By Ed Rappuhn – SCORE Nashville
“I buy from a distributer and I know my competition is getting better prices than I am. I don’t think they buy any more than I do, yet they undercut my customer pricing. What can I do?”
Learn to negotiate. There are books and articles galore on the art of negotiating. I’ll share 8 simple negotiating concepts.
1. Prepare prior to actual negotiations. Learn as much as possible about the other company/person. What is important to them? Make sure the person with whom you are negotiating can make a decision. Are there competitive alternatives to what they offer? Is there a trade association you can join that has already negotiated better terms than you are receiving?
2. LISTEN more than you talk. Silence is very effective in getting the other side to talk. So are open-ended questions. Also, THINK before you talk! Don’t blurt out something that can damage your position.
3. Create a win-win situation. Without this, you might get a short-term victory, but if you negotiate a price that causes the other party to lose money, you won’t be doing business under those terms for very long.
4. Be willing to “give” in some areas. If you know of something important to the other party, but of little consequence to you, feign interest then acquiesce.
5. Look at the entire deal. Price is only one consideration. Consider service levels, delivery schedules, and payment terms. For example, if a supplier is willing to provide inventory on a consignment basis, you may pay more but have less cash tied up in inventory.
6. Who should make the first offer? Popular wisdom says you should insist the other party make the initial proposal. However, there is research that shows the final price will be closer to the initial offer than the counter-offer assuming the initial offer is not absurdly high (or low). Be careful not to begin negotiations with a range of between $x and $y. The other party will take the end of the range in their favor as the starting point for negotiations.
7. Non-verbal communication is key in negotiations. Body language and tone of voice are as important as the words you say. Learn how to read others’ body language and how to convey messages through your non-verbal communications. Use this knowledge to your advantage.
8. Don’t feel intimidated. You negotiate every day. For example: where to go to lunch with co-workers, what to do this weekend with your spouse, and adjustments to children’s bedtimes. What works in these simple, daily negotiations? Apply these skills to your business negotiations.
Ed Rappuhn is a mentor, workshop facilitator, and the past-chair of SCORE Nashville. SCORE mentors guide entrepreneurs in starting and growing their businesses. Sign up for a free SCORE mentor, find out about our reasonably priced workshops and other services, or volunteer to become a SCORE member at www.scorenashville.org. Email questions about your business to email@example.com watch for the answers in future columns.