The "Collaborative Proposal"

Develop Agreements with your Customers, not for them — and substantially improve your proposal-to-close rate.

In every successful sales process, you reach a point in the conversation with a prospective customer when entering into some form of mutual commitment — a pilot agreement, a product licensing contract, a consulting engagement — is the logical next step. You have invested months, quarters, maybe a year or more to learn about the customer's needs, and earn their confidence and support. One of the biggest mistakes you can make when reaching this final step of the sales process, is to send them a proposal, even if they ask for one. Sound crazy? Read on.

Enterprise sales often involves solving complex goals, problems, or unmet needs in a large organization with multiple stakeholders — each with different job responsibilities, needs, and purchasing drivers. Agreements (the ones that get signed) must reflect a well-informed understanding of each stakeholder's needs in order to build the necessary confidence and support.

The Typical Scenario

You and your contact are finally ready to "do business together," so they request a proposal for consideration. You've taken great notes throughout all your conversations. You invest a few more hours writing what you believe is a winning proposal, and send it along with a nice note. And for weeks, it's crickets. Why? Did they decide to go in another direction? Did the agreement overlook something important? Did you overlook someone important to their process? All these thoughts run through your head. No matter: take your pick, the result is the same.

A brief conversation with your contact reveals an oversight in the agreement (something they failed to mention), so you send a revised proposal that reflects your enlightened understanding. Again, and for a different item that you may have overlooked or were completely unaware of, the agreement fails to gain support, and goes unsigned. Strike two (or maybe three!). The reality is, for complex B2B sales, the likelihood is quite low — one in five; maybe two in five on a good day — that you will be able to learn everything during the sales process that reflects all of the customer's needs, special considerations and nuance necessary to gain support from the various stakeholders, especially those you are unaware of!

Developing a proposal all by yourself — without active customer involvement — is like covering one eye and throwing darts with dull tips at moving balloons at the village carnival, and hoping one will hit the mark. It's no wonder why the average B2B sales proposal-to-close rate is 30% (+/- 10). With the right approach, your close rate can (and should) be double that!

The Collaborative Proposal

There is a more effective approach to closing business with a new customer. Rather than trying to win the customer's business all by yourself, think of the final "proposal stage" as simply the next step in the sales conversation — where you actively involve the prospect in the proposal development process. This is the "Collaborative Proposal."

The final step of your sales process is not "can I send you a proposal?" but "can we work together on an agreement?" In other words, build the agreement with your customer, not for them. The "Sent Proposal" is no longer the second-last check-mark in your CRM, followed by wait-and-hope. Rather, it is a continuation of the sales conversation that requires active engagement and collaboration.

The "Collaborative Proposal" process involves three basic steps: Collaborate, Prepare, and Deliver. Executed properly, I promise you that this approach?will significantly increase the probability that your Agreement gets signed by the customer. Making concessions are often necessary to close a deal; so also included are several effective Negotiation techniques.

Agreement Collaboration

Getting the agreement signed is a win-win for you and your main contact in the account. They have invested considerable time with you to date, so they are (or should be) motivated to continue working with you to get the agreement over the goal line.

• Start the agreement development process by sharing only the basic terms with your primary contact E.g. main objectives, success criteria, price, key dates (whatever is appropriate to your offering). Simple bullet points in an email, nothing more fancy. Avoid anything that looks or smells like a formal agreement. Schedule a discussion with your contact to review the basic items to get their reaction and input. Keep this discussion limited to your contact only at this point. Your goal is to catch flaws/gaps, and understand any potential objections. Request that he/she agree not to share details with anyone on their team, until you are both satisfied that the basic terms are mutually-acceptable, and you submit a "Draft Agreement."
• Put the agreed upon terms into your standard contact template, and review and update with your contact until you have a mutually-owned “joint proposal” — where both parties are fully vested. This may take a few sessions. This process affords you the opportunity to uncover any unknowns, errors, gaps, or show-stoppers. Even an innocent misspelling of a company initiative can undermine confidence. Working with your contact to develop a mutually-acceptable agreement also demonstrates that you are truly collaborative to work with.
• Contact turned Advocate. Most important, by working with you to develop the agreement, your contact will be presenting an agreement to their colleagues that they had a hand in developing. And through this process, they gain sufficient knowledge of the ins-and-outs of the agreement necessary to address questions or concerns from colleagues, and are motivated to do so!

Agreement Preparation

Some licensing agreements are shrink-wrapped, i.e., the only difference between one agreement and the next is the customer’s name and price.?Most B2B sales agreements are more complex i.e., 70% boilerplate with standard T&Cs — with the remainder of the agreement outlining items which are specific to the customer's use case, challenges, preferences, schedule, business case for purchase, budget, and more. Here are some important things to consider when preparing an agreement:

• Cover Page. Take the time to write a personal cover page to thank the prospect for investing their time to date working with you, highlight the benefits of your proposal, and summarize all the key terms. A good cover page is like a Cliff's Note. Cover all the main points, and most executives will not read the book; they will spend only a few minutes scanning the Agreement. It's often easiest to write the cover page last, to summarize the key points in the agreement.
• If you have a schedule or timeline in your agreement (most do), include all previous meeting dates in your agreement — from your very first phone call and all subsequent interactions. Call this discovery, demo, requirements, needs analysis, due diligence (whatever). This earns you implied credit for the work you already performed. Importantly, this demonstrates to stakeholders involved in the contracting process the history of your relationship, and your investment in understanding their needs.
• Unknowns? Wear protection, E.g., contingencies, placeholders, caveats. Initial phase of a larger project? Set expectations now for what is to come. Always ensure that the customer acknowledges any unknowns within your agreement, lest they revisit you later.
• Solicit feedback from your team. You may learn something new or uncover risks or unknowns. This demonstrates that you value the opinions of others on your team, and helps to build awareness and a team sales culture. The more internal eyes on an agreement, the better.
• Follow proper agreement structure. Different stakeholders have different responsibilities when it comes to agreement review and approval. Make it easy for people to find the information in the agreement that is relevant to their job responsibility. Separate primary information (goes into the body) from supporting information (included as attachments). For example, do not co-mingle legal T's and C's in the body of the agreement; add this as an attachment. If you have service and support policies, add as a separate attachment. And so on. If you want to slow down the approval process, conflate everything into single stream of information that requires every stakeholder to read the entire document end-to-end, and then wonder whether they overlooked something important.
• Keep your Agreements short and simple. Lengthy/complex agreements invite scrutiny and encourage objections, and are catnip for executives and legal counsel to slow down or even derail your deal. Less is more. You can always add more information at the customer's request. Be open to customer requests for additional items that make sense. The more they contribute to developing the agreement, the more likely it will get signed. Make sure to thank them during the contracting process for any free business or legal advice you may receive.

Agreement Delivery

• Once you are both satisfied, send a "Draft Agreement," and give your contact the OK to share internally to solicit feedback. This is the first-time that people on your contact’s team — some of whom you may have never met, but are involved with making the decision — see the terms of your Agreement in document form. Print “Draft” on every page to invite feedback.
• Ask your contact to schedule time with their team to walk through the agreement, to make sure that everything is understood, and to address any questions or concerns. It is easy for misunderstandings or objections to become cemented in people's minds, so always use direct communication (in-person / Zoom / phone) during agreement review/feedback discussions, so you can sense/react immediately to any potential concerns. This initial review session with their team is your opportunity to clarify and build consensus — not to negotiate.
• After every conversation where the Draft Agreement is modified, send an email to memorialize your discussion and any requested changes. Assumptions are the mother of screw-ups when it comes to Agreements, so make sure that you confirm any changes, especially in areas that may be sensitive or unclear. Confirm your understanding of changes before you send a revised agreement. You may choose to red-line changes, depending upon the customer's preference.
• Once you have confirmed that there are no outstanding objections or concerns, send the agreement, still marked "Draft Agreement" in the title and filename, along with the date E.g., "Startup X - Customer Y Draft Agreement (date)". Never put the word "final" anywhere in an agreement. Final infers that you are done (and you may not be!), and you are not open to any further changes (and you might need to be!).

Negotiation

Your Collaborative Agreement is now complete, but it may not be done. Be prepared for additional requests or concessions from the customer. In the movie The Bourne Identity, there was a saying among their agents (the ones that were still alive): “We do not do Random.” Making decisions with limited information is the reality of selling, not negotiating.

Before you enter any negotiation, you must know the difference between your negotiable and non-negotiable items, so you know where to hold the line on any concessions you may decide to make.

Always discuss non-negotiable items early in the sales process. This is the “hill you are willing to die on.” Walking away from a deal is your negotiating position. Establishing non-negotiable items early qualifies the prospect, and avoids fatal surprises later on. Be prepared to provide rational explanations to support your non-negotiable items, E.g., “This is necessary to protect our IP,” or “This is our most-favored-nation pricing. Anything lower would require that we further discount existing agreements, and that is not feasible.”

The “Cardinal and the Kremlin” is the negotiating practice of separating responsibility from authority during the negotiating process. This is the only time in sales you use the word “I” not “we.” During negotiations, state that your objective is to understand any objections or requests they may have, so you can take this back to your (co-founder, board, investors, etc.) to consider. The first step in any contract negotiation process is to collect requests for consideration, not to negotiate.

Separating the responsibility to understand from the authority to approve during the negotiating process helps to diffuse tensions, and gain clarity on any sticking points while avoiding conflict. This approach also affords sufficient time to think through requested changes. As the Cardinal “facilitator” of the negotiating process, you can claim a neutral “I’m here to understand, not to negotiate” position. Modest two- or three-day pauses between requests and responses demonstrate genuine consideration.

There is no hiding that you are a startup, so citing your company’s young status during negotiations can be an advantage. Your customer needs you to survive the terms of the deal so you can service their needs! In my experience, people tend to negotiate in good faith when you seek their advice on how best to strike a balanced deal.

Push-back on Price? Instead of offering a discount, offer extra service and/or product value — items that are already paying for, or cost you little — as a means to preserve your price. If they insist on a price discount, this is when your "Volume Discount Pricing Schedule" comes in handy (which I will discuss later).

Always expect buyers to seek concessions; this is human nature. As the final step in the negotiating process, never make concessions too quickly, as this undermines the value of your concession. And always confirm that any concession(s) you may make is the final barrier to purchase. Otherwise, addressing one objection may (often does) lead to others. Give a mouse a cookie, and the next thing he wants is a glass of milk!

Throwing darts is not how you win a new customer's business. Never email an agreement to a prospective customer without first actively involving?them in the agreement development process. Follow this simple three-step method to build a Collaborative Agreement with your prospective customers. It will strengthen the final step of your sales process, and substantially improve your proposal-to-close rate.