Refining your negotiation skills could mean the difference between thriving and barely surviving in your small business.
Virtually everything in business is up for negotiation. You may have to cut deals with lenders, investors, equity partners, employees, consultants, suppliers, and customers. If you approach each negotiation strategically and employ some tried-and-true tactics, the overall effect on your business can be substantial.
Be Honest About Your Goals
You want to walk into any business dealing or contract negotiation with complete confidence in your own goals, values, and convictions. This mindset is helpful because you are less likely to agree to an offer that does not meet these qualifications. The other side will also take your considerations more seriously when you can show that you are confident and will not settle for less than what you know you and your company deserves.
Have a clear idea about how each negotiation affects your bottom line, other business relationships, and personal goals. The more honest you are with yourself, the more honest and direct you can be at the negotiating table.
Aim for the Win-Win Outcome
Always strive for the win-win outcome – the best negotiators address concerns on both sides and work to ensure both parties gain something from the deal.
The Harvard Business Review took at look at negotiations in extreme situations and found it was critical to avoid combative mindsets. Ideally, the process of looking for the mutually beneficial outcome can force each party to avoid trying to win the deal and set egos aside.
Ask sincere questions about the other party’s motivations, such as “What is most important to you?” and “Why do you want it?” Encourage everyone to think creatively to line up motivations and process before proposing an outcome.
Determine Your Potential Concessions Beforehand
Still keeping your clear goals in mind, think through the things that you are willing to give up during the negotiating process. Write down a list of everything you want from the other party. When you’re finished, cross off the items that you are absolutely unwilling to compromise on. Anything left over should be considered negotiable, and you can use it as leverage to get something else you want.
Some artful negotiators add items that they intend to concede to help the other party feel as though they are getting a great deal.
Know When to Stop Negotiating
Before walking into a negotiation, ask yourself what it would take for you to abandon the deal. If you can know ahead of time when to reach for the exit, you can project strength and leverage – it shows the other party that you don’t necessarily need this deal.
There are times when this will be more difficult, especially when a major lender or equity partner is sitting across from you. At other times, your budget limitations can make the decision for you. Never forget how powerful it can be to know when to walk away.