4 Ways To Sniff Out A Bad Deal Before You Sign The Contract.

For those of you that have the pleasure of negotiating agreements, I have a question:

Do you know when to walk away?

I had the most perplexing experience last week that reminded me that yes, it is crucial to say “no” when a deal smells bad. I’ll spare you the of the details of how it all unfolded, but ultimately it boiled down to a negotiation that went like this: “agree to our terms or we’re walking.”

I gracefully waved goodbye.

The truth is though, I see way too many salespeople agree to a one-sided arrangement like this just to “get the business” (if I’m honest, I’ve done it myself before too). Because after all, sales are like pizza, right? I mean, even when it’s “meh”, it’s still pizza…

If there’s anything my experience has taught me, it’s that this kind of attitude never works out in the long run for companies or salespeople — they usually end up trying to satisfy customers that you’ll never be able to satisfy because they are a bad fit (Einstein’s definition of insanity anyone?).

That said, gaining the experience to know when a deal is going to be unproductive takes a lot of years and a lot of practice. So in the spirit of Warren Buffett (quoted below), I want to help you shorten your learning curve and save you years of headaches.

To do so, I’ve tapped into my exceptionally wise and talented sales peeps on LinkedIn, as well as a couple resources across the web which have definitely rung true in my 20 years in sales.

First… Why Do We Ever Agree To Bad Terms In The First Place?

Tell me if this story sounds familiar.

The end of the quarter is approaching and you’re two sales short of the target.

You’ve got a couple in the pipeline, but you can feel it in your gut that they are bad deals. The customers are sending you all kinds of signals, demanding too much, and not communicative enough.

But you push them through anyway because you’re on your 3rd quarter of just missing your target and can’t afford another without the risk of getting managed out.

The next quarter, those two customers churn and you start the process all over again.

Folks, I get it. Life as a salesperson is hard! Since our paychecks are usually riding on our ability to deliver, the pressure is needless to say, intense. And if we don’t deliver? You better believe hard times await.

The truth is, I think this pressure is where the problem starts for most. And that’s because it gets us what I like to describe as “off balance” — or in plain English, it gets us desperate.

That’s why the two most important mindsets you’ll ever internalize as a salesperson are:

  1. Your prospect doesn’t need you if you’re not the right fit
  2. You don’t need your prospect if they’re not the right fit for you

That second one is terrifying, I know.

“Let go of sales for the sake of getting the right fit??? No way!” I hear you saying. But think about it… when was anything good done in desperation?

It’s been proven to me time and time again that if you want to win at sales, quality always comes first. Focus on finding that client that is never going to leave first. You can ramp later.

(Note to founders and sales leaders here: this is exactly why unattainable sales goals are so deadly to your growth)

How To Sniff Out A Bad Deal Before You Sign The Contract.

Here are 4 things my experience (and the experience of my sales network) has proven to be useful in discerning which deals will be bad over the last 20 years.

1. Define Your Values And Vet Clients Against Them.

This may sound a little touchy-feely, but if there’s anything you absolutely must implement from these tactical points, this is the one.

Let’s face it… you know which core values are is important for a successful business relationship (if you don’t you’ve got some work to do!). People need to be communicative, honest, helpful, timely and more.

Take some time, list them out on a scorecard, and evaluate each prospect and deal against it. And say NO if there’s not a good fit!

Need help doing that? Here are two resources that will help you:

  1. Hubspot: prebuilt checklist for each stage of a deal.
  2. Inc: One trick to knowing if a client will be good or bad

2. Ask The “Magic” Question.

This one comes from Dan Morris, a managing partner at Mindracer Consulting and it is ON POINT.

I call his approach it the “magic question” because you can literally ask any prospect this early in the process and it’s like having a crystal ball you can look into for what the future of the engagement would look like:

“If you look back on your decision to engage with us six months from now, how will you be sure you made the right decision?”

In Dan’s words, this is particularly powerful because “if we can get clear on that, and are both sure we can fulfill, then the negotiation process (if any) is always smoother because we’re aligned.”

I couldn’t agree more. As I always say, it’s critical to set the stage early and often!

3. Look For “Little Tests” Throughout Negotiations.

This one comes from David Masover, an independent consultant, speaker, and author with years of experience in startups as a sales leader, CEO, and founder.

In his words, here’s what he means by “tests”:

“A test can be any small thing the other side is supposed to do or agrees to do. When those get done as agreed, things feel more smooth, and when they are consistently ignored, modified, turned back on or worse — that too is a sign.”

I love this “little tests” approach because it’s usually the little things early on in a deal that are the tells for what’s to come later once the ink is dry on the contract. I mean, if the other part isn’t doing their part early in the process, when exactly do you expect they will start?

Remember, the road to success almost always a two-way street.

Here are a few things you can easily test throughout negotiations courtesy of Gerard McLean, the CEO of Rivershark Inc:

  1. Do they call/take my call on the agreed upon time? Lack of timeliness and responsiveness is a dead giveaway that things are going to be very difficult in the future. 70% filter themselves out right away with this
  2. Do they call me to pay attention to the little things like my name? Seriously, people who can’t get details like names right are generally bad clients. That knocks out another 10%
  3. Do they talk about my services like they are easy, they could do them but don’t have time, etc.? That filters another 10%
  4. The remaining 10% is worth dealing with.

Remember, this is about finding the 20 that is going to bring you the 80. That’s the key mindset to take away here.

4. Flip The Script And Put Them In Your Shoes.

Here’s a simple trick to level the playing field in a negotiation, courtesy of Philip J Saweris, founder of PSM Consulting:

I’ve had a few one-sided agreements where I noticed that all of my redlines/comments were in every section. So I decided to scrap my comments and ask them if this was reversed, would they sign this contract. As expected they danced around it so I decided it was not a fit for me.”

I love this role reversal tactic for several reasons, but first and foremost, it forces a prospect to put themselves in your shoes. In essence, it requires them to wrestle with the fact that they are being unreasonable.

How they respond is a dead giveaway whether they’re going to be a bad client or not. Remember, it’s like dating — if they don’t respect you now, they won’t later either.

A good deal is always beneficial to both parties involved.

Final Thoughts.

There’s a lot of tactical advice here. But I’ve got to be honest… the most important thing to take away from this article isn’t tactical at all.

Instead, the place you need to start is with your mindset. Learning to say NO to bad clients is probably the most important skill you’ll ever learn as a salesperson. And while I know that is probably terrifying, it is essential to your long-term success.

And if you work in a place where you can’t say no, or this attitude is not supported, it’s time for a new gig. Really, I mean that. It’s that important.

I want to hear from you all — what ways have you learned to filter out bad business? What are the telltale signs? Leave it in the comments below!




Helping SaaS startups hire executive Sales and CS leaders without the cringe ⋆ Personally closed $100MM+ ⋆ Founder/CEO ⋆ 2 Exits ⋆ LP ⋆ Sharing lessons here

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Amy Volas

Helping SaaS startups hire executive Sales and CS leaders without the cringe ⋆ Personally closed $100MM+ ⋆ Founder/CEO ⋆ 2 Exits ⋆ LP ⋆ Sharing lessons here