Even in a world of online shopping and bureaucracy, there’s still a place for negotiation. While haggling in an open-air market might seem completely out of step with 2020s America, you’d be surprised by how many times, as a small business owner, you’ll discuss pricing or other factors in person. Often, this means that negotiation is both possible and preferable.
The Art of the Deal may have been a bestseller decades ago, but we’re still undoubtedly living in the wake of this mindset, for better or worse. It’s best to take advantage of negotiation possibilities for your company—because even if you aren’t, Big Business definitely is. Beyond just looking out for yourself, though, a tactful negotiation can actually be beneficial for all parties involved.
Why Is Negotiation a Vital Skill for Small Business Owners?
As a small business owner, every day is a negotiation. This is true even if you’re just negotiating with yourself—for example, asking yourself what will I spend my time on today?
There’s an element of negotiation in every sale you make or partnership you forge. Your small business exists in a wider economic network, so understanding negotiation tactics can help you improve your place in this network. Hopefully, as you grow, so will everyone connected to your business’s network, too.
In the most basic sense, though, every penny counts when you’re running a small company. Why leave any money on the table?
Who Will You Be Negotiating With?
You’ll be negotiating with essentially everyone you come across as a small business owner.
Some aspects can be seen as negotiations from the get-go: pricing items or meting out services involves negotiating with customers, even if you haven’t made a sale yet.
Beyond customers and clients, the other obvious group you’ll negotiate with is your employees.
However, you’ll find yourself negotiating in almost every area where money is involved in your business, including your vendors, landlords, potential lenders, utility companies, and government agencies. While the amount of wiggle room will vary greatly from organization to organization (don’t expect a lot of leeway from the IRS, for example), you should always be thinking about how to get the best deal possible—even if you aren’t facing the most optimal options.
Looking at every business interaction as a negotiation can help to ensure that you find solutions that work for everyone.
1. Do Your Research
Preparation is key for negotiation, and research plays a key role in opening a meeting ready to get the best possible outcome. Know the details of your business, the market, and your negotiation partner. Without data, you can’t actually know what a fair deal looks like for you. Spending a few minutes Googling, making phone calls, or talking to other people in your industry can save you lots of money. You’ll want to understand what outcome you should embrace, what you should avoid, and everything in between.
2. Have a Strategy
Along with doing your research, you should articulate a strategy before you enter any negotiation. What should be your opening bid? What do you expect your partner to counter with? Are there ways you can sweeten a deal beyond just cash? Just like how banks once offered a free toaster to new account holders, think about how a deal could be beneficial besides the price point. Having a strategy and goal in mind can also help you to stay flexible if you want to deviate—as long as you’re aware of your ideal outcomes.
3. Start High
Studies show that you want to start high when you open negotiations. Even if you think you’re asking for a steeper discount or a higher wage than you deserve, these higher numbers form an anchor figure that shapes the entire discussion. If you’ve done your research, you can back up your opening gambit with data. Because negotiations almost always end up in the middle between 2 parties, you want to start from your ideal position and move down from there.
4. Know What You’re Willing to Cede
Part of your research and strategy preparation should include listing what you’re willing to lose in a negotiation. There might be valueless or superficial elements that land first on the chopping block. Say a client will pay you extra to be available on weekends—if agreeing to this isn’t a big deal to you, it’s an easy detail to acquiesce. If cost is the only thing that matters to you, then you should entertain offers from various options knowing that the quality might vary.
5. Know Your BATNA
When heading into negotiations, you should always know your Best Alternative to a Negotiated Agreement, or BATNA. Your BATNA is your best plan in case your negotiation fails. Knowing it ahead of time helps you in 2 ways: first, you can present it as a way to strengthen your argument in a negotiation. BATNA also gives you a clear benchmark for knowing when to walk away from the table. Say you’re negotiating with a credit card company for a better interest rate and you’re aware of a card with similar benefits and a superior rate. This is your BATNA—and you can dangle your knowledge to get an even better rate if your credit card issuer wants to keep you as a customer.
6. Make It Succinct
A study published in the Journal of Applied Sciences found that you can often predict the outcome of a negotiation within its first 5 minutes. Therefore, you should pay attention to first impressions and make your argument as clear and quick as possible. Think of a fast way to articulate how you’re the solution to the problems of the other party, whether negotiating with a new customer or a longtime vendor.
7. Talk First
There’s some mysticism surrounding negotiation, and a lot of theorizing revolves around whether you should speak first or wait to hear what the other party has to say. Alongside the idea that you should make your argument quickly and succinctly, research suggests that speaking first puts you in the best position. It comes down to dropping an anchor—everyone else has to respond to what you put on the table at the outset.
8. Set a Ticking Clock
Creating a sense of urgency is an old-school negotiating technique that still works today: people leap at limited-time offers and weekly specials. Make sure to let other parties know that your best offer won’t be around forever. Don’t think of it as a gimmick—if you give a great offer to a potential client and they take months to get back to you, that’s time you could’ve spent pursuing other clients.
9. Ask Questions That Require More Than ‘Yes’ or ‘No’
Another vital sales technique involves how you ask questions. Humans are creatures of habit and are preconditioned to avoid change—we’re apt to say “no,” especially in a sales situation. Therefore, salespeople are often told to avoid questions that require a binary yes or no response. Instead of asking if someone wants to buy a product, ask what color of a product they want. Even on a more intellectual level, this can help you to guide a negotiation. Assume you’ll reach an outcome that will benefit all parties instead of going in with a simplistic yes-or-no mindset.
10. Surprise Them With Data
As part of your research process, gather hard data on the negotiation situation. It’s much harder to argue against numbers, so try to define everything with them—your product’s price is a great example, considering how much it’ll benefit your customer. You deserve a bulk discount from your vendor because they earn a sizable profit from your monthly order. Knowing the data strengthens your position because so much of business comes down to dollars and cents.
11. Have a Plan B
Hand in hand with your BATNA, you should always know what your options are, even in the most simplistic of negotiations. Don’t like how much your internet provider is charging? Tell them you’re aware of their competitors’ better rates. Remember that you always have the option to walk away from the table.
12. Watch Out for Hardball Tactics
You might come across some pretty ruthless negotiators, and there are certain hardball tactics that should make you wary. These include parties who make extreme demands and very limited concessions, people who obviously bluff and bluster, and the occasional negotiators who make threats. In most cases, you’ll probably want to walk away from these situations because the other party probably isn’t interested in reaching a serious offer. You’ll sometimes come across negotiators who try to play mind games with you by belittling your product or making personal insults to ruffle your wits. Don’t let it get to you—know your business’s worth, remember your alternatives, and don’t be afraid to leave the table.