Negotiation is a key skill in business, a skill for every member of your team but especially when it comes to sales. This subtle art is something to be worked at; a skill to be practiced, braved, chanced and sometimes blagged for the best result. Being prepared, knowing your cost base and finding mutual benefits are all key when it comes to striking a deal that is beneficial for both parties. It’s about knowing what you can give and take, in what order and with what perceived value to the buyer. Stanford taught me a great deal but the best ever book is by Margaret A Neale.
When it comes to negotiation of any kind, the most important skill is listening. There is no point at all in attempting to negotiate a deal if you cannot listen to what the other person is telling you. You must be prepared and organised, and happy to walk away if the deal is wrong for you, but you must also listen to the other person calmly and respond accordingly. Empathy is a fantastic trait to take into a negotiation as it allows you to see the proposed deal from the other person’s perspective.
If your negotiation is not moving along productively, it’s important to be calm and clear headed enough to know when to stop and take a break. In America they call this “going to the balcony” and it just means stepping away to collect your thoughts before returning to begin again. In my case I have used breathing control and a lot of thinking time in advance of meetings and probably read more than many to try and become the really knowledgable expert in the field I am selling. I have learned the value of having a broad range of experiences, buying and trading on the Asian market, manufacturing knowledge, logistics competency and financial knowledge – all the deal terms and your position with the possibility of give and take. All of these things matter but more so does the impact they have on margins.
Bartering can come in many different forms and even the tiniest detail can make a difference when it comes to negotiations. Even something as seemingly inconsequential as the timing of a phone call can actually give a clear message that you are perhaps over desperate for an agreement – or that you are comfortable waiting, taking your time to mull it over, better still always have so much in your own growth pipeline that you have the luxury of selecting the right deal for the company you are growing at the time it needs it. An example of the deals that became more attractive as we push our financial boundaries are those that stack up with the right supplier credit terms and the right payment terms (in advance from any new export buyer.) At Pacific Direct this focus supported our fast growth acceleration when cash was exceptionally tight but we had great product.
All of your behaviour has an impact when it comes to negotiating. It conveys a great deal about your situation and your mood, and a skilled negotiator can and will use these tells (hints), against you if you seem to be in a rush to sign a deal.
When I am negotiating, my approach is often but not always very open. Remember there are styles for stages, and different methods for different equations. Sometimes I lay my cards on the table to begin with. In terms of the parameters of what I can and cannot do. I cannot say I hold nothing back. Fact finding before making any recommendation always in my experience gives you the amunition you will need. When we can go into detail, discussing the fit and nature of the deal, then you sense check and weigh up priorities and the critical needs of the customer. Always clarify timescales for delivery at the outset – you could be wasting each other’s time. For a deal to be successful, there should be a very clear win-win situation, where both parties must appreciate the merit of the offer on the table.
For example, when I was selling cosmetics in the hotel industry I understood that a big partnership with a major hotel chain would be fantastic exposure for my business. I didn’t hide this when it came to negotiating terms; instead I just put everything out there: this is what I think you need; this is what I can give you; this is what I want in return. It would have been foolish to pretend I wasn’t interested in having that big name to drop in other meetings. I believe that tip-toeing around an issue or pretending that something of value isn’t worth much will just turn people off and prevent you from making a mutually beneficial deal.
When I was winning in a licensing deal it was because I came across as the expert and I respected the possible brand partner and really put myself in their shoes. As I became more knowledgable and could deliver on possibilities of course I gained greater chips of value and better terms because we had a proven track record.
Of course, if you are going into negotiations you really need to have researched your target client – and then you will be able to walk into discussions already knowing their pain points. Now you are perfectly placed to demonstrate just how you and your product can soothe them. There is no need to over-embellish the opportunity or to make grand claims; just let them know that you are able to solve their problem, but solve it well with the right ambition to exceed expectations
Price should never be the only point of conversations. Of course it is likely that they will not like the price you have in mind, so you should sometimes but not always come prepared with options for different service levels in exchange for reducing costs. For example, can you offer a cheaper version without packaging? Can you cut costs by making mixed deliveries rather than delivering on individual pallets? You must be on top of what your business costs are so that you can give lower pricing options to your potential client while still making a profit for your business. Can you extend the contract term; can the customer introduce you to further growth opportuntiies; is there room for better payment terms or could they collect goods and does that perhaps suit the client? Can you change the packaging; can you change the pack size and reduce waste; can you reduce the product size, amend labelling, even re-tool the shape of a soap to use and waste less soap so that it still looks the same but then you can meet the price required and everyone is happy.
I find it amazing how rarely people do this. Knowldge is indeed power. There is no point in going into a negotiation with one fixed price point in mind; what is there to negotiate in that case? A single offer is always a matrix of several different components that should be adjustable to fit your customer’s appetite. It is absolutely vital to understand all of your costs and whether it is possible to move them up and down in order to strike a deal. The better you know your service costs, the inmapct and stability of these (Are they fixed / do you have currency risk / bank charges, hidden set up fees, is the customer going to ask for a head office royalty payment?) the better your negotiations will be.
The majority of sales is really just common sense, and negotiation is just a trade like any other. Where most people fall down is that they don’t have all the information to hand so they are unable to approach a negotiation in an ordered and intelligent way. Always know which aspects of your deal are set in stone and which you can move around a little. You can then negotiate on the basis of give and take.
Perhaps the most important part of negotiating is understanding the personality of the person with whom you are negotiating and their actual neds and influence in the heirarchy of the decision making. Most people would assume that you should “wine and dine” a prospect and do a lot of entertaining but for those working in the hospitality industry that is something of a busman’s holiday. If they already work in catering, do they really want to sit in another restaurant for another conversation? In my experience the last thing anyone in hospitality wants is more hospitality – so I would just say honestly, “let’s just have a meeting and then we can all get home early” – something everyone appreciates, especially these days! It’s about reading your customer and gauging how they want to work.
In my view anyone working for a business, from the receptionist to the board members, should be able to negotiate. We all do it every day, even if we don’t necessarily realise it. People should always feel empowered to say no, and to walk away from a bad deal. Do your accounts team know they should push for better terms; do your buying team review the volume of raw materials you purchase; do you re-negotiate bank rates as you grow?
Nine years ago when I sold Pacific Direct I learned possibly my most important lesson in negotiation. We had made an agreement in principle and were about to go through the due diligence phase, but in that first meeting it became clear to me that the venture capital company I was selling to would soon renege on the agreed terms. I walked away from the largest sum of money I had seen in my life until that point. You might think me mad, but the alternative was to lose all integrity and credibility, accepting their moving the goalposts. I stuck to my guns and in the process was able to negotiate a good result that benefited everyone involved.