When entrepreneurs start their business ventures, they are known to seek for the best quality at the lowest price; a habit that sticks with them no matter how much wealth they accumulate along the way.
There are many untold truths in business, like the fact that everything, at the right price, is on sale. The industrialist, Andrew Carnegie, wanted to hold on to his steel empire for as long as he could. When the renowned banker JP Morgan first approached him to buy the business, Carnegie refused, but Morgan kept coming back, until he presented a number that convinced Carnegie to let go and become the richest man around at that time.
During deal negotiations there is a magic number that the seller needs to hear before a transaction can be made. How you arrive at that number is a skill that every entrepreneur needs to master. The general rule is that a deal hinges on the price that the seller and buyer are both willing to agree on.
Do not be timid when making a business deal. It is important not to agree with the first price offered; it should rather be considered as a starting point of your negotiation. If you are selling, hike the price above what you are actually looking for to allow space for negotiation. If they agree to your first offer, you will get more than you had bargained for.
Another crucial aspect of your negotiation is whether you go into the discussion with a mentality of win-lose or win-win. The problem with win-lose, where you get everything you want and your counterpart gets less than they wanted, is it might be the last deal you will do with them. The problem with win-win, where both of you get something out of the deal, is the likelihood that some sort of compromise will have to be made.
Often the one who is willing to walk away from the deal is the one who ends up winning. It is also important to prepare before the negotiation – study everything you need to know about your counterpart.
As you start the discussion, establish a common interest with the other person; this brings a sense of ease and familiarity to the talks. According to research, those who go straight to the point have around 50% probability of success. Those who first discover shared interests have a 76% chance of success.
Once the friendliness is established, try not to show too much emotion in the negotiation room. Similar to a poker player, Asian business leaders like to apply this rule. Part of not showing emotion is not letting your counterpart detect that you are desperate; even if you are, never show it.
A useful tool for negotiating is leverage. It is your weapon to help sway decisions in your favor. It might be that you are the only provider of a particular product or service, you might have the most qualified personnel, the lowest price, the credibility of being profiled by leading media platforms, or have respected celebrities endorsing your product.
A mistake often made by entrepreneurs is not realizing when to stop convincing and when to start closing the deal. This can lead to overselling, and losing, the deal, or the deal will take an unnecessarily long time to close.
With entrepreneurship, this separates the best from the average. The most successful know when and how to close a deal, while leaving the details to lawyers, accountants and other colleagues. A deal can die by dwelling on too many technical details; unless they ask for it, only highlight what’s necessary.
Avoid childish techniques, like walking out of a meeting, creating uncomfortable silences, and intimidating the other party.
More than anything, always remember what you are trying to achieve. Every move you make, should be a step closer to getting you there.