What’s Sales Negotiation | Key Stages, Steps, and Q&A

As sales and marketing professionals, you already understand the importance of smooth deal-making.

However, with an average sales win rate of only 21%, you must consider one critical strategy: negotiation.

The right sales negotiation approach does not focus solely on obtaining a signature. It prioritizes collaborating with a prospect to finalize terms such as price, contract length, and deliverables. 

Whether the deal involves a simple, low-cost product or a complex, high-priced service, negotiations require tact, strategy, and preparation.

In this guide, we’ll walk you through how to negotiate effectively, prepare your team, and close deals that strengthen both your business relationships and bottom line.

The Sales Negotiation Process: A Breakdown

Sales negotiations begin after the prospect indicates they’re interested in moving forward but have specific concerns or requests. This phase involves reaching a mutually beneficial agreement through a series of conversations. 

To navigate these interactions effectively, you need a process. 

Breaking negotiations into clear steps can help you:

▢ Streamline communication
▢ Anticipate challenges
▢ Keep both parties focused on closing the deal

The Three Phases of Sales Negotiation

Sales negotiations typically cover three stages:

1. Preparation

This involves securing a verbal agreement, drafting a business proposal, sending the proposal, and setting an agenda for the meeting. A clear understanding of your firm's offering and potential areas of pushback will make the negotiation smoother.

2. Negotiation Meeting(s)

In this phase, sales reps review the proposal, listen to requests, facilitate compromises, and confirm the next steps. Depending on the complexity of the deal, this could take multiple meetings.

3. Sales Contract

Once both parties agree on the terms, the next step is to draft and send a sales contract. It’s crucial to follow up consistently until the deal is officially closed.

The 4 Standard Areas for Negotiation

Although each negotiation may differ, there are several elements in a sales agreement that prospects frequently seek to discuss. Here are four essential aspects often subject to negotiation:

1. Scope of Service or Product

This outlines what you will provide. Prospects usually want a clear understanding of the specific services or products the agreement covers. They want to ensure all their requirements are addressed, and no unforeseen costs are involved.

2. Pricing

Pricing is a vital component of any negotiation. Prospects often want to discuss the total cost, including:

▢ Potential discounts
▢ Additional services
▢ Any conditions that could affect pricing

They aim to achieve a price that fits their budget while ensuring they receive adequate value.

3. Payment Conditions

Payment conditions specify when and how payments should be made. Prospects may negotiate aspects like:

▢ The payment timeline
▢ Accepted payment methods
▢ Penalties for late payments

More flexible terms can make the agreement more attractive and manageable for them.

4. Contract Length and Termination Clauses

This aspect deals with the duration of the agreement and the terms under which either party can terminate it. Prospects often seek clarity on renewal options and any penalties associated with early termination. 

Understanding the commitment period and exit strategies is crucial for their decision-making.

10 Steps to Master Sales Negotiation with Ease

Negotiating a successful deal requires a strategic approach. Follow this structured process to effectively lead negotiations, from securing verbal agreements to closing the deal.

1. Obtain a Verbal Agreement and Define Next Steps

The negotiation begins once your prospect indicates they are ready to move forward. Look for cues such as:

• "Can you send a proposal?"
• "We’re ready to proceed."

Secure Next Steps

After this verbal commitment, communicate that you will provide a sales proposal highlighting essential terms. Schedule a meeting, ideally lasting 30 minutes or more, to discuss the proposal in detail. This meeting is where the negotiations truly begin.

2. Create a Comprehensive Business Proposal

Design a written proposal that aligns with your prospect’s needs. Include:

• Scope of work
• Deliverables
• Pricing
• Payment terms
• Contract duration
• Any anticipated pushback areas

Benefits of a Pre-Meeting Proposal

Sending the proposal before the meeting allows the prospect to reflect on the deal, minimizing back-and-forth during negotiations. It also provides a solid foundation for discussions.

3. Dispatch the Proposal and Meeting Agenda

Send the proposal as an attachment in an email. In the email body, confirm the meeting details and outline the agenda. 

Label this as a “Proposal Review Meeting” to reinforce your leadership in the negotiation.

4. Prepare Thoroughly for the Meeting

Preparation is crucial for achieving favorable outcomes. Focus on these key areas:

5. Open the Meeting and Review Proposal Terms

Start with a casual conversation to create a relaxed environment. Then, outline the meeting agenda to keep discussions focused.

Review Key Proposal Components

Discuss critical aspects of the business proposal, including:

• Scope of work
• Deliverables
• Implementation process
• Pricing and payment terms

Encourage Engagement

Once you’ve covered these areas, invite the prospect to share their thoughts. Ask, “Does this all align with your expectations?” This opens the floor for negotiations and helps you gauge their reactions.

6. Encourage Collaboration and Negotiation

Once you've presented the details of your terms, expect the prospect to propose adjustments to the agreement. This may pertain to pricing, payment conditions, scope of services, or other factors. 

Your role is to foster a collaborative environment. When they make suggestions, actively listen, empathize with their perspective, and evaluate whether the request aligns with your:

▢ Best Alternative to a Negotiated Agreement (BATNA)
▢ Predefined limits for concessions from the preparation phase

Here are some strategies to effectively navigate the negotiation stage:

Maintain a calm and confident demeanor throughout the negotiation, even if you are faced with unreasonable requests. Reacting defensively can hinder communication.

If you feel frustration rising, take a deep breath or count silently to regain composure before responding.

7. Maintain Ongoing Negotiation Discussions

Negotiations may extend beyond a single call, requiring multiple discussions as both parties evaluate proposals and generate new ideas. Teams often need time to analyze terms before providing feedback.

A productive way to conclude a meeting is to ask, “If I can accommodate A, will you agree to sign this by Tuesday?” 

If they agree, you can secure the necessary approvals from your management or confirm the agreement over the call, effectively solidifying the close.

8. Validate the Agreement

Once all significant terms have been discussed and you sense agreement, summarize the deal points and ask for their confirmation—such as, 

“We’ve settled on terms X, Y, and Z, and we’ll provide A as you requested. Shall we finalize this in writing?”

If they affirm, guide them on the subsequent actions. Typically, you’ll draft a sales contract that captures the agreed terms while addressing the necessary legal components. 

Inform the prospect when to expect the contract and establish a timeline for their review and signing.

9. Create and Dispatch the Sales Contract

Post-discussion, draft a sales contract including vital sections: 

▢ Parties involved
▢ Service description
▢ Payment conditions
▢ Delivery expectations
▢ Contract length
▢ Termination clauses

Ensure it reflects the agreed-upon language from your negotiation discussions. Depending on your needs, consider adding clauses for confidentiality or severability.

10. Conclude the Negotiation Process

After sending the contract, be prepared for potential revisions from the client or their legal team regarding clauses and stipulations. Contract management software or collaborative document tools will enable them to propose edits, allowing you to discuss these changes with your team.

Further discussions may be necessary to resolve legal specifics, though most amendments are usually manageable. Once you and the legal teams finalize the terms, follow up with the prospect until the contract is signed. 

Send reminder emails every few days after the review deadline, assuring them of your availability for questions and support. Ideally, this leads to a signed contract and a new client.

Essential Sales Negotiation Questions and Answers

Negotiation often concerns critical areas that prospects typically focus on: the scope of work, pricing, payment terms, and contract duration. 

Here are several response strategies for each common request from a prospect: investigate, trade, concede, or reject. 

You can use these responses as they are or adapt them to suit your team’s negotiation style. 

Here are some examples to guide you:

Feel free to modify these examples to fit your negotiation approach or the situation's specifics!

The Bottom Line

Mastering negotiation strategies is essential when aiming to secure beneficial agreements. Effective techniques such as asking probing questions, fostering reciprocity, and encouraging empathy enhance your chances of reaching a favorable outcome. 

Remember to remain calm and strategic throughout the process. With a robust negotiation framework and the right approach, you can successfully navigate complex discussions and strengthen your partnerships for long-term success.