8 Negotiation Tips for Confident Business Owners
Small business owners have an unyielding entrepreneurial spirit. It’s what separates them from the competition. That’s only one component of success; negotiating skills are essential. Your ability to forge favorable relationships with customers, suppliers, employees, lenders, and partners directly affects your profit margin and cash flow. That can be challenging, even stressful. It’s a delicate dance for these Ambitious Spenders, trying to keep up with the latest competitor advancements and industry trends while keeping spend at manageable levels. Can you relate?
Here are some tips to help you negotiate more confidently:
Be positive. Small business owners are collaborative by nature. You know how to build strong personal relationships with employees and customers. Bring that same attitude to negotiating. A successful negotiation depends on building rapport and finding common ground, not on taking a hard line. Confidence engenders positivity.
Share your dream. Some small business owners are so self-motivated, they can forget to inspire passion in others. In negotiating with a vendor or lender, for example, share your hopes, goals, and vision for the business. Negotiating is not all numbers; it involves heart and emotion as well.
Barter up. When you negotiate, don’t automatically default to a cash exchange. Bring all your company’s resources to the table. Perhaps there’s a way to trade underutilized capacity or excess inventory in exchange for what you want—to preserve cash for other needs. Financial professionals may be able to offer some alternative solutions for managing cash.1
Get it in writing. The informality of small business negotiating can turn into a negative if the terms of a deal are not documented in writing. Confident business owners stick with a plan. Creating a document that both sides sign off on can avoid confusion and misunderstandings down the road.2
Pay for outcomes. Think outside the box in negotiating employee compensation. Some experts say small businesses, especially in the start-up phase, are best served if employee pay is tied in some way to overall company performance. That way everyone on the team is accountable for and can profit from the success of the business. You may also consider an executive bonus strategy as a replacement incentive for a cash bonus.
Do your research. Small business owners like to learn about others. Put that natural curiosity to work for you by discovering the strengths and challenges of your negotiating partner. Coming to the table with insights into mutual interests and areas of potential flexibility can give you leverage.3
Set targets and limits. As the song says, you got to know when to hold ‘em and when to fold ‘em. Define what you want out of the negotiation, and establish your “walk-away” point when the terms of the deal are beyond what you should concede. Combining realistic expectations with the ability to defer gratification is the mark of a confident planner, according to our research.4
Be strategic, not transactional. Driving favorable terms and prices is easier when the other party sees opportunity in being your long-term partner. Discuss the potential in a mutually-beneficial relationship that extends beyond the immediate deal on the table.
Negotiating is just one facet of ensuring small business success. To uncover more creative solutions to managing your business, talk with your financial representative.
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2021-129659 Exp. 11/23