© 2006 October Research Corporation

Business Negotiation

Joe PiernockCorporate Development Services

© 2006 October Research Corporation 2

1. Preparation

2. Negotiation

3. Contract

4. Operation

5. Termination

Phases of a Business Arrangement

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Remove emotion from the process:

1. Set your financial and business objectives

2. Prioritize AfBA candidates• Your operational and financial factors (use the Model)• Your business and strategic factors• Their needs and objections

3. Define your Best Alternative (to this deal)

4. Define your Target Price

5. Define your legal risk threshold

6. Plan your attack• The order you will approach each candidate• Individual tactics

Preparation

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Business and strategic factors:

1. Reduce a coming loss of business

2. Strategic block

3. Reduce business risk

4. Gain the market’s “high ground”

5. Strong partner to grow business

6. Enter a new geographic region

Preparation (continued)

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1. Discovery – revealing information to define needs• Focus on your Target Price• Discuss their underlying needs and beliefs, not demands• Never lie or reveal facts about your Best Alternative

2. Opening Offer – sets the range of expectations• Research says this is more important than we think

3. Concessions – lead to the final offer• Make them small – Reciprocity is human nature• They are not gifts – use “If… then” statements

4. Final Offer - you must be willing to walk• Do not lie

Negotiation’s Phases

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The Heart of Negotiation

“BATNA”Define the other party’s

BestAlternative

ToA

NegotiatedAgreement

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1. Zero Sum Game – Always look to make the pie bigger

2. Nondirective Listening – Ask about Feeling, then Facts, then Solutions

3. Deadline – Set a deadline and keep it

4. Risk – most would rather avoid a risk than have a gain

5. Contingency – Break logjams with contingency deals

6. Differences – provide opportunities for mutual gains• Different forecasts, risk aversion, capabilities, core needs

7. Intermediaries – pros and cons• Hired guns

8. “Liking” matters

9. Bluffs

Negotiation Tools

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1. You have an advantage if you control the paper.

• Final language• Pace of the negotiation

2. Operational issues• Rigorous performance reporting for the entity• Define scrupulous accounting of all metrics. Provide

examples as attachments.

3. Termination• Always set a termination date• Know your deal breakers

Written Agreement

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• Good Partner

• Enough revenue

• Fair financial arrangement

• Accounting is not a burden

• Operations are not a burden• Little collateral damage to other business

Elements of a Lasting Arrangement