Keys to Understanding Software Sales Negotiation

I’ve spent my whole career negotiating deals: everything from newspaper ads in Oakland as a salesman to NYC office leases as an entrepreneur. You can learn so much about people by negotiating and I’ve always tried to sharpen my skills by reading articles and books to get better at it. Along the way, I’ve been asked by many for my favorite book on negotiation, and I always point people to Never Split the Difference by Chris Voss. Chris was an FBI negotiator for 24 years before taking his skills to businesses as a consultant. Although I always suggest folks just read the book, I’ve also sent many sellers—they are usually sellers asking—my notes and takeaways. I figured it was time to publish it as a post. 

For many years BATNA was the most common negotiation framework. BATNA is an acronym for Best Alternative To a Negotiated Agreement. It is considered the most advantageous alternative that a negotiating party can take if negotiations fail and an agreement cannot be made.

The problem with BATNA is it anchors you in a bad outcome and focuses you on a low goal. Voss argues you should have a lofty goal and think about how you will get there by finding new information. 

“Seek first to understand, then to be understood.” - Steven Covey in The 7 Habits of Highly Effective People

Voss’s premise revolves around empathy, and that is where the famous Covey quote comes into play. Understand the emotional state of the person you are negotiating with, and you have a far better chance of predicting your outcome. Empathy saves time by helping to root out problems early. People only articulate real issues when they feel like they have a personal connection with you. 

The principles of the book revolve around: 

• Writing down what you know going into the negotiations and then seeking new information
• Calming the negotiation down
• Establishing rapport
• Gaining trust
• Getting the other to side to verbalize their needs
• Empathizing with the other side
  

There is naturally a lot in the way of empathy in a negotiation, and here are some of the things Voss talks about to help ensure you empathize with the other side and that it’s recognized. 

Mirroring: Listen first and pick up information to show you care. This can help in increasing trust. Enter with multiple hypotheses and gather info to test them. Ask a lot of questions and playback what you hear.

Labeling: Think from their point of view. Use phrases like “it looks like” or “it sounds like.” Find places you can apologize, especially if you have done wrong. List out the other party’s potential fears. 

“No” Before “Yes”: Look to get a “no.” It helps the other party feel in control. Follow a “no” with a solutions-based question—“What about this doesn’t work for you?” or “What would you need to make it work?” No is their protection if they feel they are being forced to say “yes.” Force a “no” when necessary to unstick a negotiation—“have you given up on this project?”. (Side note: you can take the same approach with your outreach emails, but I find this approach annoying. I never asked for anything, so why are you asking me for a “no”?) 

Get them to say “That’s right”: This breaks down defenses and goes well with listening and mirroring. It can establish momentum in a conversation that could lead in the direction you want. 

Always summarize the conversation: If there is a challenge in that summary, use a “how” statement. “How” minimizes confrontation and often gets the person in problem-solving mode instead of a defensive mode. A few examples: 

• “How will we know we’re on track?”
• “How will we address things if we find we are off track?”
  

Strategically say “Fair”: People are heavily swayed by how much they perceive they are being respected. I once worked with a revenue leader, Matt Elders, who was a master at this. I stole it from him even before reading Voss’ book. 

Be tuned in to how this deal could make them lose, not just how it will make them win: People are drawn to sure things. Daniel Kahneman and Amos Tversky’s Prospect theory explains this well: 

• The fear of loss is the biggest driver of human behavior 
• Loss stings twice as much as an equivalent gain. 
• Look for the loss, and factor it into your thinking
• 70% of buying decisions are based on avoiding a loss versus accomplishing a gain. 
• People aren’t afraid to fail. They are afraid to fail in a new way. Nobody gets fired for buying IBM—you can still fail, but it is a safe failure. 
• Call out the fear/negative, don’t hide from it. Acknowledge and move on. 
  

Illusion of Control: Use questions to find out what they want. Start questions with “what” or “how” and avoid “why,” as it raises defenses. 

• “What is the biggest challenge you face?”
• “What about this is most important to you?” 
• “How can I make this better for us?”
  

Avoid negotiation in situations of chaos: When things are chaotic (tone changes, you went above them to try and do something, name-calling has occurred, etc.), people worry more about the downside and the threats that could make that happen. Referencing back to loss aversion above, chaos is when the other person might feel like the situation is no longer in their control or emotions are running high and their ego has been damaged. Get out of a negotiation if it is chaotic until you can calm it down. 

Negotiating with people that aren’t there: Often when you are negotiating with complex enterprises there are a large number of stakeholders who, even when you’re not talking to them directly, are making their voices heard. Ask questions to get at those people’s desires. A few examples: 

• “How does this affect the rest of your team?” 
• “How on board are the people not here?” 
• “What do your colleagues see as the main challenges in this area?” 
  

Negotiating leverage as you listen: Understanding your leverage is a little like counting cards in blackjack—it helps you know when to hit and when to stand. There are three types of leverage:

• Positive leverage: you have control of what they want. Listen for “I want(s)”. Positive leverage should improve your confidence during a negotiation. 
• Negative leverage: ability to create suffering. Use “it seems” here. Remind yourself that negative leverage can create chaos or loss aversion for the other party if you make them feel like they have no control. 
• Normative leverage: look for inconsistencies and understand their standards and values. If you understand this, you understand where they could be vulnerable. 
  

What is said or not said—the 7-38-55 rule: The psychologist Albert Mehrabian has said communication is 7% verbal, 38% tone, and 55% body language.  Seeing non-verbal cues allows you to try and call out inconsistencies in a negotiation. “I noticed you said yes, but it seems you are hesitant.” 

Get three agreements: This is a kind-of milestone system for negotiating deals. The three agreements are:

Agreement 1 = the first time they agree

Agreement 2 = label and summarize to get a “that’s right” 

Agreement 3 = a calibrated “what” or “how” question that gets them to explain their agreement 

Look out when people won’t say “I”: It often means they are lying or deflecting. You want to be negotiating with someone who is taking ownership. 

Say “no” indirectly: No is a strong word that you want to use sparingly. It can kill momentum and stop a conversation At the same time you might need to deflect or gather more information in a place where it might feel natural to say “no.” Here are a few alternative ways to say “no”:

• “How am I supposed to do that?” 
• Your offer is generous. I’m sorry it doesn’t work for me
• I”m sorry, I just can’t do that. 
  

Identifying Styles: Voss lists three styles of negotiators.  

Assertives

• Time is money
• Direct and candid
• “That’s right” is key to get from them
  

Accommodators

• Want to build rapport
• OPtimistic and peacekeeping
• Silent means anger
• Can often offer something they can’t deliver 
  

Analysts 

• Analytical
• Minimizing mistakes 
• Avoid answering questions directly
• Avoid immediate counters
• Warn them of issues early 
  

Become an aggressor if getting nowhere: In some ways this goes back to getting a fast “no.” You can use “why” questions like “why would change from your existing supplier?” to force a hard conversation. “I’s” can also help here, particularly if you’ve built a relationship of trust and empathy. “I feel” can push a conversation beyond its blockage.

Price Targeting: In general, do your best to not offer a price, ask them first to give you a price. Anchoring your price at to high of a level will cause the other side to walk away without the chance to negotiate. If asked you can try to avoid answering with “how” and “what” questions like “Let’s put price aside and talk about what would make this a good deal?”

If you must set the anchor price, set a price target by starting at +/- 35% of your target (if you’re buying this is 65% of your target price and will increase and if you’re selling it’s 135% of your target pricing and will decrease). From there, have three increments of +/- 15%, +/- 5%, and, finally, your target. This helps them think you are going to break. Try to use precise numbers like $4,975 v. $5,000. In a final offer, you can also throw a non-monetary item in to show you are out of ideas/areas you can bend. 

Negotiation Preparation: “When the pressure is on, you don’t rise to the occasion, you fall to your highest level of preparation.” It’s important to always have scenarios in mind:

• Summarize and write out known facts that have led to the negotiation
• Identify 3-5 labels in their negotiation (“It seems like X is valuable to you” and “It seems you don’t like Y”
• Prepare 3-5 questions: Effective negotiations are about moving past stated wants and identifying underlying motives 
• When there are deal killing issues consider asking “What are we up against here?” or “What happens if you do nothing?” or “What is the biggest challenge you face?” 
• Prepare a list of non-monetary things to give away when nearing the end to showcase you are out of price options.
  

Obviously, the ideas and techniques here range from highly strategic to highly tactical. But the biggest thing to remember in any negotiation is that you’re working with another human just like you. We should always assume people by their nature are NOT difficult and that it’s most likely you are the one missing something about them. “Seek first to understand, then to be understood,” will never steer you wrong.