How to close a business deal
Over the course of my career, I have closed dozens of business deals. Most were lengthy negotiations spanning months, sometimes years; but I often found a way to get it done. As part of my yearly performance reviews with management, I was often recognized for being efficient in reaching long-term goals with little frustration or wasted time.
How does one go about closing a business deal? I've outlined the steps I take below.
Find a potential deal and try to determine whether it has legs or not. Don't waste your time on deals with little chance of success, as they will just sap your energy for no benefit. To find out if you have a good chance at all, ask the following questions:
Who are the decision makers? How much can they spend?
What is their main motivation for buying your product or service?
Do they have a strong sense of urgency?
Can you resolve any ancillary issues you may face to close this deal?
If there is no urgency, then it's going to be difficult to close quickly. If you can't resolve ancillary matters, it could be a long time before the deal concludes successfully.
When I start negotiations with a new client, I define what success looks like in terms of the main drivers of the deal. These are often price, timeline, and specific performance requirements. You may define these as:
Price: $20 million
Timeline: I would like to close this deal by the end of the month
Performance requirements: Our software must be able to perform at 100% uptime, we cannot have any security breaches, etc.
I define these based on what I have assessed as key drivers for this particular client, and then I seek to meet those requirements.
For example, if a buyer is motivated by a lower price, then that's what you should try to give them. But keep in mind that it may not be your final offer—sometimes you need to make concessions first to get the price you want. Ideally, you can find a satisfying middle ground where both parties are happy with the outcome.
The same is true of timeframes. If this client has a strong sense of urgency, then you may need to agree to faster delivery times or payment terms than are optimal for your company to make this deal happen. Just make sure you can deliver on your promises and that the buyer is reliable in terms of fulfilling their end of the bargain, which will give you a basis for future business transactions.
Lastly, defining clear performance requirements and ensuring they are met (or at least significantly improved) by the time the deal closes should be an important factor in your decision-making. If the deal cannot be closed on this basis, then it's better not to move forward for both parties.
I make sure these main drivers are met before I start negotiations or even reach out to a potential buyer. Too often I see colleagues fail by presenting an opportunity without first doing their due diligence and then running into problems when the buyer isn't willing to budge on price, timeframe, or performance requirements.
I always discuss payment terms at the end of negotiations
This is one area where I differ from my colleagues in how they handle it. Many people like to include this detail right away and get it out of the way. I have found that the best time to bring up payment is at the very end of negotiations.
Generally by this point, both parties are aware of what they need to do—one side has made concessions and agreed to either price or performance requirements, while the other side has offered concessions in return. Asking for terms will be clear at this time.
To give you an example, let's say I'm the one making concessions. Let's say that I have offered to deliver on a faster timeline or to lower my price. If it comes time for me to ask for something in return, then rather than asking for payment terms up front, I might bring up performance requirements instead. For example:
"If we can agree on terms and it looks like we're going to do a deal, I will need you to provide a strong guarantee that any software problems will be resolved in two days maximum."
The buyer may then reply with:
"Sounds good. My CTO will help resolve the problems. And I'll also give you a discount on the price we discussed."
This is a win-win. My client and I will get what we want, while the buyer gets the software they need quickly and at a lower cost than originally quoted. This helps me close deals faster because buyers are eager to meet deadlines, while also keeping prices low enough that my clients can profit from the transaction.
I always end by asking the buyer, "Can we agree to these terms?"
This is my closing question which usually gets a positive response. I don't want you to miss out on the chance to get an agreement because your clients are eager to do business with you and they may simply forget to ask for this essential detail in the heat of negotiations.
Doing all this upfront allows me to confidently and effectively close business deals and return to my clients with a favorable offer. It lets them know that we're in it together and that I'm not here just to make a quick buck, which helps build relationships for future transactions. And when you can do that, closing deals becomes easier over time.
That's it! Thanks for reading this post, and please leave any feedback or questions in the comments. If you think others would benefit from reading this article, share it with them using the social media buttons at the top of the page. Thanks again!
