We had a client some years back – one of our favorites of all time. He was a respected voice on business and leadership, and we enjoyed all the years we were associated with him.
He was also well-known as a master negotiator, and we often saw it firsthand. He would come back from negotiations having gotten people to agree to things we could hardly believe. He was that good.
But we learned something from that: It is possible to be too good a negotiator.
The signature example came when the client negotiated the use of his company’s social media for an outside organization. They could post their material on the client’s social media to earn clicks and revenue, and they would pay our client a set monthly fee.
All well and good, but the monthly fee was unbelievably high. We could scarcely believe he had gotten them to agree to it, but you know, he was Mr. Master Negotiator. The deal was put in place and we played a role in implementing it.
But there was a problem: His client quickly realized that, while the arrangement was netting them some revenue, it couldn’t net them nearly enough to justify what they were paying. This wasn’t a matter of anyone trying to pull a fast one. It was some years back when the uses of social media were quickly evolving and no one was quite sure how to value it or predict its monetization.
Nevertheless, the original terms of the deal quickly came apart, and before long the fee was dramatically reduced to reflect the value that our client’s client could expect to receive.
The outcome of the original negotiation was eye-popping. It was also unsustainable.
We think about this often when we negotiate deals with clients. We’re in this business to make money and we want to earn as much as we can. But we’ve also recognized that we can’t sustain client relationships if the financial terms don’t reflect a realistic expectation of the client’s likely return on investment.
This is one of the reasons it can be so difficult to establish and sustain long-term business relationships. The provider of the service understandably wants to be well compensated for its time, effort and expertise – for the overall quality of its work. But in order for that to make sense for the recipient of the service, the ROI has to be more than what it costs – not just at the beginning but over the course of time.
These kinds of relationships can and do happen, but they have to start with both parties taking seriously what the other will need out of the arrangement. If all you’re trying to do is sell the product or service at the absolute highest rate you can convince someone to pay, without any regard for the value the buyer will receive, it’s not the basis for a long-term, sustained relationship.
If you’re just selling a product or a commodity, we suppose you might not care about sustained customer relationships. (Although it seems like repeat customers are something you’d want, but to each their own.) But if the viability of your business is based on long-term, ongoing relationships with clients for whom you will be providing a service over the course of time, you’ve got to price the service so they feel they’re getting more out of it than they’re putting in.
You can be too good a negotiator. Or at least, you can be too good at driving up your rates and not smart enough about ensuring the value proposition works for all parties.
We would rather sign a client for a reasonable fee and keep the client long-term, rather than sign the client for an exorbitant fee and count the days until the client figures out the value doesn’t add up.