Example of Negotiation Points In A Sales Contract

This is an example of the possible negotiating points in a sample sales contract.

Negotiation is not only about bargaining on the price of goods. Here is an example of some non-cash points that you can negotiate over.

  1. The number of goods to be sold.
  2. The condition of the goods at the time of delivery.
  3. Return privileges and credit for goods delivered and effective condition.
  4. Rebates for goods that aren’t sold within a specified period of time.
  5. Shipping and delivery dates.
  6. Date and duration of shipping.
  7. Method of shipping.
  8. Method of payment, money order, credit card, demand draft etc.
  9. Currency payment, for international sales.
  10. Bulk discounts/volume discounts.
  11. The timing and installment payment.
  12. Interest rate to be paid on any deferred portion of the purchase price.
  13. Penalty interest rate for delayed payment.
  14. Whether the seller will have a lien on the goods till the purchase price is paid.
  15. Whether the seller or buyer will pay sales tax or transfer tax.
  16. Whether the seller or buyer will insure goods during transit.
  17. When will the title of goods be transferred from seller to buyer after sale.
  18. Whether the seller will assume responsibility for the products.
  19. Liability and other legal claims of the goods not to be defective.
  20. Whether the seller will provide the buyer with advertising and promotional material to assist in marketing and sales.
  21. If a broker is involved, who will pay his/her commission?

Everything is Negotiable In a Business Deal

Everything Is Negotiable – Understanding This Is Important

Experienced negotiators know something very important. They know that every single point during the negotiation is negotiable. Many people who have not negotiated the past are simply too hesitant or scared to negotiate about certain things because they generally feel that those points cannot possibly be open to negotiation. However, this is not the case. Even the points that you think are nonnegotiable are in fact just that. If you need the deal badly enough, it may even be possible to compromise on points that you think are crucial to your business as long as you are benefiting from the deal anyway. A very good example of how everything is negotiable and how people do not understand this can be taken from our daily lives.

Right from the household items that you buy at the maximum retail price to the car loan, real estate loan or any other financial transaction, negotiation is always possible.

The maximum retail price on products is just that. You can always negotiate for a discount. This is what many supermarkets in fact do. Haven’t you ever wondered how they managed to sell you products at low-cost price than your closest grocery store? It’s because the closest grocery store is selling the same product at a higher profit margin. The same goes for whenever you’re dealing with bankers and lending institutions.

Whenever you are ready to negotiate you can always lower your interest rate and monthly payment provided you have something they need.

In case of banks and lending institutions it could be your good credit rating which makes you desirable as a customer. They want your business and therefore may be agreeable to reducing your interest rate if only you would take the trouble to negotiate. The very same thing holds true for any business deal.

Right from dealing with your vendors to choosing real estate and even setting a price for your customers, you negotiate to get the best terms possible. Do not be afraid to press the points that you really want and be wary about giving away a few points to the other side as long as it is to the overall benefit of the business.

3 Stages Of A Business Negotiation

The Steps in a Negotiation Process

Each negotiation usually follows a certain pattern. There are typically 3 stages to any negotiation which might follow the order given below or not.

Step 1: State your position.

Right at the outset of a negotiation, both parties usually gets together and clearly state what they want.

If there are any points that you already agree on, those points can be picked up and taken off the list as it would not require any further negotiation this helps both the parties focus on what they do not agree on and need time to negotiate over.

Step 2: Analyze and dissect other parties demands.

This is where a party states what it wants from you.

But you do not just give it to them and rather analyze what they are really looking at. It is common during the negotiation process for either of the party to ask for much more than what they really need. This is because they are expecting to be brought down in their demands. You take a careful look at what the other side is demanding and see how you can narrow down and reduce the compromise that you need to make. Since the other party is likely to do the same with your demands, you are better off starting off with inflated demand yourself. But at all points of time be really very clear about how much you want to get from negotiating on a particular point.

Step 3: Do a little horse trading.

There comes a point in almost every negotiation where no more compromises possible.

At this point you need to take a careful look at the points of debate that are still open and not been agreed upon. You may decide that out of the 3 points or 4 points that are still unsettled, only 2 are crucial to your business or in other words are deal points. The other 2 maybe trading points that you may be willing to hand over to the other side in return of agreement on the main business point. Also, it is possible that your trading point maybe more important to them and they are agreeable to this exchange. However, if your deal point is the same as their deal point, the negotiation is probably over and the only option left open to you will be walk away from the table and look for a better deal somewhere else.

In order to understand what the deal points are and what your trading points, the most basic way to figure out the differences that the ones that will take cash out of your business and reduce your profit are more likely to be deal points and the ones that do not are usually trading points.

Be Clear About The Results You Want From The Negotiation Process

Figure out What You Need and Want before the Negotiation

Before you even sit down on the negotiation table you need to be absolutely clear what you want to get out of the deal. Also remember, the outcome that you want from the negotiation is not necessarily what you will start out by asking. Your approach has to be carefully planned which might involve starting with asking for more than you require. If you start by stating only what you need, the likelihood is that you will be pushed down and have to compromise on that. Basically, when you sit down with a piece of paper and try to put down what you need to get out of the negotiation process, you need to make 2 lists, one that has the deal points and the other the trading points.

Deal points are something that you must win and if you can’t get those the negotiation will be of no value. Trading points however, are something that you can compromise on without creating too much of trouble for your business and which even maybe a deal point for the other side. In a negotiation your goal is to get as many trading points as possible and all of your deal points. Simply put, deal points are those points that concern your profit and spending money directly. All others are trading points.

Remember, when trying to get the other side to agree on your most deal points, you might have to give consideration to theirs and may have to compromise a few of your demands. This is extremely important. Do not agree to give up something without asking for something else in return. Do not let go of things that you want to so easily even when you think that it is fair and generous. The other side is not going to perceive it like that and will probably see it as a sign of weakness and press you for even more concessions.

When trying to figure out the important points that you need from the negotiation, you need to be realistic. Be careful in evaluating the things that you really need and the things that you can compromise on. Don’t waste a lot of time and effort concentrating on something that you can afford to overlook as that may result in you having to gave way on the more important factors.

Be absolutely clear about what you want and make it absolutely clear to the other party on the points that you are not willing to compromise on. The secret to a good initiation is using any and all leverage that you possibly can. If you can make the other party sweat it out a bit, then do so. Do not panic, do not get nervous and more importantly, never let the other side see you nervous.

While you can take your time to think about things, and even let the negotiation carry on to a 2nd meeting, never ever give the impression that you are willing to compromise on the deal points that are crucial to your business. Make that absolutely clear. Also, if the other party requests time to think over the points that you brought up, make sure that you make them understand what points are negotiable and which are not. Also ask for a definitive time frame and date when they will be able to provide you with a definitive answer or hold a 2nd meeting. If you do not want to waste too much time with the negotiation tell them clearly that you expect an answer from them in the 2nd meeting.

Steps For a Successful Business Negotiation

There are a few basic steps that you must understand and take in order to prepare yourself for the business negotiation.

What is your bargaining position.

It is extremely important in a business negotiation to know what position of strength or weakness that you are operating from. 1st of all, it is advisable to be in a position of strength rather than weakness in order to have a successful negotiation. For example, let us say that you have found this great piece of real estate which is just perfect for your business. The problem is that the rent is really high and more than what you would like to pay. However, this piece of real estate happens to be in a really popular area of commercial real estate and many other businesses are vying after the same deal. This puts you in a weak negotiating position because the landlord knows that he does not have to reduce the rent for you or Negotiate with you because he is likely to find another larger and cash-rich business that will pay him the rent that he wants.

It is important to understand what negotiating position you are in because while you may be in a weak position, you can come up with some sort of trade-off which will allow you to negotiate in your favor. Taking the example above, you may offer the landlord a certain bonus at the end of the lease year from your business profits. This might tilt the deal in your favor. It is hard to negotiate from a position of weakness and once you understand what your position is, you can work on it and points of strength.

Get to Know the Perspective of the Other Side

It is extremely important to know the perspective of the other side when negotiating. The better you understand where the other side is coming from, the better you will know what steps to take and how to negotiate the best of your business interest. Taking the same example as above, let us say that the same commercial real estate property has been vacant for a long time. If you find this out, you would probably know that the landlord is desperate to get somebody to take it on rent. This will automatically put you in a stronger negotiating position to turn things in your favor.

Similarly, whenever you are negotiating and you are excited about the deal and it is something that you want, never show your enthusiasm. Just like in a poker game where the players can change the game in their favor not just on the basis of how good their cards but also by making other players believe how good or bad their cards are, you can do the same with the business negotiation process. Even if the deal is something you really want, you can make the other party believe that it is not something you really want or you will walk away from it if they do not consent to the terms and conditions that you want. If they feel this is true and everything else about you and your business prospect comes from a position of strength, there will be more willing to negotiate and compromise on their own conditions and demands. The idea is that not only you but the other side should worry about loosing the deal if they do not agree to your terms and conditions.

Figure out Your Negotiating Style

There are ways in which you can negotiate a business deal. You can be aggressive in your negotiation method or you can choose to be the calm and matter-of-fact person. In most cases, a person is suited to one particular style of negotiation which he is best at. However, many good negotiators use a blend of tactics for maximum effect. For example, being almost always aggressive in every situation can be counterproductive. Sometimes being silent and raising the anxiety of the other party by not saying much and not responding to their aggressiveness can be most effective. Even when it comes to being aggressive during negotiation, there is a skill attached to it. Remember that it is a game.

Personally we do not recommend shouting and screaming during negotiation even though many people use this technique to great effect. You can be polite and convey your willingness to get the deal done. One of the most important thing during a negotiation is to stay calm and not panic.

Remember, you can never truly negotiate on something that you really want. So even if you really want the deal needed for business, your negotiation should always come from a place where you act and behave like you really don’t need it and can just as easily walk away from it. Even if you cannot really afford to walk away from the, at least pretend that you can. An effective negotiation usually involves doing the following.

  • Convincing the other side that you do not need the deal so much,
  • Convincing the other side that they need the deal more than you do and
  • Any combination of the above points.

Preparing Yourself for a Business Negotiation

While preparing for a business negotiation, you must first understand what the essence of each negotiation procedure is. Negotiating with another person on a business deal is not about being fair, about being just or giving in to your inherent desire to be generous. The negotiation is about getting the best possible deal in the best possible interest of your business. It is your duty and your right to try and maximize the benefit as best as you can.

When you initially start a business relationship with any person, that person will want to maximize his profits as well. Till the time that you can develop some sort of an amicable and long-term relationship, that person is not likely to offer you the best deal that he can. When 2 people negotiate over the business transaction, both want to maximize their profit. Sellers want to maximize the money they can make from sale whereas buyers are worried about losing money and wants to pay as little as possible so that they can make maximum profit on the sale. Between these 2, there is a deal waiting to happen. This is where negotiating comes in.

If you simply accept what the seller offers you because you think it’s fair or right or correct, you could be doing your business a grave injustice. Your lack of initiative will also probably get perceived as weakness and ineptness rather than your sense of fairness and justice. You do not want that to happen right at the beginning of a business relationship with another person. It could mean that other side just keeps pushing for more and more concession which reduces your business benefits.

There is only one simple goal in a negotiation and that is to get the best deal possible. Another thing that needs to be understood about negotiating is that almost every single thing is open to negotiation. Right from the smallest purchase to the biggest transaction, everything is negotiable if you know how to approach it and are not afraid to take the issue of price and a better deal head-on.

The trick is to know how to approach the negotiation, how to ask for what you want, how to juggle getting what you want and giving the other person something in return and when to know that you have got the best deal possible and stopping further negotiation before the deal becomes useless altogether.

The Importance of Negotiation In a Business

Good negotiation skills can never be overlooked for running a business successfully. Whenever you are running a business, a major part of what you do will involve transacting with other people. These people could be your suppliers, vendors, your customers, your bankers, landlords etc. Virtually every single key that you do in a business will be about transacting with another person. If you do these deals without negotiating or not being prepared to negotiate, you are in a way undermining your business potential.

Negotiation happens at all levels of a business. Right from the time that you start approaching bankers and lenders to give you money to start your business or you need investors to invest in your business so you can grow, you will need to negotiate. If you are looking for office space for your business, you should negotiate with the landlord. Even when it comes to selling your service or product to a consumer, you will probably face negotiation.

Before you can market your product to other wholesalers or retailers, you would have to negotiate for their own profit margin. Basically, if you ignore this important skill, it could be a possible setback to your business.

Even if you do succeed and do make a profit, you are not maximizing your business potential if you are not negotiating wherever you can.

Most of the people are scared of having to negotiate. Most of the people and especially the first-time entrepreneurs are extremely shaky about their ability to negotiate successfully. They are hesitant to do so. And not without good reason.

Negotiating can be a lot about play acting and may even require you to get aggressive.

Negotiating can also put you on the very edge of having to turn down a deal that you sorely want. But you must understand that when you’re in a business, negotiating the best possible deal for yourself is the highest priority.

Specially when the transactions are of the long-term nature, putting yourself through the initial discomfort and getting the best deal possible can save you hundreds of thousands of dollars in the long run. Basically, you shouldn’t be hesitant or self-conscious when you negotiate.

While larger companies have the luxury of being able to hire other people to do the negotiating for them, these people being professional negotiators, as a small business owner, you will probably not have this luxury. As a small business owner you need to step in to this important position and fulfill the role as a negotiator for your business. In our next few posts we will discuss what is business negotiation and how you can prepare yourself to negotiate well on business deals.

Alternate Funding Source for Buying A Business

Finding alternate ways of funding a business

Whenever you are short of cash you can try these alternative methods for finding the required funding and financing and for purchasing an existing business.

Use your future assets

After you have bought the business you are going to own the assets of the business. So you can use this fact to get a loan from banks, finance Company and factors. You can make a list of all the assets that you are going to be buying along with any attached liabilities and present it to these financial and lending institutions to get the required load.

Using purchase order orders

Finance companies, banks and lending institutions will also be ready to give you a loan based on your receivables as well as on an existing inventory. Your existing equipment can be sold and then leased back from equipment leasing companies as well.

Seller financing

In certain circumstances you can ask the seller to provide financing. Many sellers may be agreeable to this kind of an arrangement because it might need a continued income for them. A seller financing should be easier for you to get because sellers are less stringent rules and regulations and to address less critical credit review than a lending institution. Seller financing is also flexible and you can come up with the the kind of arrangement that suits you both the best. You can structure a deal as you want and if they go to negotiate a payback schedule according to what is convenient to both parties. And some sellers will agree to bring down the price of business for continued perks such as a company, etc. Some may take notes of credit and a monthly payment on their financing as well.

Use an employee stock ownership plan

If you are going to raise capital immediately by selling stock in the business to employees, you may be able to get a business for as little as 10% of the purchase price. If you sell only nonvoting shares of stock you can still retain control of the business.

Lease with an option to buy

Some sellers will agree to ease your business and allow you to run it like you owned in the time that you can make a down payment you can completely buy the business. In the meantime you make a down payment and become a minority stockholder.

If you are short of money one way to reduce the cost of business is to either decline taking on the pending receivable accounts or by assuming the existing liabilities of the business.

Using a Business Broker When Buying a Business

business brokers are especially helpful for first-time buyers. They can be well worth the cost and actually help you save money by taking you through the negotiation process. A business broker can typically cost 5%-10% of the business purchase price. However, if you want to save money using a business broker, you should hire one in the later stages of the deal.

A business broker can help in the following ways

  1. Prescreening of business as already mentioned, business brokers are mostly higher by business owners who are looking to sell the business. A good and reliable business broker Williams refused to deal with the business if that business refuses to disclose full financial information or is overpriced. Such businesses could be potential risk for a new buyer and going through a broker will help you avoid these bad risks.
  2. Helping you pinpoint the right business a business broker can be of great assistance in matching you to the right business. When you explain your skills and interests to a business broker he can match you to the right business amongst the many that are available with him in his database and in some cases can even make a very clever suggestion of a business that you would have otherwise never ever considered but one that could prove to be ideal for a.
  3. Negotiating. This is probably the most important service that a business broker can lend a first-time business by. They will be aware of more points of debate and negotiation than a first-time buyer. They will help you and the seller stay focused on the ultimate cool and smooth over any problems that happen during the negotiation process.
  4. Assisting with filing paperwork and documentation completing a business for purchase is not easy. There are many technicalities to be looked into. The latest laws and regulations affect every aspect of my anger and running a business. Bloggers are usually updated with the latest amendments that affect everything from business license, permits and financing. We can help you speed up the paperwork process required for business filing, change of title, transfer etc. They can/many weeks and even months of the business purchase process. Working with a business broker also reduces the risk that you will overlook some crucial form, fee or a technical and legal procedure required for the purchase of the business.

How Long Is The Transition Period After Buying A Business

Business transition period

Will the buyer provide training? How long will the transition period be? Will seller be available after training period? Dealing with employees and helping them Adjust. Giving time to turn losses in to profits. Take it slowly and carefully.

The transition time involved with buying an existing business

The transition time is the duration that it takes for you to settle in after you have purchased the new business. Settling in means that the operations resume as normal, or the business starts working as you had intended it to before buying it. If you plan to buy the business lock stock and barrel and continue to run things as they were, you are going to have a smooth transition time. However if you intend to create a lot of changes, change marketing strategies, hire new employees or make radical changes in the functioning of the business, then the transition period is likely to be longer and more complicated.

Transition period

The transition time also includes the feelings of the business seller as well as the employees about you taking over. When the business seller is happy selling the business to you, he is going to be more forthcoming and helpful to help you take over the business, it is common for sellers to provide training for an agreed duration of time. The seller may also agree to being available over the phone or e-mail for a specific duration of time after this training is over. Any new training that you intend to provide to your existing employees is also part of the transition time.

When someone new purchase is a business, it can be a reason why the employees might feel insecure about their jobs. If you intend to keep employees in the business, you should also try and make them feel secure in their jobs as well as their future prospects with the business. The happier and more secure an employee of the business feels in his/her job, the more they will feel responsible for contributing to the growth of the business.

Takeover transition period

Building respect and appreciation from employees is important. When you first take over the business, try and include people in key positions in your future plans. Making radical changes without consulting or informing the employees might make them feel insecure in their current jobs. In order to have a smooth transition period and the least amount of problems with your employees, keep channels of communication open.

Taking on an existing business can have its own set of complications and difficulties but with hard work, and honesty you should be running things efficiently.