Negotiation Tips and Techniques Business Owners Need to Know
Whether you are working with a potential employee to determine a salary and benefits package or speaking with a competitor about selling your company or buying a different one, negotiating is a key part of owning a successful business. When you negotiate, you are working with another party to put together an agreement that somehow benefits all parties involved. You might not get everything you want out of the deal, but in some cases, that’s better than no deal at all. Here’s what you can do to improve your negotiating skills and increase the likelihood of reaching an agreement that suits everyone.
Make a Plan
Before you walk into any negotiation, you need to have a plan. Write out the things you want to discuss during the meeting and what your ideal goals for the negotiation are. Ideally, you’ll draw up a few plans before you start the negotiating process.
Plan A can be your ideal plan or the outcome that you’d like to have come about in a perfect world. Plan B can be an acceptable plan but not your preferred outcome. Try to think about how the person you are negotiating with will react and what you can do to steer the negotiation in the direct you want it to go. Making plans and lists beforehand prepares you for a variety of possible situations and helps you avoid losing your cool at the table.
Don’t Be Afraid to Go First
One common piece of negotiating advice is to always let the other party make the first move or offer. But it might actually be in your best interest to go first. A study from Harvard Business School found that people who make the first offer typically come out ahead in a negotiation. That’s because that first offer acts as a sort of anchoring point for the negotiation. The first figure you offer can sway the other party to adjust their offer either higher or lower. For example, if you are negotiating salary with someone and you offer $100,000 off of the bat, the potential employee might lower their counteroffer to be more in line with your initial offer.
Additionally, if you are selling something and you start the negotiation with a price of $5,000, the buyer might adjust their asking price upward, even if the item you’re selling isn’t really worth $5,000. The Harvard study points out that high anchor prices make people focus on the good features of the item on offer and help them ignore the not-so-great features.
Flexibility is a key part of a negotiation. After all, a successful negotiation usually involves a fair amount of give and take from both parties. When you’re making your plan, include a few things that you can give up or that wouldn’t be the end of the world if they weren’t included in the final deal. When you prepare for the negotiation in advance, it’s a lot easier to be flexible with the person you’re working with.
Another way to improve your flexibility during a negotiation is to try to see things from the other party’s perspective. You might not want to match 10 percent of contributions to an employee’s retirement plan. Ask yourself why the potential employee wants that and what you can offer as a suitable alternative.
Walk Away If Necessary
It’s important to remember that being flexible during a negotiation doesn’t mean completely giving up everything you want to get out of it. It’s not really a negotiation if the other party gets everything they want and you get nothing.
When you’re making your list of goals and plans for the negotiation, include numbers or terms that are your absolute deal breakers. For example, if a potential employee won’t budge from a $150,000 salary, but you can only afford $125,000, it’s OK to move on. If a buyer won’t pay more than $3,500 for your product, but you know it’s worth $4,000 and that you can get $4,000 from someone else, walk away.
Don’t necessarily slam the door shut when you walk away, though. The other party might change their minds after having some time to reflect on the situation. Or, they might realize that $4,000 isn’t too much to pay for a product they need.
There will come a time when you need to negotiate. If you’re nervous about heading to the negotiating table or aren’t sure where to start the planning process, the team at New Direction Capital can help. Our virtual CFO can help your team develop the negotiation techniques and skills it needs to grow your company and take your business to the next level.
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