I will never forget my first deal. It was tiny, but it was going to be my startup’s first paying customer and you fight for those pennies… After months cold calling, hundreds of calls, countless meetings, this was the only deal I had to show for it. We were halfway through a 3 month trial and rather than sit on it, our team decided to push for the long term commitment.
Keep in mind, it was November of 2008 and the fallout from the financial crisis was palpable. I was calling prospects only to find out that they’d been laid off…I had to close this deal.
I flew down to their offices to close the deal in person. I was nervous as hell but knew that I had them on the ropes. I had invested the time to develop rapport with my contact there, the Marketing Manager responsible for operational execution.
Our team had handled this account with kid gloves. Before the launch, we made sure to give ourselves wiggle room in case we underdelivered by discussing how it would take time convert their target audience and we may not see results until several after several campaigns had been run. This negotiation tactic is typically called planning a way out. I made sure to speak with my contact at least once a week during the campaigns and sent reports on our progress before every call. I established credibility by setting clear expectations and surpassing them in each and every interaction. I was early to meetings, sent updates before she asked for them, and addressed any issues head on without shirking responsibility.
She was pleased with the early indicators and more importantly, we’d become friends. This wasn’t some clichéd sales tactic. We talked about our families, our weekend plans. We were close, so close that she was advising me about how internal conversations were going, where the pain points really were and what buttons to press.
With that confidence, I attempted to assume the close by talking about how glad we were to continue working together. I opened aggressively: a 5 year commitment with a mid-tier price. Not the most aggressive pricing, but not cheap either. This would be a profitable deal for us. Now 5 years is a long time. Most people don’t even stay at the same company for 5 years. It’s an especially long time when your track record as a company is counted in months, not years. By starting with this highball, I hoped to make any incremental give seem reasonable in contrast. 3 years? That’s nothing…except a lifetime in startup years…
The three of us sat there, going back and forth and ultimatel, we ended exactly where I expected we would. I came down to 3 years after hemming and hawing, I came down on price a little, but not much. And then I made a fatal flaw. I shook hands and walked out. Without signing the papers. I hadn’t prepared the documents before walking into the room. None of that crossed my mind as I walked out of their offices.
I flew back to New York. Shared the good news with the founder of the company and our investors. We had our first client. And then waited. And waited. After three days passed without receiving the executed agreement, I called my contact. “Oh, it’s no problem, we just need final approval from our CEO.” Red flag. Big. Glaring. Red. Freakin. Flag. I had never spoken with this person. Had never teed up our positioning. Had never even known he would be involved in the decision.
And the deal never got done. If they don’t sign on the dotted line you don’t have a deal. Never forget that.