08 Jan Mastering the Art of Business Negotiations
Some seasoned business owners may refer to deal negotiations as a game. With so much at stake, however, the less you leave to the roll of the dice, the better.
In reality, things like luck and emotion have no place at the negotiating table, so be sure to check your ego at the door and prepare to enter the dealmaking process with a strong stomach, a lot of business sense and unfaltering discipline.
Keep your eye on the end game and understand these critical steps to master the art of business merger negotiations.
Know the Other Party and Find Your Leverage
Know the other party so well you are able to easily identify their weaknesses and capitalize on your own strengths. An experienced negotiator offers you plenty of business associates to tap. You’ll also likely notice patterns or negotiating styles. Psychology plays a significant role in how well you capitalize on the other’s party’s lack of preparation.
One other tip for “knowing the other party”—be sure the person you are negotiating with has the authority to make binding commitments. You don’t want to find out further approvals are necessary once you’ve struck a deal.
Demonstrate early on your own knowledge and expertise of the company’s product or service, as well as the industry and marketplace. Any sign of weakness could become a target for a bluff. You could very well intimidate the other party before they even have a chance to establish credibility. Better to take the initiative and steer the process than play catch up.
Have a Strategy
While every negotiation process is different, there are basic principles that always apply and should be used to develop your negotiating strategy:
1. The first offer is usually the most important and always serves as the benchmark for all that follow.
2. Make your first offer aggressive because you will never get what you don’t ask for.
3. There is a reason it is called the “asking” price. Typically, it includes padding that can be used in negotiation. If you are the buyer, you want to take all that margin and hopefully more, so start low and don’t worry about insulting the seller as long as your offer isn’t ridiculous.
4. Never disclose your budget or price, or any other limitations to your position for negotiations.
5. Always have something to give away without hurting your position.
6. Watch for reactions to what you say through clues in speech patterns and body language. If things seem to be at a standstill, consider suspending negotiations and express reluctance to continue. If the other party wants the deal, they will be concerned about whether you will return to the table and feel pressure to show movement.
7. Practice patience. Negotiations rarely bring instant gratification, which can be nerve-wracking, but do not let the other party sense your need to move quickly.
8. Never agree to follow your own offer with another. This is akin to negotiating with yourself and is a trap. If you were the last to make an offer, always insist on a counteroffer before allowing negotiations to continue.
If you are the buyer, your offer should be more than a dollar amount. It should be in written form, include all elements of the bargain process and comprise the foundation for a formal contract of agreement. If you have not nailed down all specifics with an offer, you have not accomplished a meeting of the minds. Even the fine print can be altered up until the final deal is inked.
Go For the Win-Win
Always try to visualize what the other party would consider an acceptable outcome as you formulate your next move. Try to address some of the other party’s priorities when developing your offers as long as doing so does not weaken your own position. Be prepared to give up some things in exchange for others you refuse to concede.
While it’s true your strategy is developed to shape the negotiation process in your own favor, your overall goal should be to secure an acceptable deal while still allowing the other party to feel they won.
Closing the Deal
Business negotiations are like chess, not checkers. Each move you make should not only set up your next move, but several moves down the line.
While keeping your end game in mind, expect at some point you will spit the remaining difference. Inevitably, it comes down to that final point of compromise that takes you from negotiations to the closed deal.