HOW TO NEGOTIATE WITH CONFIDENCE PART 1:
Being in business provides many opportunities to negotiate. The aim of negotiation is to settle differences and achieve some sort of compromise or agreement. The process occurs through a combination of influential and persuasive techniques, communication and strategy. Sometimes, the only way to get what you want is to negotiate - but negotiation can be stressful.
In this 3-part series, we explore how to negotiate with confidence. One way to ensure that you can confidently negotiate, is to prepare for the negotiation process. The more prepared you are, the more confidently you will be able to align the outcome of the negotiation to your objectives. So, if you are buying a business, what should you consider when preparing to negotiate?
Tip 1: Understand the business
You need to understand what you are dealing with, the potential of the business and the environment the business operates within, which can be achieved by undertaking market research and gathering information about the business.
Market research enables you to identify trends and identify similar businesses so you can determine the perceived value of the business. A SWOT analysis will help identify the strengths and weaknesses of the business and determine whether there are any market opportunities, competitors and any potential threats that will impact on the viability of the business including whether there is a continuing demand for the product or service that is being supplied by the business. Knowledge of the market and the business will increase your bargaining position and enable you to construct an offer and determine whether any further information is needed before an offer can be made.
Tip 2: Prepare your argument and ideal outcome
Being prepared means understanding your position and what you would like to achieve: Consider your argument or presentation, including the questions that need to be answered; whether there is any other information that you need or changes that you would like to propose to the transaction. Your comparisons of similar businesses can be used to strengthen your argument. Also, consider whether there are any mitigating circumstances in the environment the business operates within, or in the business itself, which will likely impact on the transaction and the value of the business.
Tip 3: Know what you would like your ideal outcome or objectives to be:
Consider your objectives and your ideal outcome. Ensure you have an alternative position or some compromises that can be offered if the ideal outcome is not accepted. Also consider if your objectives are not met, at what point you would walk away from the transaction.
Tip 4: Understand the framework
It is helpful to have an idea of the scope and framework of the negotiation before the meeting. Suggesting and preparing an agenda will enable you to explore what will be discussed. It will enable you to verify facts and the other party’s position. Once you are in the meeting, the agenda will be useful to keep the meeting on track.
Tip 5: Understand the location
Believe it or not, where the meeting is held, has the ability to provide a competitive advantage. It might be preferable to meet at your own premises, as this will allow you to control the meeting and access any backup paperwork that might be required. If you concede to the other party’s demands by having the very first meeting at their premises, then you have lost the first negotiation, and it might put the other party into a stronger position by making them feel empowered and, on the day, more comfortable. Alternatively, you could meet at a neutral location, which will enable both parties to focus on the negotiation, rather than using the space to strengthen a particular party’s position.
Tip 6: Understand who will be at the meeting
Consider who will be present at the meeting. Calling the other party in advance of the meeting and asking who will be present at the meeting for the purposes of the agenda will provide you with advanced knowledge of the number and quality of the attendees; their personality; motivations and style of communication and negotiation. This will help you prepare how you communicate and respond to them and enable you to match those people with people who are of the same calibre and who have a similar level of experience.
Tip 7: Understand what might happen at the meeting
Also be aware that the seating arrangements and the choice of table being used at the meeting might impact on the negotiation:
- Someone might sit at the head of the table, as a way to jostle for power and control of the meeting.
- If the table is square or oblong and you sit opposite the other party, you might be perceived as being equal, but on the other hand, it might set the parties into opposing positions, ready for battle.
- A round table softens the negotiation and allows, as a starting point, for equal representation.
Speaking for agreement:
Aim to get some sort of agreement early in the negotiation. You can have the other party agree to a general comment, or something that is common knowledge. By obtaining an initial agreement, the negotiation will start in a positive manner, with each party subconsciously feeling that their needs might be met.
Tip 8: Prepare your mindset
You can prepare for negotiation by ensuring, despite what is happening around you, you have the right mindset. Your mindset will be the strength or an impediment to the transaction. A positive mindset will help you appear and feel confident, relaxed and in control of the situation. You can prepare your mindset in advance by doing the following:
- Understand that the process of negotiation and asking for what you want is often unpredictable. The process might take longer than anticipated, and not everything will be smooth - there will likely be obstacles and surprises along the way, such as the tactics used by the other side which might take you off guard. If you are stepping into an unfamiliar situation, you might feel nervous or fearful – but these feelings are normal and knowing this, will help you manage the process emotionally.
- Assume from the beginning that you don’t know everything and there will be matters that need to be resolved. Adopt an inquiring mind. Instead of accepting the information that you receive at face value, investigate that material.
- Act consistently and direct your mind and the discussion to the outcome of what you would like to achieve. Remain open but in alignment with your objectives. This will help direct your focus to achieving your objectives rather than reacting out of nerves.
- Think that you want to solve any disparity between the parties. A solution-based mindset will provide the opportunity to think clearly and laterally. It will allow you to be flexible and come up with alternative proposals that might help traverse through any blocks.
In summary, you will be more confident when you prepare for the negotiation, if you:
- Understand the business you are buying by completing research and comparing the business to existing businesses. Examine whether you have everything about the business on which to make an informed offer or whether you need other information.
- Know your intended outcome and any compromises that you are willing to provide before you attend the meeting. This will ensure that you do not make rash emotional decisions and can confidently align to your objectives.
- Consider where you would like to meet the other party. The location of the meeting might provide an immediate strategic advantage, particularly if the location makes you feel comfortable or empowers you.
- Understand who will be at the meeting, and ensure you have similar calibre of people attending the meeting on your behalf and have framed your argument to match the styles of the participants.
- Have knowledge of what might happen at the meeting, including the framework of what will be discussed, where to sit and what you can first say to obtain an agreement given these factors will likely have a bearing on the discussion and influence the power between the parties.
- Use your mindset to shape the outcome and help manage your nerves, so you can function more effectively.
The more prepared you are, the more confident you will be, and the more likely you will be able to influence the outcome as you will know what questions to ask, the information to source and refer to, what you want and how to respond to any offer.
About the Author:
This extract has been taken from the book, ‘Entrepreneur Know How – Mindset and Winning Steps for Buying a Business,’ written by Sharon Robson (Available through Amazon). Sharon is also the principal lawyer, director and founder of the boutique law firm, Antler Legal – a corporate commercial legal practice in Sydney, Australia. She has played a key role in facilitating, advising and negotiating many business transactions on behalf of her clients. Sharon is also a speaker, marketer and business owner. She is passionate about mindset and empowering people through education.