I was doing research on the topic of women and negotiation – inspired by my fellow female entrepreneurs – when I came across the topic of making pricing concessions to parties who are seen as powerful. Negotiation skills are key to being a successful woman, in business and life.
In a 2011 Microsoft Business interview with Deborah Kolb, co-author of Her Place at the Table: A Woman’s Guide to Negotiating, she notes that small business owners often agree to lower rates when big companies push hard on price.
These small businesses reason, “I’ll do it this one time for the good of the relationship.” Is the big company grateful for this concession? No. The big company is not thinking about the relationship. They’ve just trained the small business to take lower rates.
Often, as part of the negotiation, the big company may say they have lots of cheaper choices. So as not to lose the opportunity, too many small businesses will concede and rarely do they recover getting the rate they should be getting to earn a reasonable profit.
What are your choices? How do you begin and manage the conversation to ensure you are able to charge the price you need?
Ms. Kolb suggests the following Negotiation Techniques:
- Set-up a rate going in and get increases if the work is a success. You can build contingencies into any agreement. Don’t low-ball your services.
- Remove yourself from a defensive position when confronted with the “we can get it cheaper” response. Say something to the effect of, “let’s talk about how you might do that.” If they back off, you will know that it was an idle threat.
- Add value to the deal. Think about re-framing the discussion around value of the transaction, rather than direct pricing. What is the value of the outcome you are committed to delivering?
Finally, get out of your own way, Ms. Kolb advises. Recognize tendencies you may have for making immediate concessions. Just because you are a small business, does not mean you are weak. And, just because they are a large company, doesn’t mean they have more clout.