Negotiations... with Customers and Oneself

Michele talks about how she leveled up her negotiation skills, and Colleen negotiates with herself about what really needs to be ready for her launch.

Michele Hansen 
Welcome back to software social. I'm Michele Hansen.

Colleen Schnettler 
And I'm Colleen Schnettler. So Michele, what's been on your mind this week?

Michele Hansen 
So after our conversation with Alex last week, which, by the way was so fun, I feel like we got to talk to him about like, a 10th of the things I wanted to talk about. I have been thinking a lot about what I got out of my own MBA, because his book, The Tiny MBA, and we talked about this a little bit about the differences between between that and and it's just made me reflect on some of the things I got out of mine. And one of those things is negotiation skills.

Colleen Schnettler 
Okay.

Michele Hansen 
I really learned in that program just how much of a wuss I was at negotiations.

<laughter>

I got to do this trip to India and the UAE and we were visiting factories and and whatnot and part of it, you know, being an India, was going to the markets. And our professor was very keen that we learn how to negotiate and I remember we would, you know, go out and buy things and our graduate assistant student in the program was from India and we would always go to him and be like, hey, like, you know, I got this scarf and you know, I got them down from from this price to this price. And he would always like, shake his head and be like, you could have done so much better than that, like you just got totally ripped off. And I remember feeling like oh my god, like and, and I realized that experience -- getting my ass kicked by India -- made me realize how little I knew about negotiation. And, and so I ended up taking a class on it.

Colleen Schnettler 
Oh, when you were getting your MBA, you took a class specifically on negotiation?

Michele Hansen 
Yeah.

Colleen Schnettler 
Oh, that's awesome.

Michele Hansen
Yeah, it was awesome. And we got to do exercises, simulating negotiations and learning about different styles of negotiation, and different tactics to use.

And the really, the big thing I got out of that was that you don't have to be a hard negotiator, you don't have to be mean, in order to be a good negotiator. And, and I feel like this is something that we don't have a lot of cultural exposure to negotiation, right. You know, unlike my, you know, fellow student who grew up in India and buying groceries or buying anything involved, negotiation and haggling. I didn't really observe a lot of negotiation as a child or as a teenager, right? Like, Can you recall observing that very much?

Colleen Schnettler 
No, the price is what it is and you pay for it or you don't.

Michele Hansen 
Yeah, exactly. So, um, and so I think my understanding of negotiation was very much guided by pop culture figures who are known for being you know, hard charging and you know, screwing the other side basically right like, and so I just kind of I always shied away from negotiation. But negotiation is really, really important in running a business, especially once you start dealing with enterprise customers who pretty much always want to negotiate. They're not going to, you know, just sign up for a plan on the site and then just pay for that, especially on an annual basis and then things like that. And, and so I learned that you can be a good negotiator and get what you need out of an agreement. But you don't have to be mean and you don't have to, like bend over to them, either.

Colleen Schnettler 
Okay, so let's dive into this cuz...

Michele Hansen 
Yes!

Colleen Schnettler 
I think negotiation is a fascinating topic, especially for women. I have negotiated salaries and I remember like the first time I negotiated a salary, it was like, you should always negotiate But to your earlier point, like I have no experience in negotiating. So you just kind of pick a number. You're like, Oh, this is my number. Like, let's talk a little bit more about some of these tactics and like, how does one negotiate without being a jerk?

Michele Hansen 
Yeah, so one of the most important things to remember in negotiation is knowing your BATNA.

Colleen Schnettler 
What's a BATNA?

Michele Hansen 
Your BATNA is a best alternative to a negotiated agreement.

Colleen Schnettler 
Did you make that up?

Michele Hansen 
I did not make that up. This is actually a term that like is in every piece of negotiation literature. Basically, you know, some people think of this as leverage or as your power or but it's basically your alternative, right? Like if you don't negotiate this, like if you walk away from that job, what is your alternative? And, but you always have to think about your BATNA and then your counterparty's BATNA, and maybe way to think about this is it has The word bat in it, right? Your BATNA is what allows you to fly away.

Colleen Schnettler 
Okay, so let's use your example. I like concrete examples when I'm trying to understand this. Are you comfortable? Like you can make up numbers? But let's say you're negotiating with an enterprise client. So when you say BATNA, you mean that is your number you won't go lower than.

Michele Hansen 
That's a reservation price.

Colleen Schnettler 
That's different reservation price. Okay?

Michele Hansen 
So um, so your BATNA is basically your alternatives. So, for example, let's say that you...Okay, here, here's an example. Let's say you run a customer support platform. So these things out there like intercom and whatnot. So your customers, your customers' BATNA, right, so their alternative is are there they can use one of your competitors. But maybe they don't have all of your features like maybe, let's say, you do chat and email and knowledge management. They can use one of your competitors, but they don't have one of those features. So that's their best alternative. Or they can use three different services that will cost them a lot more money than using your one service. So that's probably the simplest example is that their alternative to using your service requires them to use three other services that end up being more time and hassle for them. By knowing what their BATNA is, or what their alternative is, you have a stronger negotiating position. You don't have to give up as much. And also you can remind them Yes, for example, let's say $5,000 a year sounds like a lot of money. But if you were to not use this service, and use x, y and z instead you would be paying $15,000 a year. So you have actually just created a net positive for them of $10,000 and you haven't moved on your price at all.

Another thing that is really important in a negotiation and part of not being mean another way to put it, it's actually a book that Alex recommended last week that really piqued my interest called Just Listen. And he had mentioned how this is a book used by hostage hostage negotiators. And that really got me interested because they are some of the best negotiators out there. And one of the concepts of it is you just listen for what is important to the other side. So for example, in your salary example, what may be important to you is the number but there may be other benefits that are really important to you, that are ancillary to the salary itself, that actually aren't very difficult for the employer to give you.

So for example, let's say that you're negotiating on a salary of $100,000, and they're only willing to give you $95K. You can look at the other pieces in the negotiation and see if you can play things off of each other. So, for example, you could say, well, I'm willing to take $97K If you give me 21 days of vacation rather than 14. For the HR person, it's much easier for them to give you 21 days of, of vacation rather than 14 because they're not taking a cash hit from that, right, like understanding what their alternative is and what they are being measured by. Which in this case, it might be keeping salaries down, they can give you other fringe benefits that help sweeten that deal for you that that bridge that maybe more than $5,000 to you. So whether that's vacation time, or I was almost going to say commute benefits but that's not really a thing here right? Or, or other things that aren't cash, right? Because that's what they're being measured by, then you can increase the value of the deal to you, even though it's not increasing the actual cash value from the other party side.

Colleen Schnettler 
That makes sense. So let's take your example of an enterprise customer comes to you and says, Hey, we'd love your service, but I see you're charging $10,000 a month and we only want to pay seven. Like, what's the first thing you do? Do you when you're faced with that kind of negotiation?

Michele Hansen 
So in that scenario, I would first of all say they're taking way too big of a cut and I, I wouldn't even entertain going that far. There are a lot of purchasing managers though and managers in big organizations that may be measured based on how big of a discount they get. So whether that's like 5% or 10%, I believe a lot of them are expected to get a 10% discount on services. And what you can do in that scenario is trade the discount for the number of years. So to you, especially as a small company, multi-year deals are really valuable, because then you know that revenue is going to be there. Especially if you're a small company, and you're just building your company and you want to know that you can make investments and make decisions and the revenue will be there. So if they came to me with that, I, you know, I would say, you know, really the lowest we're willing to go is $9,000 for a three year minimum commitment deal, you know, and then you can negotiate back and forth and whether that's paid up front entirely, or they get to pay every year, I might do less of a discount for that. And it's pretty common in SaaS to buy, you know, a three year subscription and paid all of it up front. Like in the real enterprise, world of enterprise non enterprise. Yeah. So you can trade a discount in exchange for length, the length of contract.

And there can be there's always other things you're negotiating on an enterprise scenario. So for example, the invoicing length, whether it's 30 days, 45 days, 60 days, or whether you get to use their logo on your website, you maybe you can give them a discount in exchange for that. But in a negotiation, you always want to figure out okay, what are the, you know, five, 6, 10, 20 different issues here that we're negotiating on? It's not just the prices, the price, it's the length of the contract, It's, I mean, details down to what is our choice of law, what is the jurisdiction, or is it where we are established or is it Delaware or New York or wherever that other company is established? This is like something that every enterprise wants to change in a contract. They always want choice of a law to be wherever they are incorporated. But all of those other things and then thinking about how you can play those off one another and try to understand what are the what is really important to them at the end of the day, and how can you put something together that gets what you want out of it and also helps them hit their most important thing.

But going back to that, that book, how you figure that out, is you just listen to them. And one of the negotiations in my class that I learned the most from was actually probably the most scared I have ever been in an academic environment. We did all these negotiation activities from buying a used car to being a zoo negotiating for pandas. And, and one of them was a group of people in a neighborhood negotiating with a construction company about a new development going up at the end of their neighborhood. So you basically have a bunch of angry angry townspeople with pitchforks against these two corporate representatives. In my case, I got to be the corporate representative, and there was only one in my group. And then there was all the people who had all of their different concerns. And this was basically my nightmare, like, just going into this scenario, and just gonna have a bunch of people yell at me. I was really freaking out about it. And I did all that research, I was looking at all the different issues. The corporate representative is really not in a good position in that negotiation. But the one thing I had on my side was that it was time limited. And so I think it was we were limited to about 20 to 30 minutes of negotiation in front and it was actually in front of the rest of the class too. They couldn't participate or no actually, I think they could heckle us. Yeah, it was. It was a fun one. What was in front of everybody else. And so I realized I was like, okay, all of these people are upset. If I just make them all talk and I avoid saying anything, I don't have to give up anything. So if there was six people, first person would air their grievances. And then I would say, it sounds like, what you're saying is this and then "So and so I haven't heard from you in a while. What do you think about that? I thought you might have had some concerns about that." And I just kept doing that and saying, "I think this other person had concerns about this, but they were slightly different." Would you be able to tell me more about that? And so we got to the end of it. And we're doing a debrief in front of everyone else. And the people who are who are the townspeople negotiation, really struck me they're saying things like, "Oh, you know, I felt like we really got a good deal here." Like, you know, we like we really like we're heard and you know, all of these things, and then somebody else goes, wait a minute, she didn't actually give up anything. We just talked the entire time.

And so I was using it in that sense, sort of, you know, sort of to their disadvantage, but just genuinely listening to people is so, so powerful. And that's how you understand, okay, of all of these different issues in this negotiation, which ones are the most important to them? What are their alternatives? Like how strong is their negotiating position, right? If they don't have any alternatives, their position is quite weak, and you can push them harder on those issues. And then understanding what your own perspective is on it. And so that book that Alex recommended is such a good introduction to this. But if anyone just Googles BATNA, you'll get like tons and tons of stuff on negotiation. It's even something I would suggest finding like an online workshop for or something because I really learned so much from that. And it's, it's one of the big things I got out of my MBA was that confidence going into negotiations that I know it's important to us. I know what I can't back down on. But I also know where I can give them space.

Colleen Schnettler 
That's awesome. Yeah, I'm definitely gonna read that book. By the way, I have already ordered it since we talked to Alex.

Michele Hansen 
It's so good. Like I, I just started it yesterday and I'm already 15% of the way through and recommending it to people. And it's, it sounds like, you know, it's some business books can be really quite a slog. This one definitely isn't. I mean, you know, it has examples from hostage negotiators and other scenarios that really give you a tangible understanding of how this can be applied.

Colleen Schnettler 
Whatever negotiation you're thinking of that made you want to discuss this topic, how did that end up going?

Michele Hansen 
I would say that all of our negotiations have gone well. Some of them are definitely harder than others. You know, like I was saying in that scenario with the townspeople, there have been quite a few scenarios when it has been just little old me versus a team of corporate lawyers, that's pretty much how all of our negotiations are. But because I've done that training and that research into negotiations, and I've understand how it applies to our business, I feel confident in those scenarios. And the thing about our knowing my BATNA is that there are negotiations that we've walked away from. And those have been those have been very difficult, but we knew we would be able to make up the revenue elsewhere. And what they were asking us to concede were things that we just could not concede, you know, I can concede, choice of jurisdiction, but there are, there are other things that we just simply can't and if a customer or potential customer asks us to concede those then we have to walk. But we have a good BATNA in most scenarios and It's just a matter of sticking by that and knowing what makes us unique.

Colleen Schnettler 
Great.

Michele Hansen
So what's on your mind?

Colleen Schnettler 
So, update from last week, I'm just trucking along trying to get my add on configure to add it to the Heroku marketplace. I got some help today with a technical problem that's really been given me a hard time. So that felt really good. Because right after we had our podcast last week, when I was like, I'm done, I was like, Oh, no, I have to have this one more thing.

Michele Hansen 
Oh, no. Scope

Colleen Schnettler 
I know.

Michele Hansen 
Scope creep!

Colleen Schnettler 
Oh my gosh. So I wrapped it up today actually, like I am done with a feature set for now. I'm going to put it in the Heroku marketplace. I have looked into the details. So the way it works is, you put it in a marketplace you get 10 of your friends. Are people you know, to test it out with you, then once you've done that you have to request to be moved to beta status. And beta status is 100 users. A hundred! So you've got to get 100. I know that's a lot of people, right? That's a lot of users. So you got to get 100 users in the beta status to use it. And then after that, you can request to go to general availability. You can't start charging for it until you get to general availability. So this is, you know, just something interesting as I get along here. And I think once I get a couple people using it, I'll be able to get some more feedback. But also, I looked up the AWS free tiers, and the AWS free tier is five gigs of storage. So with 100 users, that's 50 MG per user. So if they each have, you know, 10 users, and the each of those Users upload a 5 MG file, like I'm already going to bust through my storage. So practically speaking, I don't really know how that's all gonna work. But you have to actually speak to someone from Heroku. I think before you go from alpha to beta, so I guess I'll just ask them like, Am I just supposed to eat that cost? I guess I just eat the cost for a while. I don't know, if it's like you get 100 users and right away, you can go or I'm still working out those details.

Michele Hansen 
You know what that sounds like to me? a negotiation.

Colleen Schnettler 
Haha, yes. Excellent. Excellent. I'm going to read this book then. And I'll be ready.

Michele Hansen 
I imagine they must have some leeway on that, especially if it's a scenario where you are incurring a genuine cost for all of those users. I have to imagine that they would be willing to work with you on that.

Colleen Schnettler 
I think so too. I mean, I just don't know how you can not. It's there's got to be a way to do that.

Michele Hansen 
Don't be afraid to ask.

Colleen Schnettler 
Yeah, there you go. And that and that's an excellent point. And so I'm not too worried about that yet, but I did want to like kind of look that up and it seems like something kind of has to happen there to make that feasible.

It's interesting because now I am trying to do well now as in like, I just started thinking about it, but I at least need like a basic marketing site. And I tell you what, this is something as a primarily back end developer, like making a marketing site makes me want to just hide under the covers, like logos and colors and I'm like, mah! So yeah, so I got to do that.

Michele Hansen 
How much do you get from Heroku marketplace? Like I cuz I've seen other products on it and like, do you customize the whole thing or do you get sort of a template that you're working with?

Colleen Schnettler 
Yeah, you have a template you're working with. I was also going to do... so the way I've written this, I was also going to just kind of have the front page like kind of like a splash page or whatever you guys call it, like, you know, a basic marketing page that would then link you back to the Heroku elements marketplace, I don't have to have that. Because Heroku does provide -- like you can do this whole thing without any kind of webpage outside of your app your application. So I guess I don't have to have one now that you say that. I could skip that for now. It's not like, I don't know, what do you think?

Michele Hansen 
Well, if you only need 10 users for the initial phase, it might even be good to not have a huge presence for it. Because, as you said, you're going to get feedback from the first 10 people using it and that will really help you guide what kind of instructional content you need to have on that page. And if they're giving you a template, that's reducing decisions for you. And that could make it easier for you to launch.

Colleen Schnettler 
Yeah, you're absolutely right. And you're right that this is great. See, this is why this is great. This conversation. I don't need to spend time on that. Right now. Right now I need to focus on getting good documentation for people who are going to use it and getting it available in the marketplace. Because you're right. I mean, there's no real point like to that page. So I'll start with my 10 users and see, you know, see where it goes from there, I guess. Try to get feedback and see if it's even something people want to use.

Michele Hansen 
Do you have your 10 users lined up?

Colleen Schnettler 
No, I know, I can think of maybe five people I know who use Heroku for personal projects. I'm hoping between like the people I know through my network of rails developers, because it's a pretty popular platform. That I can get 10 people, but no, I can think of maybe four or five. Right now.

Michele Hansen 
Do you think those people who said use the Heroku platform? I'm curious, maybe they're connected to communities as well, if they would be able to recruit people -- sort of pyramid scheme style, it's not. Um, you know if each of them can bring in one more person if they're if they're willing to retweet it or send something out to a listserv or something like that, that could help you get to that first inflectioon point.

Colleen Schnettler 
Yeah, I definitely think so. The only thing I'm kind of concerned again, about and, again, maybe it's just too early to be concerned about this. But let's say like, you sign up with Heroku because it's free to sign up. You could install my add on without ever installing it, and I would get credit for you installing it, which is cool, but I actually want people to use it. So it'd be even better if I got people who actually used it. I don't know if I need to worry about that now, or what your thoughts are on that.

Michele Hansen 
I think that's gonna happen with any platform, right? Like, I think, I think Zapier is kind of like that. I remember when we were launching our zap a couple of years ago that like, there was all these people who installed it, but they didn't actually install it and...

Colleen Schnettler 
Exactly.

Michele Hansen 
And we never really got a lot of feedback on it at the time. Um, I mean, you know, people buy things and don't use them all the time, or they sign up for something, even if it's free and don't use it. But it at this point, if you can get, you know, five solid users of it, who are giving you feedback. We're giving you ideas for documentation, for tutorials, for use cases, that's really valuable and, you know, maybe you limp over the finish line and Not all of those 10 users are actually active users. Um, but I think that's okay. Um, I think it would be more of a concern if you can't even get to 10 people.

Colleen Schnettler 
Yeah. That's telling it of itself, right. Yeah. Okay, cool. Yeah. So based on this discussion, next week, I'm going to focus on getting it in the Heroku App Store. And then just talking to people in my network to see if I can get people to start trying it out.

Michele Hansen 
Have you started writing the documentation?

Colleen Schnettler 
So what I did is, I'm using it. Well, I'm almost using it. I'm using it on a site I own right now. So I've kind of been taking notes as I integrated it with this existing site. So I have not comprehensive documentation, but I think I can pretty quickly put enough together based on these notes I've been taking to do basic documentation, but this is something I think would be really cool. Like a really cool way to do it would be like a video, you know of how to integrate it into your site. And like I should have a sample -- what I also want to do is have a sample project on GitHub, which is something I've got a got to make. So I was going to do that so people could see really quickly how to integrate it in their site. Things like that.

Michele Hansen 
Do some basic text documentation to launch right with all of this, pull back the layers, launch with the absolute minimum, you would need. I mean, I think we just started doing tutorial videos like six months or a year ago.

Colleen Schnettler 
Oh, okay.

Michele Hansen 
Like there's so great to have. But I wouldn't say that you need to throw that hurdle in front of yourself as something that you need to do before you launch. You need to be removing hurdles at this point. And so making a video that shows how to do it is awesome, but that can be done after it's launched. Having an example project on GitHub. That's a really cool idea. That can be done after it's launched.

Colleen Schnettler 
Okay.

Michele Hansen 
Simplify.

Colleen Schnettler 
Yeah. So so here's something I want to talk to you about, too, because I, you know, we've had a lot of conversations about how my own perfectionism and scope creep are getting in the way of me launching a product, right? But I don't know if I ever told you in like, 2011 maybe I put an app in the iOS App Store. It was terrible. And so um, I think I think I'm a little gun shy about that because that was something like I launched too soon. And when you first launch something, you get some like excitement because you tell people about it on Twitter and, and you know, you tell people in your network about and they check it out. And if it's terrible, then they don't check it out once you fix it the second time. So so I'm always stuck in this conflict of like, Is it good enough? Is it not?

Michele Hansen 
So, a couple of things come to mind there. The first is there's always going to be somebody who's mean. Like always, there's always gonna be somebody who's like, "Oh, this is dumb, like, you could just do this yourself by doing these 10 steps that are totally completely obvious to everybody." Not, which is like, I mean, if you launch something, and that isn't the top comment on Hacker News. I've never seen that. I mean, you know, the famous example is somebody saying that about Dropbox and about, you know, how all these you can do all this gymnastics with Linux and stuff to do it. I mean, we got that comment, right and about "Oh, is terrible. They don't have international support." And you know, like, there's always gonna be somebody who finds a problem with it. Right. And, you know, we also had an app that we got it, we got an article on DCist, which is like sort of the big, you know, DC local blog, and we totally screwed something up. And it never really recovered from it. We still launched stuff, we launched Geocodio after that you know after that. And it's fine. You just got to get it out there and you know, people who are going to be mean and rag on other people's projects, like they have bigger problems than just your app. There's one person or two people who are rude, but the vast majority of people are being super positive and supportive. And just because there's one person saying something mean, it doesn't mean that that negates all of that positive feedback that you got, like that one mean person does not deserve to live in your head, right? Like if they were a friend of yours, you would not be friends with them for very long if they said mean things to you anymore. So why do we give this attention to Hacker News commenters or people on Twitter or whatever that may be? You just screw em, like, you know, haters gonna hate, right? Like just read it out there and people don't like it like They're not your market, whatever they can do their other process. They have something else that works for them.

Colleen Schnettler   
Yeah.

Michele Hansen 
Don't let them keep you down.

Colleen Schnettler 
That's That's great advice. Thank you so much for your support and encouragement. I appreciate it.

Michele Hansen 
Always there for you, Colleen.

Colleen Schnettler 
All right. Well, that's gonna wrap us up today. Thank you so much for joining us. Tune in next week to hear if Colleen has finally launched her product or not. And to hear what's going on with Michele. We are on Twitter at @softwaresocpod and we would love to hear from you.

Michele Hansen  
Also, if you wouldn't mind leaving us a review, we would absolutely love that. Thanks so much.

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