriate time to use them.

Sales Cycle Scenario 1: Bean counter is in the technical meetings

This is really the best situation and what I preach is to integrate the bean counters into the mix from the very beginning. This way they will be educated in the economics of the situation along with everyone else. You will get less overall resistance and greatly compress your selling cycle.

The advantages to this strategy are numerous; unfortunately it can be difficult and time consuming to pull off. Here are a few of the pluses to working this strategy.

  • The buyer can voice incremental cost concerns as the solution is developed and you can deal with them piecemeal.

  • You can educate the buyer on the economical and technical repercussions of each decision point along the way. The beauty of this is that you will lay out the technical consequences to the buyer in front of the engineers.

The engineers will suddenly become your ally and fight to keep the best technical solution, regardless of the cost.

  • With the engineers fighting on your side, you can revert to a more humble and helpful role that only wants to do what’s best for their company. After the engineers pitch their case and things quite down, look directly at the buyer – and only at the buyer and ask, “I’m glad this discussion came up now rather than later. The original solution is certainly the best and what I would recommend, but if you can get away without that level of quality/service/purity we can work toward a cheaper alternative. How would you suggest we proceed?”

  • Finally, there won’t be much to negotiate at the end. You and the buyer have been keeping a tally of all the associated costs along the way, now you just have to sum them up. How can they argue with that? They can’t.

Sales Cycle Scenario 2: Bean counter is brought in at the end to negotiate price

This is the more typical scenario that you’ll find yourself in. You’ll work with the engineers and come up with a smashingly good technical proposal that will “sail through procurement” only to get a call saying that “there’s been a snag in the purchasing department, can you come in for a visit?”

There are a few things that you can do beforehand to better prepare yourself.

  1. Call your high-level engineering contact and do some detective work. Does she know what the situation is? If it’s price, what technical features are most important to her so that you’ll know what features you need to keep in the proposal? Can she join you in the meeting? Is this typically done? Has anything changed since the last time you spoke to her?

  2. Call the buyer a few days before the meeting and ask what specifically they want to cover. Try to ask a few specific questions about your proposal. Your goal here is to see if they’ve even read it. Many times, they haven’t. That’s killer information that means this is just a typical negotiating step and you can play hard ball.

  3. They will most likely try to make you break up your proposal into line items so they know exactly what everything costs. This is a pain in the butt to do and you can fight it to some extent. “I can’t really do that because this price is based on our costs of doing all the items in one project. If things need to be broken out in a menu fashion, it will substantially add to the overall costs and it will take me some time to put that together. What portion of the proposal seems to be causing you trouble?” Even with that, make sure that you know the line item costs relative to the overall project costs. If there is something that they deem unnecessary, know what that would do to the price and delivery schedule – as well as its impact on the technical merit of the project.

  4. Research your competition. If you don’t already know, find out how your product or service is superior to the competition. Don’t ever bash them, but concentrate the talks on areas where you know you are strong.

  5. Role play the meeting with someone at your organization. Have them play hardball and ask you difficult and even unfair questions.

  6. After the meeting, update your engineering contact with exactly what happened and what the consequences of that meeting will be.

The main strategy to follow here again isn’t much of a tactic at all. You simply need to have a conversation with the buyer and take their temperature. What are his main concerns? Get them all out on the table – don’t let him talk about each one individually. Start the bulk of the meeting off with:

“Can we please list all of your concerns out on the whiteboard? [physically walk up there right now] I’ve found that getting everything out in the open from the start will let us both focus better on moving this program forward.”

You then want to make them rate their issues in order of importance. You should know your rating scale also, but keep that to yourself for now.

What did we just do here? We took about 70% of the negotiation tactics that a buyer can use against you off of the table.

The white board issue strategy really is a great way to take back control of what can be a sticky situation.

Sales Cycle Scenario 3: Secret bean counter is a surprise near the end of the negotiation

I consider this negotiating in bad faith, and I’m not afraid to tell them that if things get hairy. What usually happens is that you’ll get your deal worked through engineering and the identified bean counter. Everyone seems happy. Engineering is excited to get going and the bean counter seems relieved that he can move on. And then all hell breaks loose.

The mystery man comes into the picture, usually two days after you think the deal is going to close, and says that they can’t come up with the money and if you want the work, you need to drop your price by 5%.

And my response: “Mr. Mystery Man, I certainly wish you would have been in all our previous meetings to voice your concerns. I have a few problems with your new position. First, I was negotiating in good faith and offered the lowest possible price to your company that makes this business possible for my company to accept. And secondly, your seemingly arbitrary 5% discount certainly implies that I have excess margin built into the price. I can assure you that our price is based on cost and not excessive margins. If my final proposal is not acceptable, I’m afraid we’ll have to walk away from the business.”

Sales Cycle Scenario 4: Bean counters beating you up at an annual review

This is quite common when dealing with large companies. They will meet with you on an annual basis and tell you that you need to decrease your costs by 5% or you risk losing their business.

There are two ways to go here. The first way, which you might expect me to recommend, is to tell them to shove off and that you not raising prices is actually like you decreasing prices because you didn’t adjust your prices for inflation. I’ve gone as far as graphing consumer price index (CPI) data against my historic prices to show that my prices have effectively fallen over the past few years. The problem is that while this sounds good on the surface, it hardly ever works. People just don’t buy it. So that’s why I don’t do it much anymore – although there are certain times it can be effective.

A second and usually more effective strategy is to anticipate this situation (do your homework and find out if they do it to other vendors) and build a case over the year to hold in your quiver for your annual meeting. During the year offer the buyer that you’re dealing with possible ways to reduce costs. There are always ways to do this, even if it means purchasing capital equipment.

I struggled with how best to write this strategy up. I’m afraid that in reading this you will think that it’s high level talk and not useful or practical. I work quite hard to make sure that my strategies are practical and can be implemented tomorrow. The feedback I’m getting from folks is that they don’t have these types of cost savings. I can tell you that in 100% of those cases that we explored further, we were able to identify numerous cost savings and put together a very effective summary document to take to the annual meeting. Specific examples can be found in the accompanying article to this post.

At any rate, once you have your litany of cost saving suggestions listed, put together a professional summary document to take with you to the meeting. Never send it ahead of time; you need the element of surprise here.

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1 comment so far ↓

#1 Cost reduction requirements | Engineers Can Sell on 04.15.08 at 2:32 am

[…] a previous post on sales negotiation, I talked about dealing with the annual drudgery of meeting with your whale accounts and ponying up […]

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