Self Made: NASE's Blog

7 Negotiation Techniques for Small Business Owners

Monday, December 12, 2016

Guest blog by Nick Rojas
Nick is a writer, entrepreneur, and consultation with a passion for emerging technology and amplification strategies to help businesses succeed. He currently resides in Southern California, with his German Shepherd, Pesto. Check him out on Twitter @nickarojas

Small business is entrenched into America. Starting a company from scratch and building it into something formidable is the embodiment of the American dream.

There has been a substantial amount of speculation since the 2008 economic recession that this dream is largely dead, however, hard data proves otherwise.

Small businesses built from the ground up have generated over 65 percent of the net new jobs since 1995. These same businesses continue to produce upwards of 50 percent of the private non-farm GDP.

How is it then, that people seem so down on small business? The answer lies in success rate. Few small businesses are successful, but those that are thrive.

Around 50 percent of small businesses survive five years, but only one third survive for ten. In terms of growing a company ten years is a drop in the bucket.

Debate constantly rages over why so many small businesses fail, and the reason is down to a multitude of personal choices and market factors. One factor that is consistently overlooked is negotiating skills.

Your business will need to interact and make deals with other businesses to succeed. If you lack the proper negotiation skills, you’ll soon join the two thirds of businesses who have tried and failed.

Let’s take a look at the seven negotiation techniques every small business owner needs to know.

Know When to Walk Away
You’ve got to know when to hold them, and know when to fold them.

The old adage didn’t become a hit country music song for nothing. Knowing when to walk away from a difficult client is crucial to your small business's viability in the long run.

Undervaluing yourself is an easy way to go bankrupt.

Offers put on the table should always cater to both parties. If your client is low balling you, or refusing to make any concessions, walk away.

Remember that the client is speaking to you for a reason. They chose you over other businesses, and that means you have something they want. Chances are they’ll come back looking to negotiate another offer.

Identify Your Floor and Ceiling
Determining how little you’re willing to accept or how much you’re willing to spend is crucial to knowing when to walk away.

Sit down and crunch a deal’s expenses until you’re positive of what will turn a profit and what will lose money. What is an acceptable profit or loss is up to you.

However, it’s wise to remember that while new small businesses sometimes have less than stellar profit margins, you shouldn’t ever work for free.

Ask Why Not What
Never negotiate based on what the other party wants.

It’s already obvious that they want your product or service. What you need to figure out is why they want your product or service.

Identify what about your business makes it attractive. Take that attractive quality and use it as your negotiating tool. You can force concessions based on knowing what your adversary isn’t willing to give up.

Make the First Offer
It’s a common theme for new negotiators to let the other person make the first move. The idea is to react based on the client’s decision and gain control over the situation.

Research has proven this is not always the best course of action. Studies have shown that making the first offer results in setting what is known as an “anchor.”

In one study, customers asked mechanics how they valued a car, and gave the mechanics their own estimation. The mechanics were likely to overvalue the car by as much as $550 when a high estimate was presented.

Even when faced by an expert, always lead the negotiation with a high value offer.

Do The Research
While you can influence an expert with a high value offer, chances are they will still negotiate a deal weighing in their favor if you don’t do your research.

Always study the intricacies of the market in question before negotiations start.

Think of it like buying a home. Everyone studies the local real estate market before buying or selling a home to make sure they receive a fair price. Learn your counterparts market before buying or selling your product.

Show Past Success
As your small business grows you will invariably end up cooperating with a large company during a businesses deal. It’s wise to be prepared when the time comes.

No successful business will trust a vendor without having concrete evidence that your involvement will help them turn a profit.

Compile a case study of other business deals you’ve brokered that show success. Also be ready to explain exactly why and how those deals benefited both parties.

Be Personable
Last but not least, just act personable. No one likes negotiating with someone who isn’t friendly. At the end of the day you’re both looking for a fair agreement, so don’t let competition or greed cloud your judgement.

As a small business owner, negotiating is one of your most powerful tools, but also a potential pitfall. Take these 7 tips and make sure your business heads for success.

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Self Made

A blog on the self-employed and micro-business

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Katie Vlietstra - As Vice President for Government Relations and Public Affairs, I work to explain how actions on Capitol Hill can impact the self-employed. I love D.C. and have made my home in Capitol Hill, where I live with my husband and black Labrador, Coltrane. We love playing volleyball and softball on the National Mall. 

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