3 Things Entrepreneurs Get Wrong When Negotiating
"Show me the money!" -- the famous line from the movie Jerry Maguire -- carries the sort of gusto and optimism that is ear candy to entrepreneurs. But as a professional negotiation coach with nearly three decades' in the trenches, I associate that catchy phrase with something else entirely.
The reality is most entrepreneurs begin to think about negotiation -- this includes the word "negotiation," setting up a meeting, and the overall negotiation process -- only when it's time to be shown the cash. In other words, in the minds of just about every small business owner, a negotiation is when the money talks.
Nothing could be further from the truth, and I can't imagine the millions of dollars entrepreneurs have lost, over the lifespan of their businesses, by defining negotiation in such a limited way. Negotiation is the effort to bring about agreement between two or more parties, with all parties having the right to veto. True, the topic of money is invariably involved in this process. But good negotiation includes other critical components that most entrepreneurs either ignore or are unaware of.
Here's what you're probably doing wrong, and how to get it right.
1. You think you've told the other side everything they need to know.
Does the following litany sound familiar? "My product has organic ingredients." "My services have a money-back guarantee." "My customer support is available 24/7."
Sorry, but those are just facts. What you must do is provide your potential buyer with a vision. And I'm not talking "benefits," which are often just repackaged facts. Here's the sequence. After you describe the other person's pain and dissatisfaction, you present a true picture of what his or her life will be like after using your products or services.
In other words, address how what you're selling will dramatically alter the potential customer's problem. Then let the person take in the specifics of the new peace of mind they will enjoy by doing business with you.
Related: How to Win a Business Negotiation
2. You fail to connect the vision with your fee.
If you know your potential client's pain -- which could be as simple as, say, their current supplier's inability to meet the delivery target dates -- and you've rendered a vision of that pain back to them and explained how you can take that pain away, then it's time to align your promise with a cost.
Many entrepreneurs regard their good or service as merely another product the prospective buyer will stock, or a service to replace the one currently in use. However, if what you're offering is unique, then you're presenting to the other side not an interchangeable offering but an opportunity tied to the better vision you have just painted for the buyer. Such opportunities often come with higher price tags, which you had better be prepared to defend.
3. You fail to realize that every moment with a potential client is a negotiation.
This goes back to my original observation that most entrepreneurs identify a very narrow window as the time frame in which to discuss money. However, if the only time to seal the deal is when you're "negotiating," then what are you accomplishing when you network or participate in trade shows? If you're saving negotiating for some future date, then are you simply handing out business cards?
Every moment you spend with someone you might do business with -- which means just about anyone you meet anywhere, at any time -- is a chance to create a vision for them. If you're certain that you would display a warm, nurturing and calm demeanor during a formal negotiation, then convey the same traits at a busy industry event and see how you can make the other person realize you can help them achieve their goals.
Every interaction with a potential client is a negotiation. No tables or conference rooms required.
Related: 3 Golden Rules of Negotiating