Push ROI has some hard and fast rules for when to simply walk away from a negotiation, and never return. Yes, we like closing deals. But building project proposals and negotiating contracts is a time-consuming process.
If a deal doesn’t close, that time is wasted. The less time wasted, the better. Knowing when to hold ’em and when to fold ’em is an art.
Repeated Failure To Communicate Desired Outcomes
Part of any project proposal is defining goals and budgets, at least broadly. The longer it takes to pry the real goals and actual budgets out of the other party, the more time is wasted.
Several years ago, Push ROI was asked to prepare a proposal to “level [large competitor].” We asked dozens of clarifying questions and even confirmed that the company knew they were describing a budget of several hundred thousand dollars a month. The company repeatedly told us they were willing and able to meet those budgets.
After 40 hours of research and proposal building, we presented our plan of action. The company responded by asking what we could do for $5,000 a month, (too little for a fair marketing test). Finding out that the actual budget was about 2% of what we’d been repeatedly told should have been the moment we cut and ran.
That’s not a one-off issue. In the article examining entrepreneurial addiction, I talk about a friend who said his goal was “earning at least a million a month within a year or two.” His real goals were far less lofty. That person may not have known how different their real goals were than their stated ones, but their actions communicated a very different set of goals.
Those working in startups tend to exist in a Schrödinger state, seemingly sitting on the next trillion-dollar idea but also often close to financial destitution. Flying below the media radar but acting like Elon Musk by borrowing against the future unlimited success. The personality of a narcissistic club promotor, seeking recognition without doing the work.
People who’ve never worked with startups would be shocked by how often a venture is just some form of fraud. But startups, including those pulling in media attention from Forbes, have an uncanny ability to admit they are involved in a crime during early calls. I personally know someone who ran a startup-focused ad agency who when to jail for involvement in a crypto scheme.
If you’re asking “when to walk away from a negotiation?” a good answer is, “when the project involves securities fraud.”
Once we get the hint that something is illegal, that a sniggle walk away from a negotiation, and never return. Normally, we send an email stating plainly our concerns and cut off all further communication. If the business plan involves breaking or trying to skirt incredibly justifiable laws, we’re out.
Negative Signaling Around Contracts
Contracts are a part of doing business. How people approach contracts signals a lot about how a future working relationship is likely to unfold. Some behaviors like requesting pointless NDAs or trying to avoid having contracts entirely generally show immaturity or bad faith.
Excessive Negotiation (Relative To Project Size)
Push ROI uses a standard master services agreement (MSA) that governs the terms of about 95% of our projects. The term sheet is deliberately neutral and generally requires little or no discussion prior to signing with organized companies, regardless of size. The existence of the service agreement is intended to streamline the onboarding process.
For larger projects, Push ROI will negotiate individual clauses of a contract. The time spent arguing about the terms of an indemnification clause cannot exceed the time spent doing actual work. If a project is too small to merit changing the MSA, but the other party wants to treat a service level agreement like we’re crafting the Magna Carta, we have to walk away.
Avoiding contracts is a problem common to startup companies, but while they are the worst offenders, they are not alone. I understand that a contract with 3-4 pages describing the project’s scope and another 11 pages comprising the master service agreement seems like a lot. But multi-month bespoke service deals have complexities to them by default, and it’s in everyone’s best interest to remove ambiguities.
Asking to avoid a clear service contract in favor of an email signals that someone is playing fast and loose, doesn’t value the work, or wants to abuse a power dynamic. Saying, “Call me old-fashioned, but I’d rather stick to a plain English agreement via email with you” is enough for us to walk away and never return.
Some contracts, for example, boilerplate nondisclosure agreements (NDA), are incredibly stupid. How and when an NDA is presented may cause Push ROI to walk away from the table. In a nearly five-year-old article about why I mostly don’t sign NDAs, I said,
“My experience around NDAs is mostly with people who are playing business. People having nothing specific to protect, and without money to put up much of a fight in court. Still, why would I risk anything, under the assumption someone is being honest. Or will continue to be honest. Or won’t go crazy the day I win the lottery because they mentioned a method of picking numbers while I was working with them.”
That stance has only grown stronger over time. NDAs have a place, but bringing one out at the wrong time is a red flag. Also trotting out any adhesion contract after negotiating, and signing a contract is a middle finger not a red flag.
Sometimes things take time, or genuine objections must be addressed. But when a lot of obstructions come up without much justification, it’s best to move on, and sooner is better.
Some time back, Push ROI was asked to rush out a proposal in late December to get a project started before the end of the calendar year. Starting on December 17, Push ROI speed-ran our research and proposal process. By December 22, we’d had needs assessment calls, built and presented a custom proposal in PowerPoint.
In total, we spent about 28 hours over four days meeting the requirements of this company’s RFP. At the company’s request, we began putting together a scope of work. On the 26th, the scope of work was sent to a non-lawyer, non-executive employee to review and share with the company’s team.
That employee’s job was to ensure all the requirements of the project were addressed in the scope of work and pass the document to the decision-makers. Instead, they bottlenecked, making this the most painful contract negotiation in which I’ve ever been involved. I cannot concisely describe the tedium.
The employee spent over two months making disjointed, conflicting, and compounding requests, including requests for “formatting” changes. We had around a dozen calls, probably 100 emails, and sent out at least 18 versions of the contract. Each new version of the SoW was met with more requests for minor changes.
The employee continued blocking the contract from being presented until those changes were made. Ultimately, the client wanted to continue with the first version of the scope of work they were sent. All goodwill and patience were exhausted at that point, and when they delayed signing for another month, we cut our losses.
Unreasonable asks kill deals. Imagine if the price of a house is set based on an appraisal at $450,000, an offer of $440,000 is in the realm of reasonable, but an offer of $20 is not in the ballpark. No one is going to play a game of split the difference and sell the house for $225,010.
Whether the other party knows they are being unreasonable or not is mostly irrelevant.
Being wholly ignorant of costs signals unwillingness to research. Comparing services of vastly different calibers shows an inability to recognize quality. Knowing the service’s grade and associated rate, but pushing for an unbelievably low price suggests the project is unimportant to the buyer.
Once it becomes clear that the other party is not making reasonable offers, Push ROI reclaims our time.