Negotiation #2 (Part 1 of 2) – Preparing for your first meeting to discuss terms

In this post I will outline the mandatory preparation required ahead of a negotiation.  If you  take the time to follow the following steps and write down the output you will be light years ahead of most negotiators:

Know your desired outcomes and limits:

1) What is your Best Alternative to a Negotiatied Agreement (BATNA)?

In order to maintain some leverage in a negotiation you must have a plausible alternative to doing a sub-optimal deal.  In sales, this alternative usually becomes weaker the longer you stay at the table.  An example BATNA is – ‘Stop negotiating this deal and spend time pursuing other deals with better terms.’  If the other side thinks you can just walk away, they will try much harder to get the deal done.

2) Decide where do you want the relationship to end up?

Often you can afford to walk away from a new prospect despite some residual negativity, but this will not be the case if you are negotiating with an existing customer.  Keep this in mind before going in with a tough bottom line.

3) Prepare all the points and have a firm ‘walk-away’ position.

Before you enter the negotiation you should list all the likely points for negotiation and know the ones you can move on and those you can’t.  I will discuss strategies for delivering these in a later post, but ahead of time you need to know your range for each.

Arrive with benchmarks or ‘standards’ for each negotiating point.

Inexperienced negotiators will present a demand without having a supporting standard or benchmark that justifies their position.  This leaves you open for having your position undermined and losing control of the discussion.  For example, if you wish to argue for 30 day payment terms against their desire for 90 days, then your ‘standard’ might be that this is common across the industry and is required of you by your suppliers.  You cannot just say, “This is our company policy.”, because everyone knows this is a weak justification.

In the next post I will discuss the final preparation elements to ensure that you understand how they are likely to react.

Negotiation #1 – Agreeing a close plan and making sure you don’t get double dipped.

This is the first post in a series on B2B negotiation that will give you the techniques you need to avoid the gut wrenching feeling of winning a deal, but still feeling like you lost because of the terms you ended up with.  We will begin by avoiding the all too common situation of being led through a series of value destroying negotiations because the customer took control and you were inadvertently dancing to their tunes.

Agree a close plan:  The first thing to do is to mutually agree a path to conclusion with the evaluation lead.  Be certain that this person can give you an authoritative view of how to get the deal done and then meet to confirm and document the steps to closure.

In order to create this plan you need to have a list of who is authorised to:
- Negotiate the operational/technical details
- Agree commercial terms (Usually a combination of business and procurement)
- Craft legal terms
- Physically sign the agreement

You goal is to ensure that all the necessary people (and none of the unnecessary people) are in the room at the correct time.

After you have been shortlisted, your negotiation should go in the following order:

1) A high level term sheet agreed with the business/technical/operational/procurement leads.
2) Legal draft of the term sheet to be completed and negotiated by legal counsel for each side

Expert tip: Many enterprise salespeople make the mistake of going from proposal to formal legal documentation.  This creates great inefficiencies and delivers a bad outcome for both parties.  NEVER allow legal staff to participate in the creation of the term sheet. Until terms are agreed, having lawyers in the room wastes time – Their very important risk mitigation and compliance function is best applied when the terms are concluded.

The goal of the term sheet is to accurately describe the intent of what a legally binding contract will contain.  It is non-binding and therefore allows you to focus on moving quickly and not focusing on the ‘heretofores’ and ‘notwithstandings’.

The next post will discuss what you need to prepare before going into your terms sheet negotiation.

The art of the elegant Linkedin connection

Linkedin is one of my favorite ways to stay connected and I get invitations to connect most weeks, but it irks me that many of these are inelegant and are wasted opportunities for rejuvenating old connections.

Compare and contrast:

vs

The first version has two obvious flaws:

1) This person can’t be bothered personalizing the invitation so it is essentially saying, “Matt, give me your direct line just in case I ever need you for anything.”
2) They haven’t reminded me how I know them – I have been in sales for nearly 20 years and met thousands of people, so chances are I have no idea how me met.

The second version is my suggestion for best practice:

1) Tells me how I know the person
2) Shows me they have taken the time to personalize – I feel like I owe them a response now.
3) They have indicated an interest in me personally, rather then just asking for a connection that appears self serving.

Try the second approach if you are seeking to connect with someone.

Secondly, if you do get a generic request from someone that you know but haven’t spoken to for a  while, don’t just accept – Immediately send them a Linkedin message asking about them and what they are up to. You may find great value in properly connecting.

A connection is not part of a useful network unless there is social capital involved. Ignoring this rule makes Linkedin just a database and you may as well have a spreadsheet.

Secrets of a trusted advisor to the C-Suite: Knowing your customer’s customer

Professionals engaged in enterprise selling are constantly looking to attain access to the executive suite so that they may sell “high and wide”.  The challenge for many is to determine how they can be relevant to a cross-section of interests and this post provides the answer in a way that can assure you the role of trusted advisor, thereby embedding you into the fabric of your customer.

Whether you sell technology, business services or financial instruments, knowledge of your customer’s customer will allow you to find opportunity and threats for your customer that you can use to build the strongest of relationships.  This is a large topic, but I can simplify the process for you as follows:

1) Map the landscape of your customer’s market
- Read the industry journals or analysts research on factors relating to the market your customer serves
- Ask your customer who their most important customers are and what they are thinking about in terms of serving them better

2) Brainstorm the biggest opportunities for your customer to serve their customers
- Do a quick Porter 5 forces analysis for your customer with respect to their market (Just a thumbnail sketch is fine)
- Sit with your team and think through where the highest value opportunities are for your customer to serve theirs

3) Match your capabilities to the best opportunities represented and find a fit
There are always simple themes that you can attach to – Disintermediation, regulation, consolidation, cost reduction etc… Figure out what the future scenarios might look like and how you can partner with your customer in addressing the change.

4) Discuss your thoughts with customer executives as an advisor
Having identified opportunities or threats, you can now write a considered note to any number of executives at your customer and explain the high level detail of your thinking and the opportunity you think it represents.  Set the meeting, with the simple agenda of validating the opportunity and seeking sponsorship to explore it further.  The content should be something along the lines of, “I have observed XXX with respect to your market… I believe it represents Y to you… I would like to meet to discuss how we might address this” .  Making sure not to discuss your solutions or offerings at all in the note.

Use this as an opportunity to get out of your usual silo within the customer!

Example 1) A finance provider attacking the technology wholesale market

Situation: A consolidation of wholesalers means that resellers have credit accounts with fewer distributors, resulting in tighter cashflow due to the inability to spread their account limits.

Opportunity:  A finance provider can work with one distributor to offer better credit terms to attract a greater share of reseller business.   The provider would initiate this discussion with the CEO and then would work with the CFO and head of sales to develop the plan.

Example 2) A software provider seeking to gain greater share within the mortgage processing market

Situation:  The mortgage broking market is increasingly competitive and the biggest customer demand is turnaround time in mortgage processing.  The software provider should work with the broker to use a low-cost business process automation solution that can sit behind a marketing message of speed of approval.   This discussion may start with the head of marketing and then work across to technology… A way to outflank the competition through broader executive access.

Case Study – N.Z. Telco technology outsourcing

 In 1999 a U.S. multinational technology firm called Electronic Data systems (EDS) was seeking to win a 10 year, $2bn outsourcing deal with Telecom New Zealand.  They were competing with IBM and the battle was fierce.  There were many factors for their ultimate win, but core to it was the brilliance of the lead Sales Executive, Michael B.  Michael worked very hard to understand Telecom’s strategy, which included finding ways to sell high margin content/services over their existing infrastructure (copper wires) that was increasingly becoming commoditized due to new regulations requiring wholesale/retail splits.

This insight led him to work with Microsoft to include a three-way partnership into a new entity called, ‘E-Solutions’, which would deliver Microsoft applications as one of the earliest software as a service offerings.  This innovative approach to solving a strategic challenge saw the account exec win the largest ever outsourcing deal in New Zealand I.T. history.  In this example one party focused on solving the current cost challenges, whereas the other was looking to the future and adding considerably more value through market insights.

So, if you want a way to outflank the competition and to develop long-term, enduring customer relationships, start researching your customer’s market and find ways to help them play to where the puck will be…

Beyond the process of selling – Using relationships to hunt elephants

If you want to excel in a sales career yourself or hire an awesome salesperson for your team, then this post is for you.  Over the past 15 years I have worked with some of the best sales professionals in the business – The elite salespeople within elite sales organizations.  Having had this opportunity I have come to some conclusions that may give you some food for thought in terms of your approach to the sales discipline.

The process of selling is commoditized

Before all the sales professionals out there release a collective gasp of horror, please note the emphasis on process.  Almost 30 years ago  ’Miller Heiman’ developed and documented processes for strategic selling, which have subsequently been evolved and copied by dozens of organizations.  Knowledge of how to manage a complex sale is available to the masses and can be taught to anyone.

Understanding the process is not enough

Knowing the process of selling is merely a ticket to the game, much like a driver’s license for racing cars.  Being a champion Formula 1 driver involves a complex network of interconnected variables that are actually very similar to being an elite sales person.

The second from bottom row of the table is the focus of this post – Omniscience with respect to the customer situation.  The very best sales people know what is happening at every level:
- The customer’s industry
- The customer organisation
- The target department
- The key individuals in the sales process

The question is, how does one achieve this omniscience?

Using networks for strategic selling

My father once pointed out to me that the most influential people in business don’t hold all the answers, but they know how to get them.  It makes me smile to think that one of the most valuable web properties in the world (Google) was created on that premise – Don’t try to be the answer, rather, point to the answer.  In the same vein, the key to sales is being able to make connections with people who can tell you what you need in order to successfully conclude a sales campaign.  The ability to attain near omniscience through asking questions of people is the one predictor of success that I have yet to see disproved.

One mistake that people make is thinking that knowing a lot of people is a sign of a great salesperson – It may be, but my experience has been that a large Linkedin network is a very poor predictor for success.  The reality is that the very best sales people have a dynamic network that has hot spots of focus that move across a sea of contacts as the situation dictates.  What this means in practice is that you need to be able to quickly build social capital with people who are concerned with the industry/company/person that is the focus of your selling efforts.

The acid test

When trying to determine the likely success of a sales campaign I am not so interested by what a person does know, but rather, what they don’t know and how they will find out.  If we don’t know who is competing for a deal, then how are we going to find out?  Great sales people will be able to find out due to relationships they have made in the account, through connections at the competitor organisation or through industry connections (consultants etc).

So, if you are trying to increase your close rates or accelerate the success of your business development efforts I would encourage you to think about who can help you fill in the blanks and connect with them.  For CEO’s/Sales leaders, don’t worry about who your sales people know now – Focus on how they are going to get to know the people that they need in order to succeed.

Is it time to quit your ‘great’ company?

Whether you work for large corporates or start-ups, the value of your resume is heavily weighted by the cachet of the organizations listed.  This may seem obvious, but something I think worth considering is the current ‘social capital’ that your organisation confers to you by default – Never assume it stays the same.

If you were at Yahoo! Inc, in 1999, then you would have enjoyed a high standing in the market as being one of the hot-shots that was being employed by the much admired tech start-up.  If you are at Yahoo! today, then there is considerably less brand equity to confer you status.  Notwithstanding, there are some exceptionally talented people at Yahoo!, but I am going to argue that if you stay at an organization like this too long then people are going to wonder why.

My friends at Topprospect published a nifty infographic this week, which was reformatted by Threestory to produce the image below:

You can clearly see that the cool kids are leaving less trendy brands such as Microsoft and Yahoo!.  There was a study (which I regret I can’t reference for lack of recall) that showed that this phenomena is perpetuated by the most talented people joining the hottest companies early and then when the excitement starts to slow, they leap to the next.

This is particularly so for designers, marketers, developers and sales people – All of whom either enjoy the status or financial reward of  the latest high profile projects.  When looking at a resume it is always an easy filter when someone has a history that reads like: Yahoo!1995, Google 2001, Salesforce.com 2005, Facebook 2011.

Clearly we are not all going to enjoy such a ride, but there are a couple of things worth noting:

A-players take their team with them:  If you cultivate an inner circle of A-players, then you are more likely to end up with an A-player resume as a result of the ‘executive vacuum’*.  Neglect your internal company network at your peril.

Don’t be the alpha in a dog company:  There is considerable more value for your personal brand in having a lower title in an amazingly hot company than there is in having a big title in a declining company.  There is an argument that says that as the rats jump off the ship there is opportunity for advancement – No doubt if you outlasted the Captain of The Titanic you could have taken the helm also…

Conclusion:

• Become valuable to A-players
• Work for great companies even if the title/pay is less (within reason)
• Create a cadence of success that builds your personal brand 

*This is the phenomenon where executives moving to new roles will “vacuum” up their A-team to follow along.  I have seen this happen many times.

You need a redundant array in your professional network

Tech folks are familiar with the idea that computers and connections to them are prone to failure, so years ago ‘redundancy’ was built into systems design so that if any computer or connection were to fail, a different connection/computer would take-over.  It turns out that this is exactly the same for professional networks.  If ‘Computers’ = ‘Contacts’ and ‘Connections’ = ‘Relationships, then the analogy is complete.

Top tier sales people tend to be aware of this phenomenon because in managing large accounts it is best practice to have multiple relationships just in case a contact leaves or the relationship dies for some reason – What then?  Sales people build redundancy into their accounts as a matter of course, but why should you care?

It matters because if you believe that a strong professional network is crucial, then you need to build redundancy into all the important groups within your network.  In my situation I have clusters that include the following groups:

Old employers – Salesforce.com, EDS, Wang, Hewlett-Packard
Countries – New Zealand, Australia, U.S., U.K.
Interest groups – Venture Capital (U.S.A. West coast), Venture Funding (Oz), Startups (Bay Area) and the list goes on.

My Linkedin map to the left gives an indication of what I am talking about.  It is not a comprehensive view of my network, but you can see that in several clusters there are multiple overlapping nodes within a cluster.

What this means in practice is that no matter where people move or what happens to a relationship (eg they join a competitor), I will always have a way to connect with that group.

Action:  Go and have a look at the http://inmaps.linkedinlabs.com/network map for your network and use that as a proxy for how ‘redundant’ your relationships/connections are.  If you are looking a bit light, then think about how you are going to get greater exposure and more connections within that group.

Getting a sponsor inside your organisation is the surest path to the top

Last week I was sent a brilliant piece of research that I need to share with you -   If you work at a large organisation or are a salesperson, then this article has some pearls for you.  Before you dive off to take a look I would like to highlight an important distinction for you that will assist you in accelerating your career ambitions.

I have spoken in the past about ‘mentors‘ and the importance of picking someone with influence and the value that this relationship can deliver to both parties.  Today I will stand corrected with respect to the semantics – The authors of the research above make a very important distinction:  Mentors provide guidance and advice, whereas Sponsors leverage their own power and reputational capital in your support.  By their definition I have been talking about sponsors all these years and their research clearly articulates the value of finding one.

In complex selling methodologies we use the term ‘mentor’ interchangeably with ‘coach’ and ‘sponsor’ but at the end of the day I define the relationship as being somebody that will support your case in your absence, even if it represents professional risk to them personally.

If you are looking to get ahead faster, get more things done and enhance your reputational capital, then I suggest you read the research paper and you might like to refer to this previous post to help you find the right person as a sponsor.

A quote from the paper really struck a chord with me:

“[Sales manager]  looked at me and said, “Oh my God, you are so talented and nobody knows who you are. Work with me.”"

The new WhoTo system, which will be available to you within the next few weeks, is designed to help you build relationships with influential people and in time will help you identify great potential sponsors.  If you haven’t done so already, please register for early access.

Using big goals as a happiness tool

I just came across this Inc article that demonstrates that setting and achieving big goals will make you happier – No big surprises there, but I would suggest that there are two parts to this formula and that we must consider another important factor – Motivation. The studies demonstrate that setting and achieving big goals make you happy.  Setting unachievable goals aren’t going to do much for the personal mojo at all…

So, building on what they say, I would offer my own spin on using goals as a grin grabber:

Set big achievable goals – The study indicates that if you achieve big goals you  feel better about achieving them than less ambitious ones (Amazing huh?).  Interestingly, the angle that they take is the idea that the reason you don’t feel good is mainly about the opportunity cost of selling yourself short – If we only seek a 10% improvement and do it easily, then we are left wondering if we couldn’t make 30%.

[My addition] Set meaningful goals because you are more likely to stay committed to achieving them.  Big goals are by definition difficult to achieve.  Reflecting on Dan Pink’s study of motivation in ‘Drive’, we know that meaning plays a very large part in getting us to commit to a course of action.  ’Meaningful’ goals are different for each of us, and it really comes down to understanding your personal motivations.

My trick for determining whether something is meaningful is to imagine what it would be like to  reflect on achieving a goal 5 years after you completed it – Will it still swell your chest and make you glow with satisfaction?

If you haven’t stretched yourself lately, how about setting yourself a meaningful goal that will stand the 5 year test?

 

 

Is start-up/entrepreneurial life for you? A risk-free way to see

Having split my time between corporate life and entrepreneurial endeavors over the past 18 years, a common discussion I have is, “I think I would like to try start-up life, but I am not sure.”  In my experience, the most common reasons for people to hesitate when considering leaving a large company are:

Security:  Will joining the start-up ruin me financially?  I have commitments and can’t afford to be left unemployed.
Lifestyle: I have been a corporate employee for years and I am just not sure whether I will enjoy the unstructured chaos that many start-ups embody.
Ego: I have a professional reputation and community standard, which in many ways is punctuated by the title I carry at my organisation and the circles within which I revolve.

Each of these could sustain a blog post in their own, but today I have a short-cut solution for those of you that have an idea you may like to join the start-up world – Probably because you have an annoyingly enthusiastic friend who is taunting you from the start-up sidelines and causing you to look at the option a little harder.

Dipping your toe in the water

There is a happy convergence that you need to be aware of:  Start-ups are typically cash constrained, but in need of heavyweight skills to help them avoid wasting resources/time on fruitless endeavors.  You have a good salary at your current company and specialist skills in your chosen discipline – Let’s bring the two together:

A model that is becoming more common in the U.S. today is one of moonlighting corporate employees spending some of their discretionary time working with start-ups:  Developers, designers, accountants, lawyers and other specialists are rolling up their sleeves after-hours and working with start-ups for equity, satisfying the needs of both parties.  People with less technical skills such as sales people and commercial managers are also getting involved by acting as back room advisors on business development and sales planning.

A second approach is to become an advisor – Basically you commit to joining advisory meetings once a month, taking the odd phone call, responding to occasional emails and perhaps leveraging your network for introductions – I may write another post on making advsiory roles work for both parties, but sufficeth to say, advisors are in huge demand and it is a very nice way to get an insight into a start-up and the start-up world in general.

What’s in it for you?

- You can get a feel for start-up life in a very low risk way
- You get to be a part of building something from scratch – It is incredibly rewarding to see the impact your nuggets of wisdom can make for an early stage start-up.
- It is a great way to flirt with a potential employer before you make the jump – By moonlighting for a start-up you can understand the culture, the lifestyle impact it would have, and figure out whether you think they are onto something or are going to burn out.

How to get started

You should go to events/venues where startups congregate and just start talking – Meet founders, ask them about their businesses and what their current challenges are.  Start-up founders are very open and will be more than happy to discuss their challenges because they are hoping that you will have the answers!  Good places to meet these people are meetup groups – Search for industry interest topics relevant to you at www.meetup.com as a good starting place.

Secondly, co-working spaces are full of start-ups and they often run events where visitors can join expert panels to answer questions on a specific topic – This is a great way to share your knowledge and get exposure to a bunch of startups at one time.

Finally, and perhaps the least scary is to just ask one of your friends in the start-up world for some intros.  The start-up community is exceptionally well connected and it won’t be long before you are meeting plenty of interesting people.

Go on, take the first step and try some advising or moonlighting to see whether the start-up world is for you.