How to master the art of negotiating with clients
Do not mistake negotiating for bargaining. Here are some thumb rules to acquiring this delicate art
September 24, 2013 / 10:37 IST
Gargi Banerjee
Being an entrepreneur means dealing with testy suppliers and pompous clients. It comes with the territory. That's why an entrepreneur has to be a good salesperson. And to make an effective sale or deal of any sort, you have to master the art of negotiation. But before we give you some essential tips about negotiating, let us begin by dispelling a common notion.
More often than not, the act of negotiation is associated with how little a client may want to pay for a product or service, and how as an entrepreneur one must try one's best to jack up the price. Make no mistake, this is NOT what negotiation is all about. The result of any negotiation should be to establish a lasting business relationship with a client, one that is mutually satisfying to both the client and the business owner. Here are some golden rules that guide the art of negotiating with potential clients.
1. Create A Vision And Its Fee ConnectHere's a typical scenario. You spend the bulk of your time describing your offer to a potential client and even provide a solution to what you think his current problem is. You also explain how you are better than your competitors. But when it comes to quoting a price, you falter and let the client take the upper hand.
Mukund Mohan, Director, Microsoft Ventures, a seasoned entrepreneur and mentor advises against this mindset. He says the key is to create a vision for your offering and justify your fee. You must be ready to defend your ground and be confident about it.
"When an entrepreneur is talking shop with clients, he feels the client has the upper hand because he is the buyer. While that is somewhat right, it does not mean that you are not justified in quoting a price you think is justified for your offering," says Mohan, who adds that that you must have some sort of leverage working in your favour."The only way to do this is by creating competition. The idea is to spend your time and effort identifying and making simultaneous offers to potential customers and not focus on just one client. For example, in the IT services industry, if the client is taking an upper hand and delaying a project, you can always tell him you will need to deploy your resources earmarked for the project elsewhere," says Mohan.2. Lead The NegotiationYou may be a start-up or a small business owner but if your offering is genuinely good, you should never offer the reins of control to a potential client. Your potential client, who could even be a much larger entity, will tend to dominate conversations and you may unwittingly pass the ball to his court. For example, he may tell you what he expects from vendors and what his grouse is with his current vendors. More often than not, he will reiterate the fact that he does not have the wherewithal to accommodate you in his scheme of things but would consider you if you quote a price within his budget.
As a knee-jerk reflex, you may ask what his allocated budget is. And there goes your opportunity to make an effective pitch! So instead of quoting a 'suitable' price, you end up crunching his numbers, trying to make space for yourself. Never allow this to happen. When you find a potential client going on and on about his terms and conditions, take a stand politely but firmly and tell him your price is based on the uniqueness and quality of your offering. When you make the first move in money matters, you will realise, quite happily, that things usually work in your favour.
3. Insist On A Written ContractEntrepreneurs usually treat clients with utmost regard and are wary of 'displeasing' them. This is why they shy away from making a formal, written agreement when word-of-mouth negotiations are over. Siddharth Mahajan, Managing Partner at Auxilium Partners, a Delhi-based law firm that handholds start-ups in their legal operations, says most start-ups lose a lot of money or get into serious trouble later because they are so excited about procuring a client that they deliver their offering in good faith, only to face non-payment issues later.It is therefore crucial to put down your negotiations in writing, says Mahajan. "Relevant confidentiality clauses, non-disclosure or non-use of ideas, protection of intellectual property rights are all important especially for start-ups. They must be present in a binding contract between the service provider and the client to avoid hassles at a later date," he says. Mahajan even advises that all negotiations take place on the advice of legal counsel. This puts the business owner at a vantage point, not only at the early stage of his business but also earns him brownie points with investors at later stage. 4. Take A Chill PillAs an entrepreneur, you will likely encounter plenty of people who have bloated egos, hidden agendas or who are spiteful. A smart entrepreneur keeps his emotions in check and does not give in to provocation. Losing your cool is only detrimental to your business prospects, to say the very least. So if things are not working out, calmly opt out of it. Every negotiation will not turn out to be successful and you must learn to take rejection in your stride.You can send your feedback on smementor@moneycontrol.com or simply post comments below Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
