Whether you like it or not, regular business negotiation is a reality and relationships are often built on negotiation. As business owners we negotiate daily, from infrequent high value transactions such as securing a lease on new business premises or pitching to win a substantial tender to frequent lower value transactions including customer special requests or supplier inputs for a contract. In fact, successful negotiation can often be the difference between your business thriving or merely surviving.
Over our 30 year history in supporting business owners to negotiate better outcomes for their operations we know there is not a one size that fits all approach to negotiation, we have however identified some rules of thumb that we suggest you try to stick to.
1. Don’t personalise it
Negotiating is a natural part of business. Don’t take the process personally or allow yourself to be easily offended. Good negotiating is about finding a mutually favourable position that both parties are prepared to accept.
2. Have the mindset that almost everything is negotiable
Almost everything is negotiable. Challenge everything and be prepared to state what it is you want, in a confident, yet unaggressive way. As the old saying goes ‘if you don’t ask you don’t get’.
3. Do your research
Research widely and thoroughly before you enter any negotiations. Good research should identify the value offered by comparative products or services you are looking to sell or purchase. It should also enable you to identify alternate providers for you to benchmark your primary negotiation against. Have clarity on what your ‘must have’ inclusions are, so you can compare like with like.
4. Don’t move first
Wherever possible, don’t be the first to put a position on the table. Being the first to name your price, risks giving away more than necessary. Your fellow negotiator may very well be prepared to go lower than your first offer. By opening first you lose this opportunity.
5. Aim higher or lower than you are prepared to accept
Always ensure your first offer is either much lower than you are prepared to purchase for or much higher than you are prepared to sell for. This gives you plenty of room to negotiate with.
6. Don’t be in a hurry
Negotiating on a tight timeframe will put you at a major disadvantage as it makes you (often rightly so) seem desperate. Negotiation takes time - if you are pressed to close the deal within a strict time-frame, you may be forced to accept less favourable terms. Under no circumstances should you negotiate against yourself by reducing your offer before receiving a response from your fellow negotiator.
7. Study your fellow negotiator and listen carefully
The better you understand your negotiator, the more likely it will be for you to identify potential areas that you can use to improve your position. Ask questions - many of them - and take notes. Your objective should be to identify your counterpart’s actual needs and desires which often include more than those he is openly telling you about. Negotiate hard on the ‘desires’, whilst respecting the ‘needs’. Forcing concessions on the other party’s needs risks the final product or service being delivered in a subpar manner or them walking away from the deal.
8. Don’t give anything away without getting something in return
Wherever possible always negotiate something in return for any concession. It could be that you negotiate more favourable payment terms, favourable delivery terms or deliver the work in a manner that is more favourable to you. Don’t give anything away for nothing.
9. Don’t admit to being the sole decision maker
Whatever the situation, never admit to being the sole decision maker. Another decision maker, real or not, will enable you to earn some additional time before having to make a final decision. It can also allow for a convenient non-present negotiator – e.g “I’m sorry but my investor insists that without a 10% reduction in the services you provide us, I must take our account to open tender.”
10. Always be prepared to walk away
Despite all the best intentions, sometimes a deal favourable for both parties can’t be reached. When this occurs, always be ready to walk away. Negotiating without a contingency plan is foolish and will likely lead to you to being forced to accept terms that are less than favourable.
The Hanrick Curran team is a great sounding board for business owners to discuss ways of approaching negotiations for high value transactions, please contact your usual Hanrick Curran adviser to discuss these as they arise, or call one of our Business Advisory specialists, Matthew Beasley, Nathanael Lee, or Jamie Towers on 07 3218 3900.
Thanks to Matthew Gain for contribution to content.