Negotiation Business

I Got A Better Deal - The Art Of Negotiation

2011-09-09T10:34:00.000-07:00

A good business person needs good strategies for negotiating a better deal when making transactions, regardless of which side of the bargaining table you are on. We all want to learn how to be more successful, and one of those ways is by negotiating a better deal in financial matters. This skill is necessary in order to be a success in life or business. Negotiation skills can make or break you in any deal, so it is important to understand how to use this art and skill effectively.

I am offering 4 tips to negotiating a better deal, which is one where both parties feel happy about the situation and felt they got most or all of what they wanted. It is possible for both sides to feel as if they accomplished something, without anyone being hurt. These strategies could be used to negotiate a better price on a new car, home, boat, close a sale, or get a new salary.

4 Tips To Negotiating A Better Deal

#1: Let Them Do The Talking
If you let them open the negotiations, you will able to let the other party set the opening bid. Why? Think about this scenario: you find an item you wish to purchase through a classified ad, and the item is listed as "Make Offer". You arrive to have a look at it, and think it is worth $500 to you. You ask what the other party would like to get for the item, and they say "around $350". Had you offered $500 right away, you would have lost $150. This way, you can probably negotiate the item down to $300 or $325, and get a bargain, and the other party is fairly happy as well. If they start the bidding too low, or too high, depending on which end of the sale you are on, you will also know what they had in mind for the final price, which gives you a chance to work with that or end it earlier. It is important to know what they want, and what you want, and get as close as possible to a solid middle ground, which can be done using this technique.

#2. Don't Let Your Ego Win
Negotiating a deal should be a win for both parties, at least in their own minds. If you let your ego run the show, you will most likely lose. Turn this around, and let their ego win. Let them know that they are great at negotiations, as many people take pride in their negotiating skills. Give them kudos for their skills, and let them feel better about themselves. Use this to your advantage, and let them think they are winning. They will be more willing to concede a point or two in your favor if they feel they are 'winning'.

#3. Information Is Your Friend
If you don't know a lot about what you are negotiating, you will likely lose. When buying a car, knowing the price listed on the web and at other dealers will certainly work in your favor. If you are trying to negotiate a job, know what the going rate is in your region. If you don't know what you are talking about, you cannot come from a position of strength. Knowledge is power, and power is money, so if you have one, you can get the other. Without knowledge or power, you will lose.

#4. Be Ready To Give And Take
If you are not willing to concede on any points, you have no bargaining power. In a job negotiation, or any negotiation for that matter, you should throw in some points that you don't really want, so you can concede them during the negotiating process. If you do get them, then that is a bonus, but if you have to sacrifice them, you really won't care much. This can be a key point in negotiating a good deal - make sure you ask for more than you want, then give in until you get what you wanted to begin with or slightly more. This enables both parties to feel as if they have won. For example, in a job negotiation, tell them you also want your own dedicated parking space, or something similar. Then if the other party balks at that, let it go in favor of something else, and you won't have to give up something you really wanted.

Why The Standard Answer Can Help A Negotiator Close The Deal

2011-08-19T10:33:00.000-07:00

Magical mind control powers. That's what every sales negotiator would like to have. The ability to bend the other side of the table's mind to your way of thinking would be the set of negotiation styles or negotiating techniques that would make life*so much easier. Sadly, I don't believe that such powers exist. However, there is something that comes pretty close - standards.

What Standards Are And Where You Can Find Them

So right off the bat I guess we should tackle the big question: just what the heck is a "standard?" Standards are documented ways of going about doing something that were created by someone else. Note that I didn't say that a standard is recognized as an official source by anyone in particular nor did I say that it was created by a person who is well regarded in a particular field. Don't worry, using standards is still a part of conducting a principled negotiation!

A standard is simply that: documentation about something. The important thing from your point of view is that during a negotiation when you introduce a standard into the discussion that both sides start to treat the standard as the ultimate source of information. Using standards should almost be considered part of the negotiation definition.

If you are preparing for a negotiation and you find that there is no existing standard that will support your position, then it may be time for you to create your own standard. Even if you don't create the standard, you can at least have someone within your company create it for you. Remember that who creates a standard doesn't really matter, it's just the simple fact that the standard exists that gives it its power.

How To Use Standards To Get Your Way In A Negotiation

Once you have the standards that you're going to need in order to conduct a successful negotiation, you need to understand how to use them as part of the negotiation process. The real power from a standard comes from the fact that it now equips you with legitimacy.

During the negotiations you can refer to the standards and say things like "I've got to stay within these standards, that's what my management has told me to do." The other side of the table might not like this, but what can they do?

Just by having a standard, you can make it easier for the other side to agree to go along with the proposals that you are making. The standards provide you with an air of legitimacy and they help to guide the other side to reaching the decision that you really want them to make.

What All Of This Means For You

As a negotiator you are always looking for new ways to gain legitimacy in the eyes of the other side of the table. You really want to find ways to make your way of seeing the world their way too so that a negotiated deal is that much easier to reach.

Standards that you bring to the table can provide you with the support that you are looking for. These standards don't have to be fancy internationally recognized standards. Standards that have been developed by your company (perhaps just for this negotiation!) often have as much weight. Simply by having a standard, you can reduce the amount of push-back that the other side will give to your proposals.

Take the time to plan your next negotiation. Look for ways to boost your position by the introduction of one or more standards. When the time is right, bring them to the table and defer to them. You may be amazed at just how powerful the right standard at the right time can be!

Small Business Negotiation Strategies and Commercial Lenders

2011-08-17T10:32:00.000-07:00

There is possibly no better example of underutilized small business negotiation strategies than the general lack of solid negotiating practices when most business owners are working with commercial lenders. This observation is not only applicable for recent circumstances but also when looking at the past five decades or so. What has made the situation more actionable and critical for commercial borrowers is the chaotic economic climate that has resulted in a series of negative events for commercial banks and other lending sources. In short, a bad situation has been made worse because of complex factors such as shrinking bank assets, reduced sales activity and decreasing real estate values.

Whether analyzing small business communications in general or commercial lender negotiations in particular, any business owner will probably readily admit that they would like to be able to devote more efforts to improving both management functions. However as any manager must do constantly, time and financial resources need to be juggled and allocated according to a wide variety of practical considerations. It is unfortunately not as simple as realizing that there is a problem. Instead the problems will need to be prioritized, and small business solutions will be implemented in accordance with the realistic priorities that prevail for each unique situation.

Prioritizing and managing tasks and problems is realistically the first order of business for developing successful negotiation strategies to deal with commercial lenders. For example, it can be relatively pointless to assign the top priority to negotiating a new working capital management agreement with a bank (or other financing source) if that means other critical functions will be ignored for any substantial time period. When business owners begin to reflect about the delicate balance that prevails within each of their time management scenarios as part of a candid assessment of what to do first (and what can wait until last) and how much time to devote to any given activity, it often helps them to realize that they might indeed need some external help to get through their particular set of obstacles.

The prioritization process can also help point businesses in the right direction in the way that it generally illustrates just how unique management and financial problems are for each circumstance. The unmistakable (and transferable) lesson to be learned from that particular realization is that the most appropriate strategies for commercial lender negotiations will almost surely vary widely from one business situation to another. This lack of a constant formula for business lender negotiating will make the path to practical communications solutions more challenging because the realistic business negotiation strategies likely to be most successful in dealings with commercial lenders will need to be evaluated within the unique context of each borrower.

Hotel Negotiating Is In The Details

2011-08-12T10:32:00.000-07:00

The true measure of the degree of success of negotiations with hotels regarding events, conferences and conventions, is often measured in the depth of the negotiations, and assuring that as many details as possible are anticipated and negotiated in advance. In my over three decades as a professional event planner and negotiator, I have discovered that organizations that prepare in advance, understand their needs, articulate them fully up- front to the hotels, and have negotiators that maintain their integrity at all times, invariably get the best long- term results. Many inexperienced negotiators do not understand the need to prioritize their needs, and often fail to consider many aspects that will have potential impacts on the success and viability of the event. When having discussions with hotels, some of the items that need to be thought about and negotiated, include: guest rooms; food and beverage; audio visual needs/ requirements; service charges/fees; comps; and priorities. In addition, when negotiating, it is essential to use a win- win philosophy, so as to maximize the results for all concerned.

1. Will this event require securing guest rooms? Will the organization pay for these rooms, or the attendees? What is a realistic expectation for hotel nights usage? Has the negotiator fully considered the ramifications of certain attrition policies, and minimized these ramifications by prioritizing the negotiating down of, or elimination of, attrition requirements/ penalties? If attendees are paying for their own rooms, what is the price point that must be addressed?

2. How much food and beverage is the conference providing for attendees? What are the needs of the organization and its attendees? How are these functions being paid for, as part of the registration fee to attend the conference (if any), by the organization completely, or as a paid option available for attendees? What are the expectations? There are many methods available for reducing food and beverage costs, while maintaining perceived value, but it generally requires a carefully designed balancing act, as well as expert negotiations, combined with organizers willing to think outside the box to achieve optimum results.

3. What are the audio- visual requirements for this event? This is an area that perhaps is the biggest budget breaker when organizations do not adequately understand and negotiate to meet their needs. Many inexperienced conference planners become awe- struck, when they realize what hotel audio- visual departments are going to charge. The best example is when a group negotiates complimentary microphones, but does not realize that there will be charges for the hook up, amplification, labor, etc. All of these types of needs should be pre- negotiated in as much detail as possible.

4. How much are the service charges? Many people expect ten to fifteen percent, and are astonished when they discover that some hotels charge as much as 24%, or even more. Is the group sales tax exempt in a state that permits sales tax exemptions (while many do, California, for example, rarely permits sales tax exemptions). Organizations that are eligible must plan to have the necessary sales tax exemption paperwork in place prior to the event. Regarding service charges, it is important to find out if there is any flexibility (rare), as well as what is covered by the service charge, and what services are exempt from service charge implementation.

5. What "comps" (complimentary) are going to be needed? Who receives this (for example, speakers, organizers, officers, invited guests), and what is going to offered free? Organizations must have a clearly defined policy in place in this area. Will the hotel offer some sort of accommodations to assist the organization address this area? True expert negotiators put everything on the table during the negotiations. There will always be more flexibility from a hotel at the negotiating stage, than after the contract is in place.

6. What are the groups priorities? What is the greatest need, and the biggest concern? Be sure to address these during negotiations.

What has always astonished me, when working with organizations to assist in their events, is how many of those in decision- making leadership position seem to feel that there is no need to address all these details at the beginning. They seem to feel that the organizers should be allowed to do these things later. This is perhaps one of the costliest errors, in terms of money, resources, and result, that far too many groups seem to make!

Negotiating In France and Korea: It's Like A Whole Different World

2011-08-08T10:31:00.000-07:00

Got a great email from reader Nadir Benouali the other evening. Nadir has a fantastic set of negotiating experiences and was willing to share them. Nadir is a US citizen of Algerian origin, and speaks Arabic, Spanish, and French. He has spent the last 20 years negotiating business around the world which provided exposure to all of the differences that the world has to offer.

Negotiating In France

Nadir tells the following story about negotiating in France.

"While in Paris, France our distributor took us to a wonderful local restaurant serving "une restauration du terroir" an authentic French cuisine indeed. The next day my French distributor wanted me to ask my boss about his experience in that restaurant. To my dismay, my boss told me how it was the worst meal he ever had, and how that evening he called a cab to take him to Burger King on the Champs Elysées! I almost had a heart attack. I told my French distributor in French how my boss will never forget that experience (I never lied)."

Nadir says that the French negotiation skills are indeed different than ours for one simple and so important reason. They think and act philosophically! Americans think and act mathematically!

He goes on to explain: the French educational system is based on elaborate essays whether in science, math or otherwise. A French student must explain his reasoning. An American student answers multiple choice questions, and he is allowed one hour during his exam whereas the French student is allowed between two and four hours.

History plays a role in French everyday life. The French still feel the effects of Montesquieu, Voltaire and Rousseau. Therefore when negotiating with the French an American should expect a debate rather than a yes or no process.

The French mind and psyche carries a social spirit. Not socialist, but social! They view wealth as a Marie Antoinette syndrome, and tend to favor a middle class approach to business. This view is shared among most small to medium companies whereas the elite French corporations like Loreal, Channel, Michelin etc. not only never share information about their wealth publicly, but also act as royals in private. Nadir believes that the spirit of Louis XVI is still alive.

Negotiating in Korea

Nadir went on to tell stories about negotiating in Korea. Needless to say, it was completely different from his experiences of negotiating in France. Here's what he had to say.

"In Korea my distributor humiliated my boss by telling him how I was better than him. I knew the reason for such a comment came from the fact that I knew well the history of South Korea, its sacrifices and today's rewards and achievements. Also that I shared my enthusiasm for his country.

Nadir said that "His key motivation for offering me this complement was that I had helped him achieve more than he had expected. He had been able to gain the respect of his largest customer because I had understood the expectation of this customer."

Nadir had been able to offer a solution in a form of a consultative selling which had nothing to do directly with his product. Therefore, he created a need for his company's product in the eyes of his distributor and it took only 5 minutes to turn all the negotiations on prices, products and orders into a real winning recipe for Nadir's company.

Nadir believes that Asians, whether Koreans, Japanese or Chinese, uphold respect from their customer or boss as the pinnacle of their professional achievement. He uses this "sweet spot" to his advantage by anticipating what would the big bosses want their employee to achieve with him or what would their large customers want and expect from them.

Nadir offers the solution in front of either the big boss or their respected customer, and enjoys watching his distributor get approval. From that moment he not only get the respect he needs, but he can also impose a specific product at a specific price that he was able to explain to their largest customer, and who was enthusiastic about.

What All Of This Means For You

Nadir's stories drive home a key point that all sales negotiators need to remember. Negotiations are different in every country. Everyone has different negotiation styles and different negotiating techniques.

Nadir's examples pulled from experiences in France and Korea show that much more than a knowledge of what is being negotiated is needed. A knowledge of the culture and how respect is earned and shown is needed in order to be able to conduct a successful sales negotiation.

It's stories like the ones that Nadir has shared with us that make us aware that even though the world that we live in is growing smaller, we are all still different. In order to be able to successfully reach a deal during a negotiation, we all need to be able to understand and work with a variety of other cultures.

Sales Negotiators Need To Know How To Use Regulations And Laws To Reach A Deal

2011-08-05T10:30:00.000-07:00

I can only speak for myself, but when I'm headed into a negotiation I like to have as much freedom to do things as possible. That's why I tend to shudder when I discover that there are regulations or even laws that are going to impact the negotiations. However, maybe I'm not looking at the complete picture.

How Regulations And Laws Can Harm A Negotiation

When we enter a negotiation, one of the things that we need to know even before we sit down is just exactly who is in the room? Sure there are the people who are physically there, but are there requirements and restrictions placed on either side of the table by others? This can have a big impact on the negotiation styles and the negotiating techniques that we can use.

When regulations and laws get involved, that negotiating room can get pretty crowded, pretty quickly. When we have to negotiate with these kinds of restrictions, all of a sudden our options start to narrow. I for one start to fell*rather constrained. The negotiation definition is altered in these negotiating situations.

One of the biggest challenges that I've encountered to conducting principled negotiation is when the laws that you are negotiating under require you to reveal more information to the other side than you normally would. This tends to screw up the whole negotiation process for me. A great example of this is when you are negotiating with the government - after all, they get to make up the laws. Often times you'll find that you are required to reveal elements of your product or services' costs that you normally would not share with the other side of the table. Ouch!

How Regulations And Laws Can Help A Negotiation

Having regulations and laws come and sit at the negotiating table with you is not always a bad thing. If it turns out that they are working for you, then this can actually be a good thing.

The key here is to do your homework before you start any negotiation. What you need to be looking for are those regulations, statutes, rules or laws that support your negotiating position. The more of these that you are able to find, the easier it is going to be to get the other side to come around to agreeing with your position.

In addition to helping you with the other side of the table, regulations and laws can help you better manage your own company. When others in your company see the constraints that you are operating under, they will be more likely to put their support behind your negotiating positions and provide you with the support that you'll need to be successful.

What All Of This Means For You

Negotiations can be tricky to do well. When regulations and laws get involved, things can become a great deal more challenging. Sales negotiators need to understand how to work in these situations.

These conditions can require that a negotiator reveal more to the other side of the table than they normally would. It's very important to take the time to understand just exactly what the regulations require you as a negotiator to do.

Depending on exactly what the restrictions are, they can work in your favor. If they limit the other side of the table's options, then it may become easier for the other side to agree to your requests and reach the deal that you wanted to have negotiated. In the end, that may make it worth all of the extra effort that these restrictions require.

Out Licensing and the Effect on New Product Development

2011-07-08T10:29:00.000-07:00

For long, in-licensing used to be the order of deals in bio-pharmaceutical partnerships and pharmaceutical licensing. However, many players in the sector are now considering out-licensing as a way to enhance product development for new drugs. Out licensing has a number of impacts in the pharmaceutical industry especially as a far as forecasting is concerned. This article looks at a number of these effects.

First of all, there is the effect of increased revenue brought about by partnerships in development of programs and products. This because partnering with other players has the effect of widening the market reach and consequently consolidating the gains made in such markets. This advantage has been witnessed in the industry with some partnerships recording big percentages in profit increase margins for the involved parties.

At the onset of the out-house partnerships craze in 2008, most pharmaceutical companies that entered into partnerships had their products at the initial stages of development, either the Early Stage, Preclinical Stage or Phase I. The growth in revenue for these companies therefore depicts the potential with out-licensing.

Secondly is the effect of outsourcing research in the development of new products. The challenge with in-house licenses is that they limit or slow down the pharmaceutical company's potential in research projects. Research outsourcing has greatly contributed to the "disintegration" of the drug industry worldwide and this has liberated some companies that were financially incapacitated. As such, some of the difficult research stages can be left out to the firms with bigger financial muscles while the other partner handles other lighter aspects like clinical trials of the new products at later stages and marketing research for the same. In simpler terms, there is enhanced division of labour in research work.

However, on the flip side of outsourcing research is that the partners normally have to cede some ground, and in that way they lose some grip on the take in the new product proceeds. Out licensing can sometimes be tricky if it isn't well balanced. There should be clear details on what assets are being sold out, what are the new product development goals, and what are the payment terms of this pharmaceutical licensing arrangement.

Last but not least is the effect of risk sharing between the partners involved in development of new products. This in turn increases the success rate of the new product, as compared to in-house development where if the pharmaceutical company fails to shoulder the risk, then the entire project crumples.

SBA Default and Disaster Loans

2011-07-02T10:28:00.000-07:00

Every time my phone rings, I take a quick glance at my caller ID to see what state the call is coming from. I am almost always excited to find out about the callers situation, and how I might be able to help. But there is one exception: when the call comes from Louisiana. Do I dislike the state of Louisiana? No, of course not. But I do tend to sigh when I get a call from the Big Easy, and the reason is simple: many SBA disaster loans were issued after Hurricane Katrina to Louisiana residents.

In a nutshell, these loans are really, really, really, really, really difficult to settle. And this is why I don't like getting calls from Louisiana. I get 2 to 3 calls per week from someone with a disaster loan who is struggling to pay them, and in most cases I turn those people away. Believe me, I'd love to help, but these loans tend to not to be conducive to settlements for a few reasons:

1) They Are Almost Always Secured With Homes. In cases where your home has equity in it that is sufficient to cover your debt, there is no chance that the SBA will settle the debt. The logic is simple: if they can foreclose on you and get all their money back, there is no reason to settle.

2) Loan Terms are Generous To Begin With. Most SBA disaster loans are offer very low interest rates over a long period of time (usually 30 years), so when things go wrong, there is not much that can be done to help. If your payment is $150 per month, and you are struggling to make that payment, it's likely that payment at any level would be onerous.

3) These Loans Are Typically Issued To Individuals. As a result of going to people who had scarce resources to begin with, asking a person to raise a material sum of cash to settle a disaster loan is always a tall order. If you owe $30,000 and can't afford a $300 per month payment, it's likely that you don't have access to enough cash to make a lump sum settlement offer. In other words, since most disaster loan borrowers have limited financial resources, the chances of raising enough of lump sum to settle are limited as well.

4) The "Powers That Be" Are Arbitrary. More than any other area of the SBA, I've found that the SBA Disaster Loan folks rely less on the facts and more on arbitrary thresholds. Unlike the SBA business loan settlements, which heavily consider a person's financial situation, the Disaster Loan people basically say "we don't care that you can only afford $1,000, we want you to pay $10,000". For this reason alone, many disaster loans never have a chance to settle.