Business Development Essentials: The Art of Negotiation
Amid the current health pandemic, South Africa’s economy has metaphorically been put on life support. It could be argued that negotiating and successfully closing a business deal is ‘pure gold’ in a company’s efforts to acquire new – or maintain existing – clients in the current disruptive economic climate.
By the end of reading this article, you’ll have knowledge of the necessary skills to negotiate a business deal effectively.
How to negotiate in business meetings?
Do your homework
Learn everything that you can about the company before you even think about compiling a proposal. Study their website, social media platforms, as well as any other marketing channels they use to attract customers. Comb through as much data as you can access; you can gain in-depth knowledge about the industry by looking at metrics such as
- Year-on-year (YoY) as well as month-on-month (MoM) user behaviour trends. Take note of any significant changes in their analytical data.
- Demographics and location.
- Targeted audience.
- Organic and/or Paid Media campaigns.
There’s a misconception that if you’re negotiating a deal with a prospective client, you should do all of the talking – nope; as counter-intuitive as it may seem, active listening is a sure-fire winner.
The truth is that you may employ top talent who have industry-leading skills to offer a potential client. Still, if you don’t have a complete ability to understand and articulate the client’s exact needs, it’s impossible to break through barriers to bring any value to the table. You must understand their story.
Think of their story as the foundation that once understood, can be built up with the different elements of your unique value proposition (USP). Once you know what they want and know the relevant value your business can add, you have a benchmark on which to base your proposal objectively. This is when you can roll out your elevator pitch.
All you need to remember is the 80/20 rule: Successful negotiation is 80% listening and 20% talking.
Attitude and body language
Body language such as posture, facial expressions and overall attitude towards the client can make or break a deal. Here are a few examples of negative body language that you need to watch out for. These examples have been paraphrased from one of our articles, entitled, Your Guide to Effective Employee Management.
Looking at his/her watch: If you see the individual looking at his/her watch constantly, it signals that he/she isn’t interested in the negotiation and perhaps you need to change your tactics.
Not making any eye contact: If he/she is looking downwards or refusing to make eye contact, it indicates that they are not taking the meeting seriously and are completely disinterested.
It’s also vital that you check your attitude at the door; there’s a difference between confidence and arrogance. While you should believe in your company’s ability to deliver a world-class service, you need to remain humble and connect with the client personally.
You need to know when to play your cards and when to fold. If the terms of the deal don’t benefit or reflect the value that you believe you can add to the business, then it’s time to leave the table.
It’s understandable that during this financially crippling time, declining a deal may seem for lack of a better word, idiotic; but, it’s important to keep a level head and think rationally. Stay focused on the long-term effects it may have on the synergy between the companies.
An article published on Forbes’ website explains, ‘Know before you start what your target price or walkaway price is. Be prepared with market data to back up why your price is reasonable, and if you are confronted with an ultimatum that you absolutely can’t live with, be prepared to walk away.’
The article also emphasises the fundamental principle of why you should draft the first version of the agreement. The reason is that it gives you the advantage of how you’d like the deal to be structured as well as the pertinent points on which the negotiation needs to centre around. Essentially, it provides you with leverage. Once again, beginning negotiations with a solid proposal reflects your credibility. At this point, brand reputation is a significant part of the intrinsic value you’re offering and should play a vital role in influencing the outcome.
As mentioned earlier, don’t be arrogant and put an outrageous, single-sided offer on the table – a realistic balance is vital.
Never accept the first offer
In an effort to secure a deal, you may be tempted to accept the first offer that a prospective client proposes. Don’t. It’s more than likely that it will favour their interests, not yours. Furthermore, if you accept, they may feel they’ve offered too much and may renege on their offer. The UK television show Dragons’ Den is a fantastic example of real-life negotiation application (if you’ve never watched it, do yourself a favour and catch a few episodes or clips on YouTube.)
In a nutshell, budding entrepreneurs present an elevator pitch for their business, offering a certain amount of equity in exchange for investment from one (or more) multimillionaire investors.
If the investors are interested in investing in the business, they’ll make an offer based on the value they believe they can add. More often than not, they will ask for a much larger piece of the equity than initially offered by the entrepreneur. The majority of entrepreneurs will counteroffer: some ask for a buy-back agreement, while others ask if the Dragon(s) will drop their equity demands. This usually works in favour of the entrepreneur. The investors’ offer is typically high because they are expecting a counteroffer.
The aforementioned Forbes article agrees that ‘Counteroffers and some back-and-forth negotiation will most likely lead to the two parties being satisfied that they struck the best deal they could, and thus be more committed to closing the deal.’
The power of BATNA
The reality is that not every negotiation is going to run smoothly and end with your desired outcome; quid pro quo is an essential element of your negotiation strategy. This is known as Best Alternative to a Negotiated Agreement (BATNA).
Roger Fisher and Bill Ury coined the term in their book entitled Getting to Yes: Negotiating Agreement Without Giving In, that became a universal negotiation template.
An article published on Harvard Law School’s Programme for Negotiation outlines the six essential steps that you need to take to ensure you have a powerful BATNA. Here is a summary of the article.
Separate the people from the problem
In the negotiation process, you may let the significance of the pending deal get the best of you and forget that you’re speaking to another person who has opinions, values, and experience. Therefore, should any conflict arise, it’s essential to take a step back, put yourself in your counterpart’s shoes and assess the situation from their viewpoint.
Focus on interests, not positions – AKA Developing your inner BATNA
Stating your position too firmly has the potential to set yourself up for an impasse. Remember, your goal is getting your counterpart to say ‘yes’, so in this case, your BATNA is drawing out the underlying interests of their position. By recognising which interests are stirring the other party, and sharing your interests, you can unlock opportunities to explore trade-offs across numerous issues and increase your odds of getting to the all-important ‘yes’.
Learn to manage emotions
It’s essential not to get flustered and provide your counterpart with an opportunity to voice his/her opinion; it will benefit both of you. “Freed from the burden of unexpressed emotions,” write the authors, “people will become more likely to work on the problem.” This is essential to keep the prospect of a deal alive.
Compliments and appreciation cost nothing. They are critical negotiation skills because they serve to seek the merits of their counterpart’s perspective, which will then aide in continuing the conversation.
Put a positive spin on your message
Communicating positively is a much more effective way to reach a consensus. As you are one that is in the meeting negotiating a potential deal, speak in a way that is true to your character. Should there any conflict, flip any negativity on its head and find a positive means by which you can solve the issue.
Escape from the cycle of action and reaction
The authors urge anyone who is discussing a deal to avoid a common trap: action and reaction. “If the other side announces a firm position, you may be tempted to criticise and reject it. If they criticise your proposal, you may be tempted to defend it and dig yourself in…if they push you hard, you will tend to push back.”
They offer a new skill to combat this trap; it’s known as negotiation jujitsu. Essentially, you side-step escalation by not reacting at all. Instead, it’s recommended that any built-up resistance is channelled through constructive strategies such as “exploring interests, inventing options for mutual gain, and searching for independent standards.” By adopting these skills and applying the authors’ recommendations, you’ll have a powerful BATNA toolkit which you can use strategically to cultivate a path to achieve an outcome that is beneficial to both parties, solidifying the opportunity to build a lifelong, lucrative partnership.
Now it’s time to take all this information and mould it into a negotiation package that suits your character. Everyone has a distinct demeanour and approach, and therefore certain negotiation aspects may come more naturally to you than others. It’s best to view all of the information mentioned above as a negotiation map; more concentration can be placed in particular areas depending on individuals’ requirements to perform optimally.
Once you feel you’re ready, it comes down to practice. Stand in front of the mirror and play out potential scenarios (positive and negative) so that you’ve covered all bases. If you have a spouse or partner, ask them to participate; he/she will be able to give you objective, constructive criticism to leverage strengths and fix any weaker areas.
Get advice from lawyers and independent financial advisers
Your negotiation skills may have been immaculate, but then you need to have a professionally written, legally binding contract to finally seal the deal. This requires the expertise of legal and financial specialists. You must ensure that everything that you’ve proposed is reflected in the contract. A deal is only finalised once all clauses, as well as terms and conditions, have been accepted and it’s been signed.
Negotiation is an art that needs to be mastered if you wish to close a business deal that satisfies the needs of both parties. It’s more important than ever due to the volatile times we are currently enduring.
Negotiation Consultant and Speaker, Devon Smiley reiterates in his article about developing a back-up negotiation plan ‘The power of a BATNA – or figuring out what your alternatives are – is that it gives you the power to walk away from a deal or situation that isn’t going to work for you. You’re not trapped. You have a choice. The more alternatives you have, and the stronger they are, the more powerful you are in that negotiation.’
There are a plethora of negotiation tactics that can be learned and complemented by employing experts to assist you. At fio.life, we pride ourselves on our holistic approach to helping businesses achieve their goals. We aim to help you develop and refine numerous aspects to boost your confidence and financial growth of your business.
The utilisation of negotiation tactics to bring on strategic partners is the objective. Our legal team and independent financial advisers are ready to assist you with everything from a realistic evaluation of your company to ensuring that your proposal adheres to legal requirements.
For more information about our variety of wealth management and marketing services, please don’t hesitate to contact one of our consultants today.