B2B negotiation - pricing should be the last topic to discuss

This is a quick note on B2B business negotiation. I spent 12 years in semiconductors and did quite some sales job when my friends and I did our own IC design startup for 4 years. As we do more and more investments in deep tech startups who are mostly on the B2B side, I'm seeing more rookie mistakes in business negotiation by young founders who have never closed B2B deals before.

Whatever your B2B offering is, keep in mind that unlike consumers, corporate clients seldom buy your products or services due to pricing. There are tons of other factors that come before pricing – in "The Hard Thing about Hard Things" Ben Horowitz has a fascinating story of how sales people of his struggling startup Loudcloud figured out the real nuisance preventing a big client from signing with them. Usually the corporate clients already decided on which among the various offerings to buy before they even discuss pricing with you. If they say they did not choose your product due to pricing, dropping the prices won't win them back.

The key is to study your clients – both in terms of organizations and the decision structures – carefully before you even start pitching them. Key things such as their budget allocations and the annual schedules could easily tip a deal one way or the other. Having as much knowledge as possible about your clients is much more important than explaining the benefits of the products for the clients compared to the costs (pricing).

Keep in mind that unlike the whimsical world of consumer products, product-market fit in B2B is usually very straight forward. This also means that every supplier more or less has it. The clients also probably know the benefit they could get from such products very well. There's no need to "educate" them again and again.

Also to avoid falling into the trap of horse-trading negotiations in pricing, B2B products/services should always be proposed as a package of many items. This way if the clients are interested but complain about the prices, you can always try to keep the pricing but change the offering – maybe adding more benefits or extend warranties. If doing so still doesn't help you close the deal, your product offerings are either totally out of range for them in terms of pricing, or they're not really interested.

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