7 Tips for Navigating Tricky Business Negotiations
Tips for Buying or Selling, Negotiating Contracts
Business negotiations are always tricky, because humans are involved, and humans have egos, emotions, and expectations about money, power, and position.
I've been involved in negotiations to buy a business, in union negotiations, and in employment contract negotiations (from both sides). I've learned (the hard way, mostly) what to do and what not to do. Business negotiations involve contracts, which means legal documents that must be understood and agreed to by both parties. And, yes, attorneys will need to be involved. But there are ways to make the process less treacherous, by following some simple guidelines.
1. Be patient.
The contract negotiation process takes as long as it's going to take. Rushing will only cost you money and increase your stress. Everything about the negotiation process takes time, and it almost always takes more time than you think it will. In negotiating a business sale, for example, you may find negotiations stuck on a small detail like a lien that the business owes. It might involve research to see if the lien has been paid, and this takes time. Move on to something else and come back later.
Take a deep breath.
2. Curb your expectations.
Every negotiation is different—the people are different and the situation is different. What happened last time means nothing. Someone else's experience means nothing. Listening to other experiences may give you false expectations. Listen to the stories of others with caution.
A friend is selling her dental practice, that she has run for almost 40 years. She says navigating the process of selling a business is an entirely new experience. She said she has had to take a learning mind perspective and not think she knows everything.
3. Don't make assumptions about the other party.
Assume the best until you know the worst. Going into a conversation expecting that the other person is out to get you may cause you to act differently, and how you act may damage your position.
If you are negotiating the purchase of a business, it's important to know why the current owner is selling the business. Assuming that what the owner is telling you is correct may not be the best negotiating tactic. Sometimes you have to read between the lines and make sure you check out what the person is telling you.
4. Keep your emotions in check.
Some negotiations can get nasty. I remember being in a union negotiation as a member of the management team. The lead union negotiator said some pretty hurtful things about women in negotiations, and I reacted instantly. I was ready to respond when the lead negotiator put his hand gently on my arm, and I got the message: "Let it go."
Giving in to your emotions can lead to angry words and negotiations can break down quickly. Learn to take a deep breath, call for a recess, or concentrate on something other than the person who is making you emotional.
5. Do your research.
Understand the situation as best you can before you go into a negotiation. In negotiating to buy a business, see if you can find out the real reason the seller is selling. Doing your research also means knowing your options. What is the competition doing? What are comparable prices? Doing due diligence is an important part of the process; don't cut corners.
In negotiating with suppliers, for example, Logistics expert Gary Marion says you should do what he calls "sourcing," that is, comparison shopping, before attempting to negotiate a new contract with a supplier. Having the information will keep you from making assumptions about whether you are getting the best deal or not.
6. Consider compromise.
This isn't a zero-sum game, where one person wins and the other loses. Both parties can come out ahead. This is particularly true in salary negotiations. Penny Loretto, in a discussion of negotiating a salary increase, says,
At the end of negotiations you want both parties to feel that negotiations resulted in a win-win situation. You want to feel good about what you have negotiated or you may find yourself feeling resentful; but you also want the employer to feel that they were able to get an excellent employee for a fair wage and that the negotiations were of benefit to both parties.
7. Think out of the box.
in other words, think creatively. Explore new possibilities for getting what each party wants. If negotiations get stalled, take time off. Each side may need to cool off. Come back with the assumption that everyone wants this deal and encourage everyone to think about how to get it done. Remember, everything is negotiable.