I ask many times the participants in my “Elite Negotiator” training what “winning in negotiation” means for them. In 99% of the cases, the answers are about “reaching the negotiation targets”. In over 10 years since I started “The Elite Negotiator” trainings, none, and I mean NONE ever said that winning means walking away from a bad deal! I know it may sound counter intuitive, and may hurt the ego of many people, but it is 100% true! Let me explain what I mean:
It all boils down to one fundamental rule you must never break: never, ever, close a bad deal for you! A bad deal is any deal that doesn’t fit within the limits you set when you prepared for the negotiation, or a deal that can create negative ripple effects (consequences) later on.
The first part of the bad deal definition is a no-brainer, so let me clarify the second part. Every action we take generates (positive or negative) precedents and consequences – and this is true also in deal making. We must always foresee what positive or negative impact(s) the deal has. For example, if we accept to give “a special discount”, only to be able to close the deal, then there is a high risk we will always have to give it in the future. Also, if we give unfairly good conditions to a partner in one negotiation, there is a risk that those conditions may become public (see The New York Times rule). I am very stubborn in my belief that exceptions are not healthy, as they will trigger endless similar requests later on.
Sometimes a bad deal will haunt your company for years to come. A friend told me that he inherited a client with a contract that was so bad that it made them lose money every year since the deal was originally signed. My friend tried extremely hard for several years to gradually increase the prices for that client to a level that would “stop the bleeding” for his company. And while the bleeding recently stopped, the company still doesn’t make any profits with that client…
Across the years, a few people told me that they have no problem to close a “bleeding deal” for their company, if the objective is to get a certain client. I have mixed feelings about this strategy, because such deals directly hurt the company profitability. Also, there is a very small probability that this will change in the future, as the client will not accept a significant increase in price as of year 2 to fix your profitability issue. Very recently another friend of mine told me how a retailer in which his boss pushed him to get listed is killing his overall country profitability. And there is absolutely no hope that the deal with that retailer will get any way better in the future – on the contrary.
Also, a deal that seems “too good to be true” it is exactly that! When you get too good conditions, always tripple check the details of the deal for anything you might have overlooked. Also monitor the implementation, so you make sure you get indeed what you need! I remember an infamous case when I negotiated the printed materials for a large marketing program. The prices were amazing, but we got the materials a few weeks later than planned, so we actually lost because we were forced to postpone the implementation. And no penalties could compensate for that delay…
I hope by now you are convinced that you must never close deals that are not sustainable or “too good”. But how to keep your freedom to walk away when you realize that things go in the wrong direction? Here are some tips:
- be cold-blooded and realistic about the deal and its consequences. Do not accept anything unsustainable or, if becoming public knowledge, would cause you headaches.
- have at least one viable alternative if things do not go as per your plan
- if you have an overly ambitious and pushy boss, explain to him/her what are the (longer term) consequences if you sign a bad deal
- always act with a feeling of ownership – do anything you would do if you would be the owner of the company (within the legal and ethical boundaries, of course!)
- kill your EGO – it is not a shame that you did not close a bad deal – in fact it is a matter of pride, as you did the right thing for the business!
- forget about the effort already put behid the deal – it’s sunk cost, with zero chance to recover. Just look ahead and make the right decision of not advancing a deal that is bad for you!
To conclude, closing a bad deal will not make it better over time (it’s not red wine!). On the contrary! It has the potential to become a nightmare for you due to its consequences and precedents that are created. So, by all means, stay away from it and you will actually WIN!
