Why negotiation skills are important for small business owners

Business negotiation

Small business owners must rely on competent negotiation skill to survive and flourish in today’s business world.

Business negotiation is a skill that allows different parties with differing needs and goals to solve an issue by finding a mutually acceptable solution. It is a skill-set that small business owners must learn and use competently with every business party, from suppliers to customers, investors to service providers, and even among colleagues.

The scenarios where effective negotiations are particularly useful include:

  • When you are discussing the terms of a lease.
  • When you are convincing new prospects why they should choose you.
  • When you are conversing with potential candidate about salary and job scopes.

In this article, we will look at the three most important items pertaining to negotiation – the benefits of effective negotiation, parties you negotiate with, and how you should negotiate.

How can negotiation skills help my small business?

1. Boost your bottom line

Securing favourable deals saves precious money and improves your bottom line. For example, for a bakery owner, negotiating a good price on your rent can immediately lower your overhead. Likewise, negotiating a cheap rate from your supplier earns you a commercial advantage, which enables you to pass the cost-saving to your customers and achieve greater customer loyalty.

2. Build better relationships

Negotiation is about creating a win-win situation for both parties. When both sides are satisfied, respect and trust are likely to follow, which can help to foster better and stronger relationships between you and with your business partners.

3. Resolve conflicts

Conflict resolution is at the heart of negotiation. The ability to resolve conflicts by finding a mutually acceptable solution allows both parties to move forward.

4. Enhance communication

During the negotiation process, we learn about the other party and their views. Gaining these new insights will help us to engage the other party with a greater level of confidence and ability.

5. Gain a competitive edge

Effective negotiation allows your business to save on costs, engage your team members and create loyal customers. When all parties are contented, you have already gained an edge.

Who must small business owners negotiate with?

Small business owners negotiate with practically everyone that they have a business dealing with. This can include but not limited to suppliers, customers, employees, financers, potential business partners, landlords and service providers.

What is the best way to negotiate?

To help guide small business owners, Xero, a leading accounting software for small businesses, has listed four useful tips for negotiators.

  • Do your homework – understand who you will be negotiating with, the industry they are in, the relationship between the two parties, and details of past negotiations (to get an idea of a potential outcome).
  • Have a Plan B – having a backup deal you’d be willing to accept means all hope is not lost if your primary objective can’t be reached.
  • Prepare to compromise – ask yourself how determined you are to secure a deal and prepare to compromise and give concessions. Note beforehand what you can compromise on and still walk away happy with.
  • Be prepared to negotiate a win-win situation – Negotiation is about give and take, not about who punches harder, as a win-win mentality is scientifically proven to enhance business negotiations. Sometimes concessions can be made which mean little to you but a great deal to the other party, and vice versa. Negotiating with both parties in mind helps facilitate success and builds trust.

Further tips include:

  • Deciding on a walk away point prior to negotiation; that way you don’t give away more than you anticipated.
  • Ask probing questions and listen to responses carefully. Overtalking can appear aggressive and negatively impact negotiations.
  • Deploy positive body language and professional etiquette. Hold an open stance, smile, and shake hands firmly.

Berley can help your small business thrive

As London’s leading small business accounts, we work with many entrepreneurs who understand that business negotiation is a tricky balancing act. Most small business owners do not want to push too hard to drive the other party away, yet they need to remain strong, confident, and most importantly, what they negotiate must make business sense and can help their bottom line.

For entrepreneurs who are after business financing, they know first-hand how important it is to possess a good business negotiation skill that can greatly enhance their chance of securing the much-needed business funding. If you are currently looking for additional business funding and would like some advice, speak to one of our business growth specialists. We can help you prepare the financial data and run through your presentation, making sure that what you pitch will be relevant to your investors.

For more information on how our small business accountants and business growth specialists can help you, please get in touch via our contact page or call us on 020 7636 9094.

If you enjoyed this article, you might also be interested in:

This post is intended to provide information of general interest about current business/ accounting issues. It should not replace professional advice tailored to your specific circumstances.