The ability to negotiate deals is invaluable to small business owners. From getting more favorable terms with vendors to locking in purchasing agreements with buyers, mastering the art of negotiation is extremely important to entrepreneurs.
While most small business owners know this to be true, some people are able to get the best deals while others settle for less. Ever wonder why? The key difference comes down to negotiation techniques and style.
Step #1. Do Research
Knowledge is power. This saying proves true in many aspects of doing business but especially when negotiating a deal.
Detectives do their homework and gather as much information as they possibly can before interviewing subjects. This is how you should approach doing a deal.
You already know what your needs, pressures, and options are, but what about the needs, pressures, and options of the other side? Knowing this information will help you gauge what the other side’s appetite for a deal is, which can guide you through the negotiation.
Step #2. Let the Other Side Talk … and Listen
It’s impossible to do a deal without talking, but many people fall into the trap of talking too much and not listening enough. Oftentimes, the side that talks the most is the one that gets the worse deal.
By asking poignant, open-ended questions and then sitting back and listening to the response, you’ll be gaining valuable information that you can use when it’s your turn to talk.
A good rule of thumb is that solid negotiators talk 30% of the time and listen 70% of the time. Again, think of yourself as a detective here. Gather the information you need to get what you want — and you can only do that by listening.
Step #3. Be Willing to Walk Away
Desperate people make desperate decisions. If you feel pressured into a situation, you’re more likely to come away with a bad deal than if you’re willing to walk away.
As any entrepreneur knows, there are certain things you absolutely need to run your business. If you’re in the clothing design business, you might need linen, cloth, and wool materials. If you’re in the home remodeling industry, you might need wood, stone, and concrete.
Even when negotiating a deal for the essential materials for your business, it’s important to be willing to flat out say no and find someone else.
One of the easiest ways to avoid the pressure to close a deal is to plan and prepare. The more prepared you can be in business, the less likely it is that you’ll need something — anything — immediately, with no wiggle room.
This means entering into negotiations on contracts months before your current contract is up, for instance. This extra time allows you the ability to walk away since you won’t technically lose anything at that moment.
Your willingness to walk away from a deal will also put pressure on the other side to change their initial offer if they have a need to close a deal immediately.
About Scott Crockett
Scott Crockett is the founder and CEO of Everest Business Funding. He is a seasoned professional with 20 years of experience in the finance industry. Mr. Crockett’s track record includes raising more than $250 million in capital and creating thousands of jobs. Scott has founded, built, and managed several finance companies in the consumer and commercial finance sectors.