The art of negotiation
Suddenly, we have to do a lot more negotiation, and it’s not just the small stuff. Three months ago, you were arguing over a 20c increase in chicken prices or the chef wanting a $30 wage rise.
Now you’re dealing with a stubborn landlord, an unknown bank manager,impatient suppliers and an impatient partner. Most of what you did before was haggling, but now it’s time to up the ante.
Negotiating with landlords is a good place to start, and is likely to give you the largest financial return if you get it right.
Here are some tips from leasing executive Julian Mero and business broker Paul Leach.
Mero on the first steps of rental negotiation
Preparation and planning are two of the most important components of a negotiation. Without them, you negotiate with force, threat or bluff, which is not desirable and can break down the communication.
Understand the other side — what do they need? What is the landlord’s financial position, or if it’s in a shopping centre, what are they allowed to offer?
At the beginning, create the right atmosphere. Communicate your position and learn theirs. Asking questions and gathering information gives you time to assess.
Back up every phone call with an email outlining what you understood was agreed.
Never give anything away without something in return such as an extension of the lease or help with refurbishment in exchange for paying more rent than you anticipated. The first offer has more influence on the final deal than any other factor, so plan and make it carefully.
Leach’s advice for negotiating
- Act quickly and communicate with your landlord immediately.
- Crunch the numbers and make a plan. Be ready with up-to-date bookwork — your sales data, P&L statement, bank statements, etc.
- Back up your argument with honest, transparent information.
- Do all that you can to meet your current rental obligations.
- Work out what help you need from the landlord and look at it from both sides.
- Don’t take “no” as being final — it might be the start of some serious discussion.
Common mistakes to avoid
- Rushing; the person with the most time pressure has the lower hand.
- Letting price dominate all other interests — there are other concessions that may be worth more than just a rent reduction.
- Neglecting the other side’s position or problems — the landlord is not a demon!
- Searching too hard for common ground to make the deal happen.
- Neglecting your ‘walk away position’ previously set — if it looks like you were bluffing, you immediately lose leverage.
Image credit: Business Simulations