Business Negotiations 101

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What *You* Need to Know Before Your Next Negotiation

In an OWN IT Live Chat with Guest Host Michael Bush, we covered all the points you need to know before heading into your next business negotiation. Here’s a recap that’ll help you achieve better outcomes the next time you’re at the negotiating table.

What is a Negotiation?

Webster defines negotiation as a discussion aimed at reaching an agreement. While we don't disagree, Michael put a slightly different spin on it. He narrowed that down to a "situation where there are two people or businesses that both have something to gain from one another."

What is a Negotiation?

There are trade-offs involved while working to reach that point of agreement. Michael considers a negotiation to be a success if both sides are able to clearly state what they need and get most of their needs met.

A negotiation is when both sides have something to gain, and if they move from their current position they could gain even more.

What is a Negotiation?

Are you a good match?

Are you a good match?Before even sitting down to a discussion, an important element of working with a partner and r e a c h i n g a n a g r e e m e n t i s understanding whether your values are in alignment.

Are you a good match?For example: if you're working with someone whose business is built on maintaining the lowest cost, cheapest product or most inexpensive service, they're going to maintain that in a negotiation. If your business is focused on the best quality product, or the highest-end service, you're facing a fundamental mismatch in business principles.

Are you a good match?

If your values and goals are n o t w e l l - a l i g n e d , t h e l i k e l i h o o d i s t h a t t h e c o n v e r s a t i o n w i l l b e unsuccessful.

Let's Start at Square One

Let's Start at Square OneSo you're ready for this business conversation, or negotiation, and there's a good chance you know what you want but you're unsure of how to get there. You're not alone! We've got a few basic steps to help you get started.

Start with an icebreaker.Before heading into your meeting, be sure you've done a bit of research on the other person's industry and business. If they own an orchard, try mentioning the recent rainfall or ask how shipping prices are affecting destinations for their harvest. Ask something you wouldn't know by just Googling their business. Basically, find common ground.

Start with an icebreaker.

Use how they respond to your questions as a way to gauge their interest and their mood.

Are they just trying to move on to the next item, or are they taking the time to answer and responding with questions of their own?

Don't Get Hung Up On Price

Don't Get Hung Up On Price

Don't be so focused on price, instead keep your profit in mind, which is the cash you'll walk away with after your costs are subtracted from the price you're charging. As the owner of your business, it's absolutely necessary that you understand each of your costs and expenses.

Don't Get Hung Up On Price

If you're in a situation where someone is pushing you down on price, it's important to consider how much you can push your cost down. You want to maintain this ratio – if your price goes down, your cost must also go down (to maintain your profit).

Don't Get Hung Up On Price

And don't be afraid to leave a deal if it's not profitable! If this idea of quickly calculating your costs seems daunting, make a nice cup of tea and curl up with your accounting books this weekend until you truly understand your expenses.

Always shoot for the best possible outcome for a high profit when starting a negotiation, and keep in mind the lowest price you can offer while still making a profit.

If Things Start to Turn Sour

If a negotiation conversation turns negative or derisive, understand that what's really happening is someone's needs aren't being met. As the skillful negotiator, it's up to you to figure out what those missing needs are.

If Things Start to Turn Sour

Clarity and honesty can be your best friends in these situations. In other words, just ask what the other person wants!

"What is it that is important to you in this partnership?"

If Things Start to Turn Sour

If the opposing party's goals remain unclear, listen to what they're *really* saying. There may be a lot of concentration on price, but there's something underlying.

It could be speed, where they need your product or service faster. Maybe they need more flexible payment terms or they have a risk that needs to be reduced. It could be that they need a different design in the product or a higher level of performance.

If Things Start to Turn Sour

Even if the other party tells you *only* price matters, the skillful negotiator knows that there may be more to the issue. Understanding your customer is the most important part of these conversations.

Tricks Are For Kids

You've probably heard accounts of "master negotiators" who have games they play and tricks they use to get their way. Those rare birds who never leave a meeting with less than they came for. The truth is, tricks are for kids. Leave the games for the Monopoly board. No one's telling you to show all your cards right away, but honesty is the best policy here.

Tricks Are For Kids

The only thing that's worth concealing are the elements of your cost structure. You don't want to turn that over. Do not give someone the ability to decide what they *are* paying for and what they aren't. Your product or service is not up for line item debates!

Always steer the conversation towards value proposition. What can you offer that will increase the value and importance of your product or service? Discuss things like speed, customization, size, shipping terms, features, color and design.

You need to figure out what will make *their* business successful.

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