Secrets of successful negotiation
Article Date: Oct 09 2007Running a successful company requires negotiating prowess. When it comes to getting the best deal, ensure you’re not letting yourself down, writes Michael Jackson.
I have an admission to make – I am a lousy negotiator. Yes, I’ve been on training courses. No, they haven’t worked. When it comes to protracted, drawn-out discussions, I still fall short.
But I’ve found a neat solution over the years: I get other people to negotiate on my behalf.
When the stakes are high, negotiations will be a test of both your wits and your willpower. Now, while I may not be able to practise what I preach, I think I’ve learnt to spot what makes a good negotiator.
Use time to your benefit
Anyone who has done business in the Far East, particularly China, will vouch for how long it can take to do deals. Often a simple agreement can take three days to go through. There are lots of pleasantries and you move at a snail’s pace before you reach the nitty-gritty.
If you’re impatient, like me, you will often give a series of concessions because you want to move. That’s a big mistake. If you’re running to a tight schedule then try to get someone who has the time to go through the finer details to help you – someone who recognises that you must be patient and rigorously argue every point.
Information is key
During an exit, an adviser will provide a long list of comparable deals in order to benchmark price. Facts and figures, however, will not be the only factors that come into play when negotiations begin.
You’ll need to step back, be objective and try your best to view things from the other side of the table. For example, if the seller doesn’t strike a deal with you, what options do they have? How desperate are they? Is there a hefty divorce that needs to be settled sooner rather than later? Where are the weaknesses? Who are the key decision-makers and what drives them?
Never assume you know what drives the other party. It may sound trite, but make sure you learn their genuine motives, however obvious you think they are.
Don’t fall into the trap of thinking that every deal is about price. Clearly, you have to be in the ballpark, but many, many deals are done because someone wants to do business with a particular person or company.
Set expectations early
Of course, the issue of price still needs to be raised. I’ve been to numerous meetings to acquire companies in which the financials were skipped over as though it was impolite to mention them.
It is vital to set a price on a deal at the first meeting. Any other key issues like staff – who goes, who stays – and the like are equally important to tackle early in the game. If you don’t get these out of the way, you waste a lot of time negotiating a deal when you never really had one to start with.
This doesn’t mean the price you set is the one you will settle on, but it establishes reference points, making it clear whether the deal is achievable or just pie in the sky.
Fools rush in
In many ways, I can be my own worst enemy. If I see what I want, I want it there and then. I’m too impatient to sit back and wait, which can be dangerous.
If you’re like me, use someone else you trust and let them establish the price and conditions. When they’ve been established, you give your input.
This gives you a couple of advantages. First, you’re not going to rashly agree to something that you might regret the minute you’re outside the boardroom. Second, you can always come back and change the terms without losing face.
If you know the deal is going through and you’ve got the upper hand, it can be useful to stall, leaving certain ambiguities to hang in the air. This cranks up the tension and can force the opposition to, perhaps, make additional concessions to bring discussions to a close.
Negotiation is a key business and personal skill – neglect it at your peril.
