Business Can Acquire Negotiating Skills
The art of negotiation has somehow gotten a bad name. Perhaps it is the image of Nikita Khrushchev pounding his shoe on a table at the United Nations, or the endless teacher union negotiations that take place here in Pennsylvania every year.
Small business negotiations should not and cannot follow these models. Business negotiations should follow one principle rule. Than rule is win-win. Many small business owners frequently find themselves in negotiations and the confrontation illustrated above should be avoided at all costs. You and your client/customer should leave a negotiation feeling good about the result.
Every negotiation has three crucial variables. These variables are Power, Time and Information. Control these variables for more successful negotiating outcomes. Additionally you will find that you will be better organized if you structure your approach with these three variables in mind. Power in negotiations is perhaps the most misunderstood of the variables. Power is not about who is the biggest, it is about understanding the negotiation process. Preparation is a critical part of that process. Here are some basic rules that support good negotiation technique and will give you power at the table:
Investment: By working collaboratively on the non-controversial issues, the other party will have invested time in the negotiation. The more emotion and time invested up front, the more cooperative they will be when you get to the tough issues. Money is frequently that tough issue, so save it until later in the negotiation process.
Client’s Needs: Research the account to determine what the client’s real needs are. You are not selling a product—you are selling a solution.
Limited Authority: The negotiator should lack the authority to make a final agreement or claim to lack the authority. Limited authority allows you to obtain a delay without argument. It also allows you say no without confrontation. In addition, limited authority allows you to delineate terms or a price range that you as negotiator can not exceed. To avoid the delay, while you “go to higher authority,” your client may agree to your terms.
Price: When possible, let the other party set a price on the table first. This gives you the flexibility of moving upward from that price. You should negotiate the package, not the price.
Expertise: Establish your expertise and credibility in the area being negotiated. You know your product and its application better than anyone else. People frequently take plumbers, doctors and lawyers at their word because we concede that they are the experts.
Persistence: If a negotiation issue is important to you, you should keep at it. Move away from that issue when the discussion gets tense. When you come back to the issue, phrase it differently but stay focused on your point. These are some of the ways you can exercise power in a negotiation.
Deadlines: We have all been exposed to the sale price that is only good until the end of the next business day. While this is transparent, there are other ways of setting deadlines. For example, in selling health insurance, decisions are tied to a plan year. In December, employees sign up for the health plan, and an executive decision must be made in mid-summer for implementation of a new plan.
Patience: It pays to be patient. Give the client time to digest your proposal. Always keep the deal open and be prepared to respond to potential deal breakers.
Timing: Know your client and when is the best time to deal with them. CFOs are notoriously difficult to deal with when they are doing a year-end closing of the books or a quarterly closing. CEOs are tough to deal with the week before a meeting with their Board of Directors. Once the Board meeting is over, CEOs become much more relaxed and open to new ideas.
Research: Know more about your customer. The Internet gives us the ability to get more information than was ever available in the past. Also, if you know the right questions to ask receptionists and administrative assistants, they can provide valuable clues to your client’s needs.
Competition: Understand who your client’s competition is, and how you can help your client to cope.
Early Arrival: Sometimes, you can learn a lot just by arriving early and reading the materials in the lobby, such as the organization’s internal newsletter. Early arrival — and keen observation — also allow you to get feel for the organization’s culture.
Listen: Write down the questions you can ask to draw out the client. As Steven Covey says “You have to understand to be understood.” It takes talent and sensitivity to get a reluctant customer to open up about their company’s needs and problems.
Authority: Understand the authority level of the person you are negotiating with. Determine who must approve your proposal. Structure your proposal accordingly.
In conclusion, negotiation is both an art and a science. Every sale starts with a negotiation, and for the small business, successful negotiations go straight to the bottom line. For better negotiating results, do your research, define your limits and follow the guidelines listed above.
Whan, Business Consultant for the Kutztown SBDC, is an experienced professional
manager in health care with a strong background in management consulting, small
business development, finance and marketing. Strong skills in contract
negotiation and all aspects of process improvement.
Planning in health care, process improvement, financial issues in health care