This is the second of a two-part article adapted from a Jan 2011 INC. Magazine article of the same title.
Every business owner spends some time negotiating, whether it is with customers, suppliers, investors, or would-be employees. Most business owners are street smart, and seem to naturally perform well in negotiations. You probably have a trick or two—some magic phrases to say, perhaps—that can help you gain the upperhand. But, often, the moment you get into trouble in a negotiation is when something careless just slips out. If you are new to negotiation, or feel it is an area where you can improve, check out these tips on precisely what not to say.
- “Why don’t you throw out a number?” There are differing schools of thought on this, and many people believe you should never be the first person in a negotiation to quote a price. Let the other side start the bidding, the thinking goes, and they will be forced to show their hands, which will provide you with an advantage. But some research has indicated that the result of a negotiation is often closer to what the first mover proposed than to the number the other party had in mind; the first number uttered in a negotiation (so long as it is not ridiculous) has the effect of “anchoring the conversation.” And one’s role in the negotiation can matter, too. In the book Negotiation, Adam D. Galinsky of Northwestern’s Kellogg School of Management and Roderick I. Swaab of INSEAD in France write: “In our studies, we found that the final outcome of a negotiation is affected by whether the buyer or the seller makes the first offer. Specifically, when a seller makes the first offer, the final settlement price tends to be higher than when the buyer makes the first offer.”
- “Screw you.” Whenever you negotiate, remember that it pays to stay calm. The savviest negotiators take nothing personally; they are impervious to criticism and impossible to fluster. And because they seem unmoved by the whole situation and unimpressed with the stakes involved, they have a way of unnerving less-experienced counterparts. This can be an effective weapon when used against entrepreneurs, because entrepreneurs tend to take every aspect of their businesses very personally. Entrepreneurs often style themselves as frank, no-nonsense individuals, and they can at times have thin skin. But whenever you negotiate, remember that it pays to stay calm, to never show that an absurdly low counter-offer or an annoying stalling tactic has upset you. Use your equanimity to unnerve the person who is negotiating with you. And if he or she becomes angry or peeved, don’t take the bait to strike back. Just take heart: You’ve grabbed the emotional advantage in the situation. Now go close that deal!
If you know of someone who’s thinking of selling or buying a business and who might benefit from a complimentary, confidential, consultation, have them contact me directly at 813.299.7862, or mertel@lmaallc.com
By: Mike Ertel, Transworld M&A Advisors