There’s no rule that says you have to sell to every customer who expresses an interest in what you have to offer. In this last article in the series, we look at knowing when to walk away. The great British industrialist Lord Hanson, who led the British takeover boom in the US in the 1980s was famous for ensuring he could always walk away from any deal at any time.
If you are being hammered on price, decide whether or not you really want the business. Businesses in their early start-up years are notorious for dropping their prices to win business. It’s sometimes called ‘buying business’ or ‘buying market share’. Sometimes it can be a good thing to do. New retail parks often drop their price to secure the right anchor tenant, which then draws in the other tenants. And small businesses sometimes drop their prices to win a blue-chip client in the hope it will give them the credibility to win more.
In both of these cases the price drop can be justified for a bigger picture business gain. Other examples include businesses which do an initial piece of work at a lower price, simply to get a foot in the door with the client. They then aim to grow the business. It’s sometimes referred to as a ‘sprat to catch a mackerel’. These are all valid approaches.
But be careful if you go down this route, or it becomes the norm in your business. It’s often hard to put your prices back up, once you drop them. Make sure your full price appears in all documentation, including your invoices so you can refer back to it. And clearly state why the discount was given on this occasion.
But you always have the option not to do the deal if you aren’t happy with the terms the customer is proposing. Being able to walk away from the deal if you want to has several benefits. It can show a confidence in your position, so long as it doesn’t cross into arrogance. I bet negotiators could see the confidence in Lord Hanson’s eyes as he negotiated across the table with them, a look that no doubt came from the clarity that he wasn’t bluffing. If negotiation is a game of poker, this belief can sometimes lead to the other guy folding first.
Some businesses are conscious of their position in the market, and they simply don’t want to do business with customers who only buy on price. If you are positioning yourself at the higher end of the market, it’s unlikely that you are going to retain customers who buy only on price, so you could argue, why bother trying to win them in the first place, if next time you try and sell to them, they are only going to try and hammer you again on price?
Take action: Decide what your bottom line price is. Give your team the authority to confidently decide when to walk away from a deal. Practice negotiation techniques, and learn how to walk away from a deal without appearing arrogant.