The dos and don’ts of negotiating
Whether you’re buying or selling a business, it should come as no surprise to you that, at some point, you’ll enter into a negotiation. In business transfer it’s expected, and it’s the norm and, of course, the objective in any negotiation is to reach an agreement.
How to conclude negotiations and achieve that sale or acquisition…
A business can’t remain on the market indefinitely; it needs to be bought or sold at some point! For that to happen, each side needs to be reasonably content with the outcome.
If you’re buying a business, you don’t want to pay too much for it. And, if you’re selling your business, you won’t want to give away too much either.
Whether you’re genuinely delighted or somewhat disappointed with the final outcome will depend on one thing: how good you are at negotiating!
So, how have your previous negotiations gone? Have you always got what you wanted? Or do you feel that you concede too much when brokering a deal? If it’s the latter, then don’t worry. You’re not alone. Negotiating is a game and, perhaps, to date you’ve just been dealing with more experienced players than you are.
The good news, though, is that negotiating is a skill that almost anyone can master. It takes diligence, practice and application. But, in time, you’ll be able to wheel and deal like the best of them.
Especially if you follow these dos and don’ts of negotiating…
If you take one piece of advice away from this article it is this – be prepared. The best negotiators and dealmakers definitely will be. Undertake your own research and find out all you can about who you’re negotiating with.
If they’re selling their business, then why? What are their objectives? Do they have a timescale that’s important to them, and one that could give you leverage? How long has the business been on the market, and have they had any other offers?
Information like this will influence your negotiations when buying a business.
What about if you want to sell your business? Again, the better prepared you are, then the better the outcome will be for you.
Why does the other side want to buy your business? Is it for financial returns, the location or for a better lifestyle? If you know the answer to this, you can focus on specific features and benefits of your business, all of which will help you broker a better deal for yourself.
Don’t expect everything to go as planned
So, you’ve done your homework and you’ve laid the groundwork. That’s great. But this is the real world and in negotiations, as with most things in life, it’s rare that everything goes exactly as planned!
Someone will throw in a curve ball and, unless you can react quickly, you could unwittingly weaken your position. Importantly, you might have to think on your feet, and you will need to adapt and evolve to whatever situation you are presented with.
If negotiating is a game, imagine you are heading into the cup final. You’ll know all about the opposition. You’ll understand their strengths and weaknesses. You’ve set your team up to bring home the trophy. And then your star striker is injured in the first minute.
You need to bring on a replacement and alter your tactics. The same applies in negotiations. If the opposition does something unexpected, or you are faced with an objection you hadn’t anticipated, then you’ll need to adjust your strategy to reach an agreement.
Information is vital in any deal-making scenario. It will help you gain an insight into what the other party is hoping to achieve. And the only way to gather that intelligence is through questioning.
You need to ask questions – and lots of them. But they need to be the right type of question.
A good technique is to use open questions, ones that start with words like ‘what’, ‘where’, ‘when’, ‘why’, ‘who’ and ‘how’. Open questions can’t be closed off with a ‘yes’ or ‘no’; they require a more detailed answer. The more you probe, the more you learn, and that detail is incredibly valuable to you. For, while it might be clichéd, knowledge is power!
Don’t forget to listen
It’s all well and good asking lots of open questions. But it’s vitally important you listen to the answers too! A great tip in any negotiation – or in any verbal communication – is to talk less and listen more. Some say a good ratio is to talk for just 30% of the time, and listen for 70%.
Could you do that?
Listening is a skill that lots of people lack. But, again, it is one you can practice and begin to master. You just need to concentrate on what the other person is saying. Don’t make the common mistake of beginning to listen, then start to formulate your response while the other side is still talking.
Don’t be afraid of silence, as that can give you the opportunity to digest an answer. You can even repeat the answer back to them for clarity while you’re thinking of your response.
Be open and honest
This might sound counter-intuitive to some, especially if they are hard-nosed deal makers used to getting their own way. But, if you can build trust with the person you are negotiating with, they are more likely to want to do business with you.
Show them you are human, and that your needs are important to you. You are negotiating with a person after all and people like to do business with someone they can trust.
So, do be open and honest. Communicate your needs and explain why they are important to you. But, at the same time, emphasise that you understand they have needs too, and you would like to find a solution that suits all parties.
That doesn’t mean you have to be soft. And feel free to explain why there will be some aspects that you won’t move on. But if the other side really believes you are interested in finding a mutually beneficial outcome, you have a better chance of succeeding than if you are closed off and cold.
Don’t ignore the other side’s needs
Use empathy in your negotiations, as all deals are influenced by emotions. Understand how the other side feels, consider what they want to achieve and what concessions they might make. That understanding will help you get the best outcome for you.
If you can convince them that what you are proposing is in their best interests too, you’ll have the upper hand. If you are buying a business and negotiating with a vendor, why not focus on the benefits they will see once a deal has been struck.
That might be the speed in which they will receive their money, or the freedom they will have once their business has been sold. Reassure them that, in negotiating with yourself you’re seeking a solution that suits all parties. That they will benefit as much as you will form a positive outcome.
Let them know what they could be missing out on
As well as exploring the upside of a positive outcome, it can be equally powerful to portray the negatives if a deal can’t be done. FoMO, or ‘Fear of Missing Out’ is human nature. So, in an unthreatening way, show the other side what they’d be missing out on if you can’t come to a positive outcome through your negotiations.
It instils fear and will make them wonder what they might regret if they can’t reach an agreement with yourself.
If you’re selling your business, and the purchaser is playing hardball, then outline to them what they could be missing out on if the deal falls down. It could be monetary, or it could be lifestyle. It could even be the threat of a competitor coming in and stealing some of their market share.
If you’re at the negotiation stage, it can be assumed that the other side has an interest in brokering a deal. So, make them fearful of what they might lose if they can’t meet some of your demands. Let them know that you have options, that they aren’t the only buyer for your business. It shows them that you don’t have to cave in to their demands.
Don’t be afraid to walk away
Finally, it is important you enter negotiations with a limit to your concessions. If you are selling your business, be clear in your mind what you would accept as an offer and don’t take a penny less.
Conversely, if you are buying a business, have a budget and don’t budge from it. You can easily overspend while caught up in the emotions of a negotiation. Know your walk-away point – and stick to it.
If you’re selling, aim high. And if you’re buying, strike a low blow first. Ultimately, you’ll probably meet somewhere in the middle.
Good luck in your future negotiations!