A CEO’s Guide to Winning at Negotiations
Did you think your last negotiation had a favorable outcome only to discover later you left money on the table? Here are some tips to follow to avoid this from happening again.
Most business owners and CEOs are pretty good at negotiations – some better than others. Let’s face it, you wouldn’t be in your position if you weren’t fairly confident in your negotiating skills. But where most CEOs and business owners fail are negotiating a deal that doesn’t benefit their overall business strategy and leaves money on the table.
Becoming a stronger negotiator takes time to cultivate and practice. Surprisingly, negotiations are more about the other side than a list of your demands. And while you need to need to know exactly what you want (we’ll talk about that more in just a minute), you need to first understand the person on the opposite side. A successful negotiation happens because you understand more about the other side – their hurts, pressure points, and motivators.
As commercial real estate advisors, negotiating contract and lease terms on behalf of our clients is part of our everyday. Through this experience, we’ve learned a thing or two about the art of negotiations that can help you align with your business goals and positively impact your bottom line.
Consider these tips before walking into your next negotiation.
- Understand your goals – Often, we focus exclusively on the goal of the negotiations but first and foremost, you need to understand your overall business goals and strategy. How do you know what to ask for or give up if you don’t know why you need it or don’t need it? Ask yourself what you want to accomplish with the negotiation as it relates to your business goals. We often advise our clients to start with the end in mind and work from there to get a clear idea of what they want.
- Be prepared – Entering into negotiations, you need to do your homework. Put together your business plan so you have defined goals. Learn about the position the opposite party holds in the company. Identify whether they have other options. Also, research current market conditions and business drivers to get a handle on their motivators. People who don’t do their homework will leave the most money on the table.
- Listen and learn – So many people talk but few actually listen. It’s really surprising what you can learn from someone when you sit quietly and listen. Ask open-ended questions that can’t be answered with a simple ‘yes’ or ‘no’. Don’t be hung up on making sure the other side hears you – listen and learn because it will help you understand them more.
- Speak the lingo – Much of negotiations is about understanding the language of the other party. For example, if you’re negotiating with a financial person, talk numbers. If you’re negotiating with an operations person, talk about processes and procedures. Speaking in similar terms will help get you what you want.
- Don’t assume – Assuming the other party won’t consider a term is a big mistake. We see this time and time again. Tenants believe landlords won’t negotiate lease rate and instead, go right to negotiating concessions like free rent and tenant improvement allowance to sweeten the deal when in fact they could be negotiating a lower lease rate.
- It’s not a conflict – Negotiations can sometimes feel like a conflict but in reality, it’s done through a give-and-take process. Don’t take bad behavior personally and focus on the deal. Leave emotions out of it by identifying your “must have” terms versus “wish-list” terms. Bargain with your “wish-list” and leave your “must-haves” in.
- It’s not a contest – A win/lose mentality is ok for sports but not when it comes to negotiations. A win/win resolution to negotiations is commonly viewed as the most successful outcome – one that gives everyone an equally favorable deal. However, if through negotiations both sides realize that doing business together makes no sense for either of them that is also considered a successful outcome.
Remember, to understand where the other person is coming you need to see it from all sides. Clearly define your goals. Before the discussion begins, make sure you know what you want and the minimum you’re willing to accept.
Strong negotiators develop their skills over time with lots of practice. Ask for advice in areas outside of your expertise. It won’t hurt to get more than one opinion on how to approach negotiations, especially if you’re in unfamiliar territory.
Verity Commercial can help you with your negotiations when it comes to your commercial real estate. Contact us if you need more guidance.