How to negotiate with small business owners

Being a modern day business owner requires you to exhibit skills in a variety of different areas. This is never more true than when you are starting out and do not have the resources to build a team of dedicated professionals.

The advent of technology has made it easier than ever for businesses of all sizes and ages to become more streamline and agile. In an ever-changing world, the ability to assess, respond and pivot has never been more crucial. The pandemic has seen many businesses, unfortunately, close their doors for good as they’ve been unable to realign to the new commercial realities they face.

In this weeks blog we want to explore the art of negotiating as it impacts almost every aspect of a business. From getting the best deal with suppliers and clients to ensuring you hire the right talent for your business, negotiation skills play a crucial role in the long term success of any business.

However, negotiating effectively is something that a lot of business owners and especially sales professionals don’t have a clear idea on how to approach. There are simple things that we can all do to negotiate more effectively which will help us secure the most favourable outcomes.

What do we mean by negotiating?
In its simplest and purest form, negotiating is a, “discussion aimed at reaching an agreement”. With any agreement, there is usually dialogue and a compromise. This is essentially what negotiating is all about, ensuring that both parties are happy or agreed on the outcome.

From a business perspective, this could be a negotiation between a business owner and their supplier. Both have something that the other party wants, the negotiating is all about ensuring favourable terms can be agreed.

When negotiating it is important to recognise that both parties have something that the other party wants. The discussion, dialogue and negotiating part is all about maximising the upside and reducing the downside as much as possible.

Most people find negotiating difficult as they feel they are losing out or devaluing their product/service by entering into a discussion. However, negotiating effectively can be a great way to build trust, a long-lasting relationship and the potential to open up additional avenues in the future. Therefore, learning when and how to negotiate is a key skill that most business owners aim to perfect over the long term.

Why do small business owners negotiate?
As we have seen above, people negotiate to get the best possible terms of any encounter. Small business owners more than ever are price and value conscious, so negotiating is something they now expect.

However, it’s not only small business owners who negotiate. Large companies also negotiate because their deals are usually worth a large amount of money and include a large volume order, which places the buyer in a strong positionally usually.

Focusing on small business owners, they look to negotiate with the majority of stakeholders that they interact with. This could be suppliers of their products or services, customers and even their staff.

The majority of small business owners do not negotiate for the sake of it. As busy business owners, negotiating takes time and effort, therefore it is only initiated when the business owner is ready to make a firm decision or commitment.

When negotiating with small business owners it’s important to be transparent, fair and open to discussing a path forward. Compromise is the key to successful negotiating any kind of outcome.

Effective negotiation tactics
There are a number of strategies that can be utilised to negotiate with small business owners who are often value and price conscious. We will now detail some of the best tactics you can use straight away to close deals in your favour.

1. Decide when you’ll walk away
Striking a deal at “any cost” is something that people think is mandatory when entering into a negotiation with a small business owner. However, sometimes it is better to walk away and not conclude a deal when it just isn’t right for both parties. For example, if there is a huge disparity between the price you are charging and what the client is willing to pay, then no amount of compromising will be effective.

Before you enter into a negotiation, you should always be prepared to walk away from a deal. This will give you the confidence to only work with business owners that you can genuinely help with your products or services and ensure you only sign up the right fit for your business.

2. Know your minimum or maximum
Building on the point above, it’s important to recognise the minimum amount you are willing to charge as well as the maximum you are will to pay for a particular service or product. Having a clear appreciation of your numbers will ensure that any negotiation you conclude will lead to a profit for you.

Also, understanding your numbers will enable you to walk away from a negotiation that will result in a loss, both in monetary terms or in terms of time. One of the biggest challenges for all businesses is failing to recognise a problematic client and then having to deal with issues that are difficult to resolve in the future.

3. Understand the why
When negotiating with a business owner it is clear to see that they want what you are providing. However, never negotiate on what they want. Instead, you should identify ‘why’ they want your product or service.

This is where you can really focus on the pain points that your product or service will alleviate and build up more value around what you are providing. Using this strategy will give you an advantage when you are negotiating with a small business owner.

4. Be proactive with your offer
Always try to make the first offer when negotiating with a small business owner. Instead of waiting for them to make an offer, which will often be below your expectation, take a proactive approach and make the first move.

By making the first move, you are effectively laying an ‘anchor’ or starting point for the negotiation. This approach will help you stay in control of the negotiation with a small business owner.

5. Research thoroughly
It goes without saying that when you enter into a meeting and negotiation with a small business owner, you should ensure that you’ve researched extensively. Your research should focus on the business, their competitors, the market, your own competitors, the services, the benefits, the drawbacks etc.

Taking a holistic approach to research allows you to overcome any objections that the small business owner may make during the course of the negotiation. It also allows you to tackle obstacles proactively rather than waiting for them to be mentioned by the small business owner.

6. Show testimonials
Where possible, it’s always beneficial to highlight testimonials or case studies similar clients. This gives you the small business owner confidence that you can deliver the results that you claim as a result of your products or services.

Having a number of testimonials can help you build more value around your products or services and in most cases, command a higher price.

7. Demonstrate your personality
We all understand that business is about people. Small business owners generally only buy from people they like, know and trust. One of the most effective ways to build a relationship with a business owner is through demonstrating your own personality.

It is good practice to be friendly, approachable and fair with small business owners when negotiating a deal that works for both parties. Let your personality shine and you will go a long way to closing deals in your favour.

8. Practise makes perfect
As with most things in life, don’t expect to become an expert negotiator overnight. Effectively negotiating with small business owners is a key skill that takes time to perfect. By regularly putting yourself in situations where you can negotiate and influence others, you will develop the right strategies to negotiate with any type of business owner.

Practise and repetition will help you refine your negotiation skills and clearly articulate the value of your products and services. Always try to compromise to get the best possible deal for all, but be prepared to walk away if the negotiation will not result in a profit for you.

Summary
Negotiating with small business owners can be simplified if you follow the tactics mentioned in this weeks blog. With more and more small business owners looking to invest in technology and digital marketing, having an appreciation of how to negotiate effectively will give you an advantage during a sales meeting.

To find out more about how you can develop into a well-rounded business professional and operate your own Digital Agency, please contact a member of our team.

Until next time, take care.