Choose Your Negotiations Wisely

In the entrepreneurial world, it’s often said that if you don’t negotiate down to the last dollar and cent, you didn’t get a good deal. 

Early in my career, I firmly believed this. I approached negotiations with creativity, slashing costs with inventive terms and a resolute stance on my target number. I saw negotiation as a game with clear winners and losers. However, one day my perspective drastically changed when I found myself on the receiving end of a poor negotiation, altering my approach forever.

Our agency’s sales funnel was thriving. We had a steady influx of leads, a productised service, a well-defined sales process, and signing new clients was a breeze. Then came “This Client.” They had an exciting product, and I was pumped to work with them. However, they showed no respect for the people responsible for building their product. This became evident in their negotiations for our services. My excitement clouded my judgement, leading me to agree to less favourable pricing and payment terms. Initially, I offered goodwill, trusting things would sort themselves out. Instead, this client turned into a nightmare: late payments, refusal to accept work, and project extensions at our cost.

This experience made me reflect: despite delivering above and beyond our contractual requirements, the client relationship was a shambles.

Why?

Don’t Negotiate Down People’s Value

It dawned on me that negotiating the cost and terms of someone’s service directly negotiates down their value. In this case, when the client negotiated down the price of our design services, they indirectly devalued our team’s capabilities. By aggressively negotiating the price, they sent a message that our team wasn’t worth what we had advertised. This is a dangerous game with critical impacts on both sides of the transaction:

As a service provider, when your financial value is slashed, it’s natural to feel frustration toward the client or project. Consequently, you might look for ways to complete the project faster (possibly cutting corners) to regain lost value. Additionally, it’s unlikely you’ll go above and beyond with multiple rounds of feedback or adjustments if your slim margins are already consumed.

Similarly, as a purchaser, you’re likely to receive only a fraction of the service the provider would typically deliver due to the frustration bred during the negotiation phase. This situation revolves around what I call the “Value Balance.” When two parties transact, there must be a balance between the value paid and the value received. If there’s too much imbalance, one party will feel extremely dissatisfied, potentially derailing the entire transaction.

The key takeaway is not to stop negotiating—far from it. To this day, I still seek ways to negotiate. The lesson lies in choosing your negotiation battles wisely and understanding how to negotiate. When negotiating the cost of a service provided by an individual, consider alternative ways to reduce costs, such as reducing the scope of work, changing materials, or adjusting timeframes. Importantly, if you’re negotiating a transaction not reliant on an individual delivering the product or service, feel free to negotiate aggressively. For instance, we recently renegotiated our company CRM deal, a software product not dependent on an individual, saving thousands of dollars.

Ultimately, strive for win-win transactions and avoid burning bridges before work even begins. The worst thing you can do at the beginning of an engagement is to reduce the perceived value an individual is offering. This only leads to frustrated service providers and frustrated clients.

Chose Your Negotiations Wisely