HOW TO LEVEL THE PLAYING FIELD WHEN NEGOTIATING WITH BIG BUSINESSES
As a small-business owner you likely deal with larger companies that are your clients, partners or vendors. These companies may have experience and resources that you don’t when it comes to contract negotiations, but that doesn’t mean you’re necessarily at a disadvantage. Skillful negotiating can let you strike a deal with these big businesses that’s a win for you both, and that leads to long-term relationships.
We reached out to Michael Wheeler, who has taught negotiation in Harvard Business School's MBA program since 1993 and who is leading Harvard’s negotiation course for its HBX online initiative, to get some advice for small businesses on negotiating with their larger counterparts.
Here are Wheeler’s key tips for small businesses who are negotiating with larger organizations.
Picture Your Win Before You Begin
You should walk into any negotiation armed with a clear idea of what you need from the deal, Wheeler says. At minimum, this means understanding what price you can accept that will let you make a profit, as well as which terms are acceptable and which aren’t. Do you want a long- or short-term contract? What trade-offs are you willing to make to secure the deal?
But beyond what you need, you should have a vision of what you really want, and you should bargain with that target in mind, as opposed to aiming for your minimum expectations, Wheeler says. “New ideas might come up that you need to consider, but you should know upfront what you want,” he says.
Also, remember that as a small business, your power isn’t in your resources but the value of your product or service. If you have cutting-edge technology or you can do things faster and better than the other guy, then you have something to offer that your negotiating partner needs, Wheeler says. Be clear about what they need and how you can provide it before you start negotiating.
Identify All the Key Players
You’ve probably already made contact with people at the other company who understand the value of your product. You should keep in touch with them during the negotiation process, not only because you’ll work with them after the deal is done but because they might be able to help you during negotiations — including by telling others in-house why the lowest price isn’t necessarily the best deal, Wheeler says.
But there will almost certain be some new faces for you. For example, large companies might have a procurement person who is tasked with buying products at the best price but who isn’t the person you’ll be working with long term. You’ll want to learn as much as you can about this person, Wheeler says. “Understand what that person’s role is, what their authority is and how their performance is measured,” he says.
Remember that as the ultimate decision-maker for your business, you have agility they don’t. Large companies often have many layers of people who need to weigh in. If you sense that things are stalling, ask if the person you’re negotiating with has the power to close the deal or if it must be approved by someone else. Then you can get your in-house allies to help make your case with their co-workers, as well.
Prepare to Hear ‘No”
Being ready to hear “no” to any or all of your desired terms doesn’t mean being ready to accept defeat; it means you’ve prepared compelling responses on why the answer should be “yes,” Wheeler says.
Try to anticipate from your counterpart’s point of view all the reasons for not doing business with you or for not doing the type of business you want, he says. If you’re prepared that way, you’ll walk into the negotiations with assurance and you’ll know you’re offering a good value proposition, he says. “Just because you’re small doesn’t mean you’re weak,” Wheeler says.
Bring In Your Attorney, but Stay Involved
Large companies have attorneys — perhaps many — at their disposal, and they make sure they’re covered legally. You should do the same.
You need an attorney to handle sensitive contracts, especially if intellectual property rights are involved. You don’t want to end up in a dispute about who owns what because the contract wasn’t clear, Wheeler says. Small businesses without good legal representation can risk losing out because of overlooked fine print crafted by corporate attorneys.
However, don’t let attorneys do all the negotiating for you, Wheeler says. “Business owners and the parties who will benefit need to be involved,” he says. “You’re the one who knows the market, the industry customs, what would be a welcome exception and what would be an unwelcome exception.”