This blogpost is guest written by James Madelin, with whom I co-present ExplainTrade’s negotiation training. He brings corporate and private experience to supplement my own background in diplomacy and international trade policy negotiations.
In 2006 James built an award-winning million dollar business called ‘enlight photo’ by combining business skills learnt on trading floors with an invention conceived in his garage. At its height, enlight photo sold James’ inventions worldwide, in Apple Stores in the US and EU. I asked him to share some of the lessons he learned being an entrepreneur abruptly thrust into negotiating every aspect of his business. - Dmitry
I had a few things in my favour when I launched my business 13 years ago. I had a unique product photographers wanted to buy and that distributors and retailers worldwide, including Apple, wanted to sell. I had enthusiasm, energy, and the support of a frankly far too patient family.
What I didn’t have was an appreciation for how many tough negotiations were awaiting me, with suppliers, clients, employees and partners.
Looking back, that ignorance cost my business revenue, hurt relationships, and damaged growth.
I don’t want others to make the same mistakes I did, which is one of the reasons I partnered with Dmitry to develop courses like the upcoming TechUK Negotiating Business program. For me, it’s a chance to vicariously go back in time and help a younger me avoid the traps ahead.
Here are three things I wish I’d known:
1) Pros prepare and you should too
I was in Tokyo to agree my companies first international distribution agreement. The Japanese firm’s representatives walked into the room and put a thick sheaf of papers on the table. It was everything I’d ever written online about any subject. They informed me they would.l be using it to help decide if I was a respectable partner.
Their diligence meant they knew me, my business and my product almost better than I knew them myself. They walked into the room having done their homework, and I couldn’t even blame my dog for having eaten mine because they’d uncovered I don’t have one.
A misconception about negotiations is that it’s what happens in the room that makes all the difference. In reality, preparation is far more likely to prove decisive. Research and planning helps you call bullshit on unsupported claims, gives you a sense of the other side’s interests and values, and allows you to craft proposals that speak directly to their core needs.
Something we hammer home relentlessly in training is you don’t need the resources of a Japanese Mega-Corporation to research and plan for a negotiation, provided you know the right questions to ask of yourself, your team and through some basic research, your counter-party.
2) Perceived value is always your strongest argument
Take the worst negotiator in the world. Give them the only fresh water in a scorching desert. Chances are, they’ll strike favorable deals that make them rich. Unfortunately, value propositions are rarely so clear or compelling and it falls to you, as your businesses champion, to make to make up the difference.
Early on in my career I often made the mistake of talking about what a deal would mean for me, or gushing over parts of my business that I was most excited about but left my audience cold. I was putting my best foot forward, but often not the foot they wanted to see. That cost me.
One of the most difficult tasks you have as a business negotiator is to set aside all the reasons why your position is the right one for you, to focus on why it’s the right fit for them. Chances are the person on the other side of the table is going to have to defend any deal reached to a boss, a board, a mentor or a business partner. If how you’re advocating for your position in the room isn’t also not arming them with lines that will resonate in that conversation, you’re wasting your breath.
3) A lot of traditional negotiating wisdom is bunk
I once spent half of a negotiation in a ridiculous standoff with the other side over who would be the first to name a proposed price. They genuinely didn’t know how to price my product, and I was sticking to some used-car salesman advice: don’t do it.
It seemed logical at the time. If I named a price below what they were willing to pay, I’d lose out on that margin (and probably more as they’d expect my price to have some downward flexibility in it).
The problems were twofold.
First, science says the exact opposite approach works better. On average, the first party to name a price creates a psychological anchor for the negotiation against which any future proposals are subconsciously judged. Had I opened with an aggressive but still vaguely reasonable offer, my odds would have improved, not diminished.
Second, I’d allowed my reliance on negotiating folk-wisdom to overrule my common sense and inject blatant gamesmanship into what should have been a good faith discussion. The other side knew perfectly well I could give them a number (and was better placed than they were to do so). They could tell I was refusing as part of a negotiating tactic, and they didn’t like it. I’d shown up to a friendly card game with rolled down sleeves and a copy of “How to Cheat at Poker” visibly sticking out of my back pocket.
There’s nothing wrong with taking advice, but it’s worth checking the science behind it and doubly worth ditching it if it costs you the good faith you need to reach a deal. The apocryphal used-car salesman full of shady tricks is not someone anyone enjoys negotiating with. Their every word is treated with suspicion, and certainly no one makes any special effort to meet them half way.
There are certainly scientifically established psychological tricks and techniques which can be helpful in a negotiation, but they should never come at the expense of your research, your core value proposition or your integrity. Negotiating is about having something others want, understanding them well enough to help them see just how much, and comporting yourself with the good faith they’ll need to see to not second guess either.
We hope you enjoyed this first ever guest blogpost on ExplainTrade.com. As you may have guessed, the terrible jokes above are mine and all of the intelligent content is James’s.