4 Steps to Prepare for Your Next Business Negotiation
Practical Tips for Small Business & Startup Entrepreneurs from a Corporate Negotiation Expert
Stop me if you’ve heard this situation before. Jerry is a small business entrepreneur. His biggest supplier represents 80% of his business, so whenever they ask for something, Jerry has to bend over backwards to keep them happy.
Jerry feels like his supplier gets so much more out of this relationship than he does, but there’s not much he can do about it. In every conversation where they negotiate prices, Jerry feels like he’s getting a bad deal because the supplier has all the power in their relationship. Or do they?
Recently we attended a workshop hosted by Marty Finkle, a Board Director for Scotwork, one of the most popular negotiation training companies in the world. Scotwork does negotiation consulting for clients such as Amazon, Boeing, Merck, Dell, Starbucks, and Walmart.
We thought the seminar provided some very useful and actionable best practices on business negotiation that would be very helpful to small business entrepreneurs like Jerry.
That’s why, with Marty’s permission, we are sharing with you how to prepare for your next negotiation, whether it’s negotiating prices on a sales call, or negotiating for your next raise.
This time, we are going to focus on the principles of negotiation. In the next few weeks, we’ll publish a worksheet to help you turn the theory into practice for your next real-life business negotiation. Let’s begin!
Do I need to negotiate in the first place?
The first thing to consider is whether negotiation is needed in the first place.
Negotiation isn’t the only way to resolve conflict. There are a whole host of conflict resolution strategies, including:
- Problem solving: Can we engineer a solution to the problem that benefits both parties?
- Persuasion: Can I simply talk the other party into doing what I want without negotiating?
- Haggling: Can I just focus on lowering one variable (such as price) and end the conflict for good?
However, sometimes the alternatives fall through and negotiation is your best option. If that’s the case, preparation is key.
To prepare for a successful negotiation, you need to go through 4 main steps:
- Clarify Objectives
- Research Information
- Plan an Agile Strategy
- Identify Potential Concessions
1. Clarify Objectives
Clarity is power. If you’re not clear about what you want, you’re going to become soft on your objectives, and you’re more likely to give in on key goals. In other words, if you don’t know what you want, the other party will get what they want.
That’s why you should always start with clarifying your objectives of negotiation.
List all that you are trying to get from the negotiation, go through each item on the list, and ask yourself, is this:
- a wish (i.e. a nice-to-have)?
- an intend (i.e. a realistic expectation)?
- or a non-negotiable (i.e. a must-have or must-avoid)
If an item on your list is non-negotiable, protect it with your dying breath when you’re negotiating. Don’t let your opponent tempt you into giving these up!
However, being clear doesn’t mean that you can’t be creative. It is important to consider other potential categories of benefits you can gain from the negotiation.
For example, if you show up to your dinner reservation and find out that your table is going to be an hour late, ask for something creative like a bottle of wine and roses on your table. You may just get it (this is an real-life story from Marty)!
Lastly, also consider the other side’s potential objectives. It’s impossible to always know exactly what the other party wants, but you can create some educated hypotheses that you can test with questions during the negotiation.
2. Research Information
We’ve all heard that knowledge is power, but it’s especially true in negotiations.
The party with less information is less equipped to make a rational decision about how much they should ask for and what they can realistically expect from the negotiation.
Therefore, it is mission-critical to do your homework thoroughly and learn as much as you can about the other party.
The first thing you need to pay close attention to is the power balance between you and the other party.
If you are a small food supplier negotiating with Walmart, you will have a lot less leeway for demands than if you were on the other side of the negotiating table.
That’s why, if you can, try to do your research ahead of time on factors such as:
- market share
- risk of failure
- costs of change
After identifying the power balance, you need to think through what information you need from the negotiation, and prepare the questions you can ask to test the accuracy of your assumptions and positions.
You also need to think through what information you should give and not give to the other party.
For instance, one piece of information you may want to draw out from the other party is their supplier concentration — that is, what other vendors is the other party using besides your company, and what are their other options?
If you learn that you’re their main vendor and their other vendor options are significantly more expensive, that will greatly improve your negotiating position.
Alternatively, you are on the other side of the table, then you want to make sure not to disclose that information if it’s not necessary.
3. Plan an Agile Strategy
To paraphrase Thomas Jefferson, “In matters of strategy, swim with the current; in matters of non-negotiables, stand like a rock.”
To succeed in your negotiation, even though you should plan out your strategy to focus on achieving your objectives, you need to keep it simple and flexible.
Here are some tips to create an effective strategy for your team:
- Keep it simple so everybody understands the strategy
- Keep your strategy flexible — don’t confuse your objectives with your strategy
- Allow yourself to adjust your strategy during the negotiation
If you represent a small business or startup, your decision-making flexibility can be your advantage, relative to large enterprises that are more constrained by countless stakeholders and bureaucratic rules.
But what if your strategy doesn’t work?
If things are not going to plan, be prepared to take a “time out.” You should strongly consider taking an adjournment during the negotiation if:
- your objectives turn out to be unrealistic
- if important new information has emerged
- if you need time to think
For example, if, in the middle of the negotiation, your team learned some surprising news from the other party that you didn’t prepare for, you may want to consider taking a short break to readjust your strategy with your team.
4. Identify Potential Concessions
Just as you write out your objectives ahead of time, you should also write out your possible concessions to the other party.
If you don’t, you may find yourself offering concessions that are unwise to give away (e.g. giving away must-haves or giving away too much). It’s much easier to make good trading decisions when you’re clear what the tradables are.
When considering what to consider a must-have and what to consider a possible concession, ask yourself these questions:
- What can you offer to make their life easier?
- Where do you have flexibility?
- What is the value of the concession in the other party’s mind
- What will you ask for in return?
One useful rule-of-thumb is to “trade every time.” In other words, every time someone asks for something from you, ask for something in return.
You can say something like “if you agree to x (e.g. pay us $10,000), then we’ll agree to y (e.g. make you our exclusive service provider). This will increase the likelihood the other party will take your deal. Avoid “soft” language such as “I’d like to x.”
We hope this article will help you increase your chances of success in your next negotiation with your suppliers and clients.
If you like this article, check out Marty Finkle and the great work he’s done at AscendU and Scotwork. Marty is a very in-demand trainer and speaker, so a big thanks again to Marty for letting us share his insights from his decades of experience. Also thank you VFA for booking him as our negotiation seminar!
- Always trade: when you make a proposal, say “if you do x, I will do y”
- Control the information flow: ask questions to get information you need, and carefully consider what information you to disclose or not disclose
- Ask creatively: if they can’t give you something in one category (e.g. a lower price or a higher salary), ask for something in other categories (e.g. a discount on another service they provide or more vacation days)
- Negotiation skills = power: controlling information flow and committing to non-negotiables can give you real power in negotiations. That’s why the best poker players can win even when the opponent has a better hand.
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