By: Brad Nakase, Attorney
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Kendall is nervous. As the son of a business owner, he has spent his life watching his father conduct incredibly successful business deals. He always wondered how his dad did it. Now that Kendall has his own startup business, a social media app, he worries he hasn’t inherited his dad’s negotiation skills. Ken has a big deal coming up, one that could transform his company and result in millions of dollars in his bank account. Understandably, Ken is freaking out. The night before the deal, unable to sleep, he calls his father, who advises him on the best negotiation techniques for small business owners.
Even for small business owners who have studied negotiation tactics and skills, there are some techniques that are less well-known but just as useful and effective. Let’s review them.
Before going into a meeting to make a big deal, it is normal for small business owners to feel nervous. In this preparation stage, one might have clammy palms, a fast heart rate, or terrible anxiety and panic attacks. While it is common to feel nervous, even for professional negotiators, going into a meeting with this negative mindset can affect one’s decision-making ability. While most people would tell themselves to calm down, this is not often effective. Anxiety can be a difficult beast to control. A better technique for managing nervousness and anxiety is reframing the emotion. Try thinking of the anxiety as excitement; you’re so excited to make this deal! By treating your anxiety as a positive, and embracing it, actual feelings of excitement will increase. Performance in a negotiation environment thereby improves.
Example: Teagan is a small business owner who runs a café. Next week she has a big meeting with a supplier where she hopes to secure a good deal. Teagan is very anxious about negotiating because she’s a shy person naturally. Her nerves are out of control. Familiar with negotiation techniques, Teagan tries reframing her anxiety as excitement. She is eager to meet this supplier and get a great deal for her company! Her employees will be so happy to know the company is doing well and will be thrilled for her! Teagan begins to feel better and actually becomes excited about the opportunity to impress.
It has been found that the first person in a negotiation to make an offer is most likely to sway the negotiation in his or her favor. This phenomenon is known as the anchoring bias. First offers tends to anchor the discussion, serving as basis for negotiation. To make an even bigger impact, a small business owner might consider opening the meeting by producing a draft agreement. This agreement would serve as the anchor for the subsequent discussion. When relevant, such a move can increase one’s influence in the negotiation.
Example: Yara is a small business owner who owns her own makeup line. She has a meeting lined up with Sephora to try to convince the beauty giant to sell her products in their stores. Yara is determined to come out on top, so she prepares a draft agreement with her business lawyer. When Yara arrives at the negotiation with Sephora, she presents her draft agreement, detailing what she would like out of the meeting. The negotiations begin based on her proposal, leading to a favorable outcome for Yara.
For a small business owner, it may be tempting to fill silence with counter arguments and other methods of persuasion. But there are times when the best negotiation tactic is not to negotiate at all – rather, to be silent. Forget the back-and-forth banter. After an opponent speaks, it is best to remain quit for a few moments while processing what they have said. This way, mistakes or miscues are less likely. This also helps the small business owner from falling victim to the anchoring bias. When the opponent presents an offer, remaining silent for a few minutes can lessen the power of the offer, whereas instant negotiation can give it weight.
Example: Claes is a small business owner who runs a popular sandwich shop in Eagle Rock. AMC has asked for a meeting with Claes to see if a deal can be made to sell his sandwiches in local movie theatres. When Claes arrives at the negotiations, the AMC representatives immediately present a deal as an anchor. Skilled in negotiation techniques, Claes remains silent and looks disappointed. AMC sheepishly offers to change the offer more in Claes’ favor.
While some small business owners might think that asking a counterpart for advice is a sign of weakness, this actually is not true. Asking for advice flatters the other business owner and can strengthen or improve a relationship. When a small business owner truly needs advice, asking for help will not only benefit him or her, but also the company.
Example: Theo is a small business owner, but he does not have the most experience in his field. While making a deal with another similar business, he asks for advice from the other owner. “Hey, man,” he says, “I admire what you’ve done with your business. From one owner to another, what do you think I should do in this scenario? I could really use your advice, considering your success.” The other owner is flattered, and he offers what help he can to Theo.
When two parties are unable to come to an agreement, they may decide to use what is called final-offer arbitration. This is also known as baseball arbitration. Each party submits its best offer to an arbitrator, or judge, who selects one of the offers and does not offer any other. Even if the parties do not like the decision, they cannot appeal. Typically, when using FOA, parties make reasonable offers in an effort to win the judgement. FOA is a valuable tool, especially when one party is not making reasonable offers or is being uncooperative. FOA forces the unreasonable party to make a reasonable offer, or risk losing the judgement when the matter is taken to an arbitrator.
Example: Corinne, a small business owner, simply cannot come to an agreement with her supplier, Jasmine. After lengthy negotiations, both parties decide to pursue FOA. Corinne and Jasmine both put forth reasonable offers, and the arbitrator decides in favor of Jasmine. Though disappointed, Corinne must accept the decision.
