The Importance of Guardrails

...key to negotiating your company's FIRST enterprise deal

At Top Hat, we had a really fun tradition: every Friday at 9:15 am, the entire sales team would make a long line on either side of an aisle leading to a person-sized gong. Account executive Jonathan Teixeira would crank up the music. Then everyone who’d closed a deal over a certain size that week would hear their walk-up music, high-five everyone on their way up the aisle, and then whack the hell out of the gong. It reverberated all over the floor.

I’ll never forget the first time I got to hit the gong. Marketers never got to hit the gong (I’ve been in B2B marketing for 30+ years). But I worked very closely with sales and my boss John Hood gave me a shot running the B2B enterprise sales team when the job opened up. I love enterprise sales and have never looked back.

At Top Hat, I was the second enterprise sales leader in, following Jacquie Dwyer, who could sell ice cream in the Arctic in a snowstorm. Being second is so much easier. Jacquie and her team landed the first 3-4 very large accounts as well as a bunch of smaller ones. Whenever a potential prospect would ask us for references, we’d name the OG, one of the 50,000+ student universities that Jacquie and team had landed. We had instant credibility and those all-important references. We more than doubled enterprise sales in one year and hit the all-important $1 million ARR milestone. Our team got a lot of credit for that, but we were standing on some big shoulders.

That brings me to how to land that very first enterprise deal. It generally comes down to knowing where your guardrails are and minimizing risk for the prospect. My Dad was a terrific negotiator, landing the first natural gas deal in Kazakstan back when the Cold War was still, well, cold. He told me that you can lose a dollar trying to get that last nickel. Great advice, especially on your first enterprise deal.

Here’s how I closed our first two enterprise deals as enterprise sales VP at a company that had no enterprise revenue:

• Show up in person. Today, everything is Zoom and email. Get to yes faster by showing up in person. It builds trust much faster. People like to know you’ll answer your cell or show up in person if the installation goes south. We closed a deal with a large retail telecom vendor (400 locations) 2 weeks after we showed up in Texas to meet them for the first time.

• Know where your guardrails are. What’s the point at which you’ll walk away? More than anything else, this is what helps me negotiate deals “on the spot,” without having to go back, do more analysis, and delay the deal. At this same Texas customer, when they asked for software below our minimum guardrail in the first 5 minutes, I was able to say no and explain that was below our hard costs. That allowed the conversation to continue and established some trust since my answer was swift, definitive and backed by facts.

• Don’t lose the deal stretching to get the last nickel. I closed our very first Enterprise deal at one startup this way. We were talking to a 50 site retailer in the fitness industry.

The prospect said that our hardware price was fine but our software price was at least 2-3X too high. I knew our costs were estimates (since we’d first worked them out on a spreadsheet the day before), and therefore fluid. I figured out our lower guardrail based on what our cheapest competitor advertised for software pricing. I figured if we were at least above that, we must be making money, since cloud usage costs are relatively consistent.

I asked what software price would work for him. It was just above the guardrail, so I agreed to his price on the spot. We had our first enterprise customer. And when a 2,000 site retailer asked for references, guess who we used?

Don’t quibble over nickels. In fact, don’t worry too much about profitability. You won’t know what your real costs are until you get a few deals under your belt. Because those first few deals are likely smaller, the risk to the P&L is low.

• Reduce their risk. They are worried you are going to flake on them. By that, I mean they worry the product is vaporware, or that you don’t have enterprise grade support, or you don’t have a good installation partner, or whatever. So, reduce that risk. Do pilots.

Did the client get a new CFO who needs more data to be convinced of the merits of the project? Extend the pilot time as long as they are covering pilot costs. Your CFO will complain about slow rollouts and whether the deal is “real”, but she’ll be happy when that client serves as a reference for another. And they will.

Similarly, if the client asks for a one year deal with 30 days’ notice to get out, do it. There is plenty of time to standardize on 3 year deals with evergreen renewal clauses later, when your enterprise clout rivals Salesforce.

Know your guardrails and reduce risk for the prospect. Future enterprise sales VPs will thank you.