One of the most common harmful practices I have seen over the past 7 years in helping companies build pipelines is the obsession with price.
Leaders I have met with are vocal about their multipliers being in the range of 10-15x revenue – depending on market conditions – which would make every $1,000,000 of annual recurring revenue valued at $10,000,000 to $15,000,000 in revenue, so why are leaders constantly trying to “save money” by beating up vendors on price?
“I can do this cheaper in-house.”
“Can you give me a discount for the onboarding period?”
“I need a cheaper headcount.”
“What would be my cost per meeting?”
My guess is that this behavior stems from an “US vs THEM” mentality that makes negotiations with agencies tend to be adversarial rather than “on the same side.”
When companies hire a W2 full-time employee, they offer top sales talent higher salaries and additional bonuses and stock options.
When companies engage an Agency, they offer top sales Agencies less than their going rate or try to negotiate the rate down.
It’s important to note that the lowest price won’t always be the right choice. When you outsource with the sole intention of cutting costs, you may compromise on the labor quality, limiting the likelihood of actually achieving the real objective of the sales operation: Accelerating sales growth.
My recommendation is to do the following when it comes to price negotiation with sales agencies:
- Create your Go To Market budget for the ROI you need in advance, then go out and hire the best quality Agency your money can buy. If you need help planning your GTM budget for ROI, maybe you’ll find this ROI Calculator useful.
- Your Agency is a member of your sales team; treat them the same way you would a W2 employee.