All business owners face the issue of negotiation in leading their companies. Depending on the task at hand, they alternate roles – sometimes selling, other times buying. Either way, the goal remains the same: obtain the best agreement possible with the most favorable terms.
Experts at K&R Negotiation Associates, a team of professional negotiators serving Fortune 200 companies around the world, teach principles to create winning conditions. They stress the acronym M.O.R.E. Prepare by gathering information about what Motivates the person with whom you are negotiating; know his Objectives (what he hopes to gain); address Requirements (how his goals will be attained); and then leverage that information for an Edge. Click here to learn more about M.O.R.E.)
Consider this in practice. When in discussions about selling goods or services, a business owner might learn the prospect requires a tight turnaround. Showing the prospect that his company has a reliable track record of on-time delivery will provide an advantage. The assurance of being able to quickly deliver a product or service can then win the negotiation – i.e., the order — for the business owner.
The same principle applies when the business owner is the buyer. Knowing how eager the seller is to move merchandise will position the owner to make a better deal. Is the salesperson working on commission? Is there an incentive to close the order before the end of month at a lower price to meet quota? The business owner should evaluate the seller’s situation. Buyers also must determine in advance what concessions they are willing to make and what alternatives are available if they were to walk away from the deal. Having a game plan instills confidence in the buyer and improves the odds of negotiating success.
Here are a few negotiation tips for buyers of common business needs:
Purchasing supplies. Whether a company is negotiating for business stationery or components for the product it manufactures, ask the supplier about quantity discounts. If the need repeats regularly, the offer to establish the supplier as a preferred vendor may lock in a better price for a contractual term. In turn, suppliers may place a valued buyer on a preferred customer list, which can yield additional perks. Ask about seasonal discounts as well. Some vendors reward customers for ordering during their least busy seasons.
Contracting for technology. Business owners shouldn’t be shy about contacting their Internet Service Provider (ISP) to reduce monthly costs. Once the special rate for the first few months of service has lapsed, an extension can be granted, particularly if a contract has expired. Let the ISP know service options are up for review. Mention special deals from competitors. Offer a longer length of contract for a better monthly rate, or seek discounts for bundled services (e.g., packaging Internet, phone and cable together).
Leasing office space. Due diligence is key. Check going rates for comparable spaces before negotiating. What is the occupancy rate and/or for how long has a property sat empty? Visit other business owners in the area and ask what they are paying. When you’re ready to discuss terms of the lease with the landlord, know that a long-term lease usually means lower rent for a predictable period, but a short-term lease (1 to 2 years) with an option to renew may be a better option. Caron Beesley, a small business expert and community moderator, works with the SBA.gov team to promote government resources that help entrepreneurs and small business owners start-up, grow and succeed. In the blog post 6 Tips for Negotiating a Commercial Lease Without Getting Burned she explains that a short-term lease ensures flexibility if a location doesn’t pan out. A cap on the amount of each year’s rent increase can also be negotiated. Clarify who pays for utilities, repairs/maintenance, taxes and insurance. A gross lease includes such expenses and can save money over time.
I hope you find this newsletter helpful. Please feel free to share with your colleagues. Also keep in mind that I’m available to help businesses in need of growth capital and welcome your referrals. For additional information about our services, call me or email me.