The Entrepreneur Life

5 Simple Tips for Successful Negotiations

Negotiation Cartoons: Positions Vs. InterestsAs an entrepreneur, you’ll find yourself having to negotiate almost as much as you have to sell. From landlords, to suppliers, prospective employees, partners and of course customers – you’ll negotiate often without even recognizing that’s what you are doing. While there are entire books written on the subject of negotiation, a few simple rules have served me well over the years.

Be clear about what you want Simple as it sounds, often we get carried away or worse yet upset and take a position or ask for something, which is really not what we want. Sometimes it’s as simple as that we were not clear going into a negotiation as to what it is we want. So when we actually get what we demanded and find that we are not happy, it’s not a good place to be – especially if you’ve burned bridges or needlessly cheesed off folks you’d have to work with. So don’t go into any negotiations without clarity on what you want – be it bringing on board a new employee, signing a new customer, re-working the terms of a loan or selling your company.

Know you walk-away price Be clear when you would not do a deal – this has to be black and white to yourself and can’t have any ifs or buts. And this need not be just about money, could easily be about the other terms. For instance, if you are selling your company and the buyer is not prepared to give the terms that you want for your team (for instance, employment guarantees or restricted stock) — a situation I’ve faced —you need to know are you prepared to walk away. Being clear about this makes the entire negotiation far less stressful.

Never negotiate against yourself This is by far the most common error all of us commit. We’ve all experienced it. Like when you see a jacket you like at a store – you ask for the price and find it too high. So you walk away – the shopkeeper calls after you – saying he’ll knock of 20% – he’s just negotiated against himself (of course he may have marked it up 40% 🙂 Particularly when negotiating a contract with a prospective customer, the temptation is great to lower our price or improve our terms when the customer feels we are not offering a good deal. Instead, it’s always best to ask the customer to counter your offer – let them quote a price that’s agreeable to them or terms that are more palatable. Now you have something to negotiate about – maybe you get nearer their price, but take something off the table (support, warranty, options) or you can counter with a different price for better payment terms. The important thing is that there’s got to be give and take and until the party puts a stake in the ground, don’t move yours.

Bring something to the table that you can concede All of us like a good deal – especially one that is done in a spirit of give and take. Just as we expect the other guy or gal to make concessions be prepared to make some of your own. This requires you not only to know what you want and what your walk away is, but what is NOT important to you. For instance, if you’re trying to close a large deal and having money up front is not critical for you, be prepared to give that up – the important thing is to ask for a thing or two, that you know you are prepared to concede and be clear which those are and which ones are non-negotiable. If everything is non-negotiable you are not going to get too far. And it makes the whole negotiation less than pleasant.

Save your best for the last Despite much advice against it, some folks and entire cultures conduct negotiations on a piecemeal basis – that is one item at a time. You discuss one point, make concessions and then they make their next demand. Refuse to do this politely. And the best way I’ve found to do this is what I term, saving your best for the last. In essence, establish what’s the critical care about for the other party (and yourself). Ask them, if we close on this item (whichever one it is) is there anything else that’s holding the deal back. If the answer is no, close on the other times. If they answer is yes, get down to negotiating to a close. If they pop something else up after this they are not dealing in good faith. Be prepared to walk.

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6 Comments

  1. Cariappa

    Excellent points! I would add these, as well:

    1. Something that goes without saying, but is rarely adhered to – DO YOUR HOMEWORK. If you’re talking to a printer, you better know what GSM is; if you’re talking to Landlord, you better know the Sq Ft rent in the area is; and if you’re talking to a potential employee, you better know your competitors’ compensation.

    2. Don’t be afraid to throw out a number (only if you’ve done your homework). It anchors the negotiation and gives you more power to call the shots. So many people have no idea what they want, and experienced service providers understand this well enough to take advantage of this.

    3. Understand the variables. Variables offer huge leverage. For example: I know some service providers (media buying agencies, etc) will knock off 10-15% at-least if you can commit to an up-front payment. If you don’t have as many variables in hand you’re headed for an impasse.

    • ksrikrishna

      Cariappa,
      Excellent points – anchoring always plays a critical role in negotiations. Of course it makes sense only if you’ve done your homework, as you rightly point out. And the variables, especially the more there are, makes it all the more important to know, what is important to the other party – again homework – as well as knowing what’s important to yourself.

      I guess we should also add, practice, practice, practice!

  2. Cariappa

    Excellent points! I would add these, as well:

    1. Something that goes without saying, but is rarely adhered to – DO YOUR HOMEWORK. If you’re talking to a printer, you better know what GSM is; if you’re talking to Landlord, you better know the Sq Ft rent in the area is; and if you’re talking to a potential employee, you better know your competitors’ compensation.

    2. Don’t be afraid to throw out a number (only if you’ve done your homework). It anchors the negotiation and gives you more power to call the shots. So many people have no idea what they want, and experienced service providers understand this well enough to take advantage of this.

    3. Understand the variables. Variables offer huge leverage. For example: I know some service providers (media buying agencies, etc) will knock off 10-15% at-least if you can commit to an up-front payment. If you don’t have as many variables in hand you’re headed for an impasse.

    • ksrikrishna

      Cariappa,
      Excellent points – anchoring always plays a critical role in negotiations. Of course it makes sense only if you’ve done your homework, as you rightly point out. And the variables, especially the more there are, makes it all the more important to know, what is important to the other party – again homework – as well as knowing what’s important to yourself.

      I guess we should also add, practice, practice, practice!

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