EP082: 3 Tips for Negotiating Your Best and Final Offer
So, you’ve submitted your RFP response. You considered pricing carefully and went as low as you felt you could in the proposal. And now the client is asking for your Best and Final Offer (BAFO).
How do you negotiate pricing so that you don’t end up taking a loss on the job or being taken advantage of by the client? Is there some way that everyone can win?
On this episode of The RFP Success Show, I share my top three tips for negotiating your BAFO, challenging you to know your own value and be willing to walk away.
I explain why negotiating doesn’t have to be a zero-sum game, discussing how to approach the process with a win-win mentality.
Listen in for insight on removing something from the offer when you drop your price and learn how to adjust the scope of a job in a way that doesn’t impact the outcome.
Key Takeaways
My top 3 tips for negotiating your BAFO with procurement
1. Always think in terms of value
2. Focus on a win-win solution
3. Never drop your price without adjusting scope
How taking a loss on a job impacts your business
Why you can’t be afraid to walk away from the negotiating table
Why negotiating doesn’t have to be a zero-sum game
The danger in letting a client nickel-and-dime you
What to take away from the offering if you drop your price
RFP Success Show EP82 Transcription
You're listening to the RFP Success Show. With eight time author, speaker, and CEO of the RFP Success company, Lisa Rehurek. Tune in each episode to learn what today's capture and RFP teams, are doing to increase their win percentages by up to 20, 30 and even 50%. And meet the industry trailblazers that are getting it right. Let's get started.
(00:24):
Hello everybody. Welcome to the RFP Success Show. Where I will provide you with teaching tips and strategies, to help you up level your proposal game. I am your host, Lisa Rehurek. Founder and CEO of the RFP Success company. Today's topic, negotiation strategies. So, we have all been there. We submit our proposal. We have spent countless hours and frustration coming up with our pricing. We feel really solid with it. We've gone in as low as we feel we can, and then they come back and they say, "now, we want your best and final offer."
(01:01):
Sometimes that has to be done in writing. Sometimes that has to be done verbally. And I want to talk about just a few negotiation strategies, that can help you as you are working through this. The very first thing, and this is no surprise. I talked about this a lot on the pricing strategies podcast. Which was the last podcast, but you got to think in terms of value.
(01:23):
So, obviously you've got to think about price, but at the end of the day it really comes down to value. So if you think in terms of value and you've got to remind them of value. So you've got to remind them of your value proposition. At the end of the day, they don't want you to take a loss on this. And if you're going to take a loss on it, you need to separate yourself. You need to be strong enough and confident enough to say you're walking away. If we cut this anymore, we're going to take a hit and it's not worth it to our business.
(01:54):
As a matter of fact, I worked with a client a couple of years ago, and that's exactly what happened. Is that, they didn't really run their numbers. And they went in and they cut their prices because they're, "Oh, they're asking for this, so we're just going to give it to them." And they didn't really pay attention to how that, was going to affect them internally and they lost their shorts on that. They just lost so much.
(02:19):
And when you lose the financial side of it, it trickles down into so many different things. It trickles down into employee morale. It trickles down into the confidence of the business. You just don't want to do that. So, you've got to be careful about that. Don't be afraid to walk away. But, I digressed a little bit there because really, you've got to be thinking in terms of value. Know your own value. Know what you're willing to do, and where you're willing to drop down to.
(02:46):
And again, unless you're buying the business for a reason, and when I say buying the business, I mean, you're willing to take a little bit of a loss, because you're going to get a gain out of it somehow. You need the experience. You really want to break into this client, things like that. On the really wanting to break into this client though, you have to be careful because, if you undercut your prices and then you want to get into that company, you get in, now they expect that those are your prices all the way through. So, you have to be very careful there if that's why you're doing it. Again, tying back to thinking in terms of value is very important.
(03:22):
The other thing about negotiation is, always think in terms of win-win. What happens generally is we go into these things, focusing on a winner and a loser. This is probably not conscious, this is probably subconscious. As we go in thinking, okay, we're going to negotiate. Somebody is going to win, somebody's going to lose. And that's not the case. In negotiation everybody can win. So, where is the win-win?
(03:47):
And you can very easily have that conversation. "Look, we want a win-win for everybody but if we drop this more here, we're going to have to hire people at a lower salary and then you're getting subpar help. Or we're going to have to cut costs here, and it's going to hurt our business and then we can't be the best, and provide you with the highest quality."
(04:08):
So, you've got to really go into those negotiations with, where your bottom line is. Know exactly where your bottom line is. What you're willing to negotiate. Air the things that you can negotiate that don't cost you anything. We're going to talk about this in the third strategy here. But, mindset is very important in negotiations. And if you think about and communicate, "look, we want to find a win-win solution here for both of us, and here's how we can make that happen." So, think win-win.
(04:38):
There's so much more behind a failed RFP, than just lost revenue. Employee engagement decreases with each loss, and a Gallup survey suggests that it cost up to 10 grand in salary per employee, with 15% lower profits. If you're ready to increase your win rate consistently, and put our winning and repeatable strategies in place, schedule your consultation now at Bitly/chatRFP. That's Bitly. B-I-T-.L-Y/chatRFP.
(05:02):
And then the third strategy is never ever ever, drop your price without adjusting scope somehow. Now, if this is a government RFP, sometimes that feels it's hard to do. But, even if you have to tell them that you're going to take something away, that isn't going to affect anything, they might not know that it wouldn't really affect anything. You just have to make sure that they feel they can't just come in and say to you, "drop your price" and that you just drop it arbitrarily. Because what happens is that, they lose confidence in your pricing. And they're just going to always try to nickel and dime you. It goes back to thinking about, where are you on the value spectrum? I talked about that in the last podcast. But when you know where your value is. When you know where you're not willing to go below, do not budge on that.
(06:00):
And yes, you might lose the business, but that's probably a good thing. Because you don't want the type of business, that's going to be nickel and diming you. But, always remove something from the offer, if you've got to drop your price. It can be simplistic. It can be smoke and mirrors. I hate to use that term because, it's not like you're trying to manipulate them. But again, you want to make sure that they don't feel they can just arbitrarily change your pricing. It's your business. It's your pricing. So what are you going to take away? It might not be high value to you or to them, but it really showcases that, here's our price for this. If you want a lower price, then there's got to be some negotiation here. And here are the things that we're going to take away.
(06:45):
Making sure that the things that you're going to take away, don't affect the outcome or the solution that you're providing. And you want to make sure you communicate that to them. So, three negotiation strategies. Number one, always think in terms of value. Always go back to your value proposition. Know your value and stand true to your value. Number two, focus on a win-win solution. Everybody wants to win. Most companies, organizations, agencies don't want you to lose. And if they do, then you shouldn't want to do business with them because that's just bad people. And then number three, never drop your price without adjusting the scope somehow some way. You might have to get really creative, but you want to make sure that you adjust your scope, so that they don't think that they can just, hog tell you and own that conversation and own your pricing. It's your business. You own your pricing. All right everybody happy negotiating. I thank you for listening to the RFP Success Show. That's our show for today. And we'll see you on the next one.
(07:43):
This has been another episode of the RFP Success Show, with Lisa Rehurek. Eight time author, speaker, and CEO of the RFP Success company. Thank you for joining us. If you have feedback on today's episode, email us at podcast@rfpsuccess.com. No matter your business size, industry, if you have an in-house RFP team or need outside support, the RFP Success company helps increase RFP win ratios by 10,20 and even 50%. Learn more at therfpsuccesscompany.com.