DEVELOP AND

PRACTICE
NEGOTIATION SKILLS
DPNS
  In this session we cover the important
impact of good negotiating skills in
OBJECTIVE growing your business. We will also
explore ways to build up skill in
negotiating.
  Growing your business includes ongoing daily
encounters where you are either buying or
Good selling. The outcome of these transactions can
negotiating play a major role in your future. To a large
measure then, the degree of your success can
skills will help depend on your skills as a negotiator. This
you grow session will explain techniques you can employ
in all transactions as you grow the business and
ultimately when you sell the business.
  Reasons for failed negotiations
Good - Lack of confidence
negotiating -Overconfidence
skills will help -Not recognizing the other side's situation
you grow -Viewing as a win/lose situation
  There are two ways to expand your business:
either increase your earnings or pay less for
what you buy. To be successful in paying less
requires negotiating skills. But for some
Reasons for f entrepreneurs negotiating is not a pleasant
ailed negotia experience. Some lack the confidence to ask
"what special price are you offering today?" You
tions can quickly overcome this by starting the
practice of asking this question every time you
buy something. Some guidelines to keep in
mind
  Negotiating is the collaboration between you
and the other side to satisfy both sides of a
transaction and a win/win result.
Guidelines  It is a standard and healthy business practice.
to keep in  It is not based on greed but from a healthy
business attitude to thrive.
mind
 As you practice it, you will get better at it.
 As Wayne Gretzky has said: "You miss 100% of
the shots you don't take."
  Can upset a potentially profitable transaction for both
parties. Here's an example: A shopping centre landlord
was negotiating with 7-Eleven Stores to renew a lease
and 7-Eleven was asking for a reduction in rent due to
disappointing sales. As a credit tenant, the 7-Eleven
occupancy was valuable to the landlord.
 But through overconfidence, he turned down the offer
Overconfidence and rented the space to an independent store which
resulted in many headaches. He had overlooked a non-
negotiable 7-Eleven deal point: they could only pay
rent that was justified by past sales. The landlord
should have negotiated a lower rent with provisions for
rent increases as sales improved.
  The 7-Eleven lease is also an example of one side (the
landlord) not fully considering the other side's
Not viewpoint and limitation. The lesson is to listen more
than talk. Ask questions to expose attitudes and
recognizing flexibility of thinking. Here the purpose of negotiating
the other is to discover the parameters of the other side. Then
after getting their story, persuade them to listen to
side's your side of the situation. In this process, put yourself
viewpoint in the other side's shoes to evaluate both the most and
the least they’d be willing to sell so that your proposal
is realistic.
  "Win or lose" means that one side is going to
lose. But approaching a negotiation as a
contest is not the way to accomplish a
transaction that could be good for both sides.
Viewing it as a Instead, look at the negotiation as a
collaboration that begins by figuring out what
win/lose they want and how much you can give them.
situation The more you are able to give them what they
want, the more likely they are to give you what
you want. The resulting goal will be a
compromise where each party gives up a little
to gain a little.
  What is acceptable to the other side?
 Determine market comparable
Good  Pricing power
negotiating  Determine the deal points for both sides
 What special benefits will the other side
skills will help derive?
you grow  What is their reason to buy or sell?
  Determine market comparable
Before starting a negotiation, the buyer should
determine what the actual closing prices were in recent
comparable transactions. For example, in real estate
the use of "comps" plays an important role in
establishing benchmarks for how much is paid for
houses. In an important transaction, such as 
selling your business (covered in another section of this
What is accept course), a professional appraiser could also be used to
able to the ot establish the price along with other evaluation
her side? methods.
 While "comps" establish overall pricing guidelines,
sellers must then justify any additional benefits
inherent in their product to justify a price above prices
paid in other recent "comps". Some other factors to
consider in a purchase transaction can be found in 
Session 9 in the Start a Business course.
  As an operating entrepreneur, one of your primary goals should be
to build pricing power into your product or service. Pricing power
is also a powerful tool in a negotiation. It can remove a product
from the competition. For example, a toll road with no
competitors has ultimate powerful pricing power because there
Pricing power are no alternatives to choose from. Coke© has built their pricing
power and consumer preference through saturation advertising,
marketing, and consistent quality over the decades. Your goal will
be to build pricing power into whatever you are selling to help
distance yourself from competition and justify your negotiating
position.
  In a buying transaction, you must consider the other side's pricing
power to establish how much you are willing to pay. For example,
you may agree to pay $1.00 for a Hershey bar when competitor
"Joe's" chocolate bar is $.70, but you may not want to pay $2.00
for the Hershey against Joe's $.80 bar.
 A commodity, on the other hand, has no pricing power. The price
Pricing power is established by the market. In order to succeed in a negotiation
involving a commodity, you will need to have the lowest cost in
order to achieve any degree of pricing power. Examples of
commodity businesses include agricultural commodities and
airlines (even as airlines try to differentiate themselves to justify
higher prices).
  Both parties to a negotiation will have some issues that are "deal
points." A deal point is a non-negotiable condition and a
transaction cannot be closed without including it. Most all
transactions will have deal points and you need to determine what
Determine they will be on both sides of the negotiation. Here are some deal
the deal points between a landlord and a tenant:
 The landlord's deal points:
points for  A cost-of-living adjustment to reflect inflation.
both sides  A net net net (triple net) lease where the tenants pay their share of
taxes and other common area costs.
  The tenant's deal points:
Determine  A right to sub-lease the premises.
the deal
 A kick-out clause in the event the anchor
points for tenants vacate the center.
both sides
  The other side may be highly motivated to
make a deal because of a special benefit to be
gained from what you are selling. You need to
What special determine if this is so. For example, your
benefits will product may have special features which can
be leveraged up to satisfy a huge market. Or
the other side you may possess a special real estate location,
derive? or a patent, or a market share which the buyer
is willing to pay a premium for, above what
might otherwise be considered the going
market rate.
  It is useful to know if there are underlying
What is their reasons why a business is for sale. Is the seller
in need of cash to make payroll? Does the
reason to buy buyer of your patented widget have ability and
or sell? desire to scale it up? Does the seller of a
business have pressing family problems?
  Comparison of "My Leverage" and
Good
"Their Leverage"
negotiating  Chart out each side's leverage
skills will help
you grow
  ere is a simple tool you can use to help establish your
negotiating stance on any buying or selling transaction.
Comparison Open a new word document and create two columns.
of "My Title the left column "my leverage" and the right
column "their leverage". Leverage means advantages
Leverage" and and pricing power each side brings to the table. Under
"Their these headings begin listing each side's leverages
including vulnerabilities, pricing power and any other
Leverage" relevant factors. This analysis can furnish a better
overall understanding of the transaction. Here is an
example where we are considering a shopping center
location for a franchised chain of pizza stores:
  Negotiating rules
 Know what you want and how much you
Good will pay
negotiating  Ask the other side to make the first offer
skills will help  When buying, require an asking price
 Don't make an offer without contingencies
you grow
 Be willing to walk
 BATNA
  Know what you want and how much you will
pay
Have a clear written specification in place to
describe the product or service you are buying
and the required terms of purchase. Terms
would include delivery date required, payment
Negotiating terms and discounts, warranties, cancellation
rules provisions, etc.
 How much you pay can also be determined by
evaluating the economic return your
investment will produce. For example, you may
establish a minimum annual return on
investment of say 20% and any purchase price
must achieve that goal.
  Willingness to pay will include factors such as
how much the other side needs your product
and what degree of pricing power does your
product (or their product) possess? Do you
Negotiating have a pricing edge for any of these reasons?
rules  If you are leasing or buying real estate locations
for your retail chain, you should create a site
model criteria format for evaluating sites. This
will be your tool to objectively rank each
potential location based on appropriate factors
such as traffic count, etc.
  Vendors selling flowers and oranges at busy
intersections make a mistake by not displaying
their prices...so potential customer drive on.
When buying, Whenever you are the buyer, the seller should
be required to specify his asking price and
require an terms. If there is no price, there is nothing to
asking price consider. With an asking price in hand, you are
in a position to evaluate whether the
transaction has enough potential to be
pursued.
  Why do we need to study DPNS?
 What is your understanding Negotiation?
 What would you expect in this subject?
Survey  How are you going to use this subject in your
Questions chosen field?
 What do you think is the importance of
undergoing DPNS subject in your course?
 Types of Negotiation skills
Types of 28 Tactics of
Assignment:
Negotiation