Top three most effective negotiation tactics for small businesses
Tony Hughes, CEO at Huthwaite International, shares his advice using negotiation and communication skills to help your business go further.
It can feel like as a small business, you’re already on the back foot when it comes to negotiations, especially if you’re negotiating with a larger business.
A failed negotiation can be detrimental to a business; not only can it cost lost revenue, but it can also have a lasting impact on the continued success and dynamic of a team in terms of confidence and power when considering further negotiations. And unlike a larger business, small SMEs will not have a dedicated team to negotiate contracts. Most of the time it will fall on the new business team, sales team or even the Managing Director.
As such, it’s essential that businesses consider how these team members can be trained to ensure effective negotiating skills are a team strength, not a weakness. With this in mind, here are some imperative considerations for small businesses to consider before approaching any negotiation.
There are lots of reasons that businesses prefer to use small companies as suppliers. Smaller, family run businesses are often perceived as being more trustworthy.
Building a reputation as an honest business will automatically gain you the upper hand in negotiations. When people know they can trust you, you place yourself in a stronger position. Other professionals are more willing to negotiate when they trust that you will act in good faith. This means that when it comes to talking about the benefits and strengths of your product or business, you’re all the more convincing.
A little honesty can go a long way when negotiating. Plus, it will also help to strengthen longer lasting relationships in the long run. And all good business people know it’s easier and more cost effective to up-sell and repeat sell, than to constantly spend time seeking out new business leads or sales.
Prepare to compromise
Negotiations often come to be because one party or another isn’t happy with pre-agreed set terms. This can begin with a series of discussions on what you can and can’t offer. It could be as simple as a smaller price for an extended contract, or it could be far more complex.
When you walk into a meeting that will involve substantial amounts of negotiating, it is essential that you know what you can and can’t compromise on. In an ideal scenario, both parties should leave negotiations feeling happy with the final deal and that it is a mutually beneficial agreement.
Therefore, it makes sense that both parties should compromise as part of a successful negotiation. If you lack leverage and fail to show willing to compromise, it is likely to kill the deal that you’re looking to make.
You’ll still get a favourable deal if you choose to compromise, as long as you have a clear understanding of your own boundaries, whilst considering what the other party values in the relationship. Often giving a little in the short term, can lead to a valuable return in the long run.
Set the conditions
If possible, set the conditions of the negotiation. You have more power this way. Rather than asking the other party if something will work for them, provide options. You might be inclined to say, “Does Monday or Tuesday work for you?” You can gain the upper hand, though, by phrasing it this way: “I am available Thursday between 12pm and 3pm or Friday at 11am. Let me know what works best.”
It’s also possible to apply this to place. Choose a place that you feel comfortable with, if possible try to meet at your office. If the other party identifies a time, you can say, “Great. Let’s meet at this great restaurant near my office.”
You’ve set the conditions for the negotiations, and the other person is already acknowledging that you are in charge. It can be surprising to realise how much this subtle shift in power can work in your favour.
Of course each negotiation is unique, and so it is essential that you approach each opportunity to negotiate as if it were your first. Take time to really understand what it is you’re looking to achieve, but also invest time in learning what the business you’re dealing with values. This will allow you to gauge a true understanding of where the ‘wiggle room’ lies. When it comes to negotiating, the old saying ‘fail to prepare, and you should prepare to fail’ couldn’t be more relevant.
If you want to learn more about how Huthwaite International can help your team develop a highly effective negotiation strategy visit the Horizons hub, where you can find ground-breaking research and techniques on how to maximise negotiation and sales techniques for business success visit their website.