There are countless stories that I can share with you about how I lowered my value just to close a sale with a price-conscious customer, as well as giving away too much equity to investors, which ultimately turned out to be the wrong decision. However, with the abundance of unsolicited advice that comes your way in the early days of leadership, you feel the pressure to take what you can while you can, in an effort to "get your business out there."
It is always the wrong approach to settle for less than your value. The longer you quantify your prices to penny pinching customers, who are shopping for a discount, rather than quality, you may run the risk of lowering the value of your business to avoid the haggling.
The one thing that many successful entrepreneurs do not discuss is the importance of establishing the valuation of your company very early and how to negotiate with potential customers, stakeholders and investors. Although I discuss negotiation in the workplace quite often, it is also an essential business tool as well.
From negotiating lease and vendor agreements, supplier contracts, partnerships, equity shares with investors and with potential clients/customers; you need to know the importance of asking for what you deserve upfront. Negotiation is not haggling, it is essentially providing clear evidence to support the value you are requesting.
It is time to face the reality that you will be faced with a price-resistant customer, or an investor who is shopping for a great investment with a larger equity position than you are willing to part with. Rather than using a reaction based approach of objecting to their offer without reason, negotiate. It is time for you to prove that you know the value of what you offer.
There are three factors you need to remember before commencing the conversation about your value.
Ask for more upfront
Have you ever watched Shark Tank or Dragon's Den and viewed hopeful entrepreneurs losing the interest of all of the sharks because they are fixed on a price and equity share? There is a reason why it is important to start high and work your way down - everyone wants to shop for a great deal in today's market.
Be prepared to negotiate by asking for more than you need upfront in order to have bargaining room and flexibility with your pricing, without losing money or equity. Before engaging in the conversation, make sure you know your absolute lowest number so you are not giving away value.
Present the facts
In my leadership seminars, I refer to this as your UVP (Unique Value Proposition). Your goal in a negotiation meeting is to defend your position and avoid vague blanket statements such as "We have the best products in town," or "I have 20 years of experience in this industry." You need to open the conversation by proving the outcome you have provided to past customers/clients and how your company out-performs your competitors. Think of it as your opening statement - never discuss price until you have addressed your value.
Be prepared to walk away
Sometimes, it is the only solution. Never become too emotionally invested that you cannot detach yourself from the potential loss. There are times when common ground is not achievable, and walking away is the only solution. If you become emotionally invested in the process, it may cause you to compromise and accept less than your ask. When the other party is assured that you are not prepared to go below your value, it raises the level of commitment and interest.