Top Negotiation Skills For Entrepreneurs
The ability to negotiate competently is one of the most vital skills a business person must learn. In a few hours or minutes, you may make terrible blunders that will cost you thousands or millions of pesos. Unfortunately, most entrepreneurs rely on sheer guts rather than apply a scientific approach, since many believe in the power of negotiation.
The problem with a lot of negotiating tips, although they do offer much useful advice, is that they often do not focus on the problems encountered by entrepreneurs. Most focus on corporate case studies or nonbusiness situations. The issues facing an executive of a large company during negotiations is radically different from the difficulties that usually confront the owners of small- or medium-sized businesses.
Entrepreneurs must be aware that skill in negotiations takes both personal ability and intensive preparation. Here are 10 things you can do to begin developing your expertise in negotiations:
Know your BATNA. BATNA, coined by negotiation experts Roger Fisher and William Ury, is one of the most famous acronyms in negotiating theory. It means Best Alternative to a Negotiated Agreement. Few take the time to have an accurate assessment of their BATNA. Frequently, this lack of preparation results in an overoptimistic estimate. Knowing your real BATNA allows you to know at what point you should stop negotiating.
Estimate the other party’s BATNA. On the other hand, knowing up to what point the other party will accept is also essential to your negotiating strategy. The main hindrance here is that even if the other party knows his BATNA, there is a remote chance that he will tell. Still, there are many ways to gather information so that you can improve your estimate of this critical information. You could try to research the motives and circumstances to have a better picture. This may also help you dig up items that can be useful in your negotiations.
Always support your points. It is very easy to say that competitors are offering the item at a cheaper price; however, the impact of this is much less than if you have actual prices and names of the competitors. Although the supplier may not dispute your alleged data, neither would they give it much weight if there are no details. You may get nothing more than the standard discount. Instead, if you have taken the effort to actually canvas prices instead of bluffing, then you could present a more credible argument for them to lower their prices.
Do not complicate matters. Negotiations are difficult enough without getting sidetracked by irrelevant topics. When making small talk to break the ice, steer clear of controversial topics like politics and religion. You could also tackle minor issues later after first getting agreement on the major issues.
Aim for the long-term benefit of both parties. If you think that your objective in negotiating is to get the most from the other party, then this is generally the wrong attitude. Unless it will only be a one-time transaction, you will generate ill-will that is hard to overcome. This is especially true here in the Philippines, unlike in western countries. A long-term relationship can only prosper if both parties benefit in the transaction.
Be wary of one-time transactions. It is in non-repeating transactions where there are the highest risks, since the other party will no longer need to deal with you again. In cases like this, the tactics are far more aggressive and the risks of deception and bad faith are more likely. In the light of this situation, you must take extreme care. Research thoroughly on the reputation of the other party and validate every claim.
Check if the deal is doable. There are instances when you will just be wasting your time if you negotiate. This is usually due to mutually incompatible BATNAs, just plain lack of interest or many other factors. Whatever the cause, some probing must be done before you even begin negotiations so that you avoid attempting the improbable if there are indeed better alternatives.
Always consider the cultural context. Many strategies and ideas that work excellently in the U.S. or Europe can prove disastrous if used indiscriminately here. Among the many differences is the tendency to be turned off by aggressive tactics. Therefore, carefully assess if a certain negotiation technique is likely to be counterproductive here.
Do not make final decisions on the spot if there is still time. For both negotiating leverage and to better study the agreement, it is best if it is still subject to final approval. One great advantage of corporate negotiators is that they normally do not have the authority to make a final decision. If you are the owner of the business, people will find it hard to believe that you do not have the authority. Nevertheless, you can state from the start that it is your intention to first consult with your wife or some other person before a binding contract can be made. This will give you some time in order to review what has been taken up or to request for an improvement in the terms, if needed.
Practice to improve. Proficiency in negotiation can only be acquired through practice. Even if you know what to do, a lot of negotiations happen face to face wherein there is no time to review your notes. Develop good negotiating habits by trying to apply its principles whenever you can.
With competition getting smarter everyday, it is no longer sufficient to rely on only natural ability when negotiating. Profit margins are getting smaller and you must know how to maximize the value from every negotiation. Entrepreneurs now must be as sophisticated as their corporate counterparts to stay in the game.
*Originally published by the Manila Bulletin. C-6, Sunday, January 13, 2013. Written by Ruben Anlacan, Jr. (President, BusinessCoach, Inc.) All rights reserved. May not be reproduced or copied without express written permission of the copyright holders.