Cash flow is tight and small business financing is increasingly hard to come by without paying a high price. To ensure positive cash management, small business owners renegotiate more favorable terms on their contracts with suppliers, bankers, and landlords.
And most of them are willing to do it in exchange for ongoing businesses.
One of the more effective ways to reduce fixed costs is renegotiating pricey real estate and office leases. With an agreement to extend a lease — ensuring longer-term business for the landlord — property owners may be amenable to reduced rent. However, be prepared to haggle and to compromise.
Regions with trouble in the commercial real estate market may provide office occupants with the upper hand in negotiations. A high vacancy rate in an office market may translate into a shorter lease term or several months of free rent.
Small business negotiations tend to move faster than it does for large corporations. There’s no group of decision-makers meeting up multiple times until they come to agreement and sign the contract. They’re also more informal as the negotiation process can occur by email or a phone call.
Here are eight negotiation tactics to help you come out ahead.
1. Do research.
Knowledge is power. Learn about the topic of the negotiation. Find out standard rates and what would drive the price up or down. Research helps you nail down the features you need and the ones that mean little to you.
Let’s say you’re shopping for a vehicle. You probably have an idea of what you want: an SUV, sedan, sports car, or truck. After you make a short list of the models, you research them to learn the strengths and weaknesses of each as well as their standard features and options. You check vehicle reviews and safety records.
Several dealerships may carry the vehicle you want. Look into their background, customer service history, and reputation.
Like shopping for a car, delve into the providers’ backgrounds and get answers to the following questions. What’s their reputation? How long have they been in business? What kind of reviews do they have? What past issues have popped up that need addressing?
2. Make a list of your requirements and concessions.
Vehicles have many features that we’d all love to have. But most of us have to draw the line somewhere or else the price climbs beyond what we can afford.
Most drivers require climate control so they don’t burn up in the summer or freeze in the winter. But do they need dual-zone climate control that allows the driver and passenger manage their own controls? For some, it’s a nice to have not a must-have.
When you make a list of your requirements, sort them from most to least important. It’ll help you decide where to make concessions and what to push on.
3. Know who has the power to approve the deal.
Car sales people don’t always have the power to approve things that come up in negotiations. They talk to their manager leaving the customers to wait. The time adds up if there’s a lot of back and forth. Try to save time by setting up a meeting with the decision maker who has the power to approve and make concessions.
However, it’s not always possible to negotiate with the person who can approve the deal. To prevent a situation that puts you at a disadvantage, determine whether the person you’re meeting has any kind of decision-making power. You want to avoid thinking you’ve made a deal when you still have one more barrier to overcome.
4. Stay friendly and positive.
After completing or walking away from negotiations, keep the tone friendly. It could be a long-term relationship or you might do business with each other again. They could become a referral source for your business. The more personable you are, the better chance you have to arriving at an agreement that satisfies everyone.
Share personal things about yourself, your interests, and your family. Encourage the others to do the same. Get to know each other. People do business with folks they like.
5. Listen closely.
“Most people do not listen with the intent to understand; they listen with the intent to reply,” Stephen R. Covey said. While the other person is talking, focus on listening rather than thinking about your response. Watch for body language.
Don’t be in a hurry to respond when they stop talking. They may talk more to fill in the silence. You’re more likely to identify what they want. When you do, you can help get them there while they agree to your requests as explained in the next item.
6. Identify both side’s needs.
If you’re purchasing something, getting the highest price may not be the first thing on the other side’s list. Listening aids in figuring out what the other party wants. As you pick up details, ask probing questions to find out what’s included in the terms and price. If a lower price is important, request cutting options or an alternative.
To use the vehicle analogy, a far more affordable Chevy or Honda might fit the ticket instead of a pricey Bentley or Rolls-Royce. Or an alternative like a bicycle will suffice.
Remember the list of requirements and concessions? Keep those close and reveal them one at a time, at the right time. Disclosing too much, too soon weakens your negotiating position. And avoid using “between” as in “I can do this for between $22k and 25k.” This concedes without getting anything in return.
7. Prevent deal fatigue.
Sometimes negotiations drag as both parties try to give and get. To put an end to it, one side may want to close too soon. Unfortunately, this puts them at a disadvantage. Don’t fold simply to close the deal. If timing is an issue, set up a situation to compel the other party to agree faster.
Walk away from negotiations when stalled or you feel pressured. It’s hard to resist when you want to get it done. But no deal is better than a bad deal.
8. Get it in writing ASAP.
Getting it in writing doesn’t have to be a signed contract. A signed deal can take time, so you want to capture all the key points in writing as protection. A simple email will suffice. It helps prevent one party from making changes.
In buying a vehicle, you may need a few days to take care of the financing. Ask the sales person to document your discussions and sign off on it. That way no surprises pop up when you’re ready to fill the official paperwork and set up financing.
Doing these eight tactics for negotiations will ensure you walk away with the best deal. A little legwork saves a lot of time, money, and frustration.
Image credit: Wisimonki, own work, CC BY-SA 3.0