By Younas Chaudhary
- Understand context
It is important to dive down deep during the negotiation of a deal, fully understand the context, and ask the question: Why? Do a hard introspection and ask yourself why this deal is important for you and have clarity about the outcome. It is natural for all of us to be tempted to look out for what is best for ourselves.
So, in understanding context, try to find out: What is the prime driver for all parties? This may not always be money. It could be future growth, debt reduction, or long-term investments; or there might be an equity company behind the deal and so forth. It is essential that you fully know and understand all the players involved in a deal and the context before you begin the negotiations.
Remember, you must know well your own priorities and business philosophies. In my case, in the past few decades I have gone solo, as I do not like partnerships with investors. It is difficult to articulate the big picture to others, as is required with investors, and going solo has allowed me to have maximum flexibility while working on a deal with my own vision. I have freedom and a deeply satisfying sense of control over my business dealings, risks, rewards, and methods for negotiating and closing deals.
2. Learn both sides of the story
In our busy lives, we too easily forget to understand others’ worldviews. Yet behind every deal, every transaction, both parties have a story to tell, and it is important for us to understand all the parties’ perspectives and drivers. As such, you need to build trust and employ empathy to understand others’ perspectives. But make sure to also remember that it is a business deal.
In the early part of my career in the 1970s, I used to sell pots and pans and entered into a partnership deal with two friends in Canada. Soon we realized that it was not working as planned because our thought processes were different, so we closed it. In the 1980s, when I started in the oil and gas business, I entered into a partnership with high net worth investors in Kansas who for a long time were quite happy with their investments with me. But when the oil price dropped to $8 a barrel, I was quickly blamed for their loss, causing me to ultimately buy them out through their lender.
3. Decide on your tipping point
As you negotiate a deal, work on your tipping point, especially concerning price and terms. Every negotiation on price starts with my lower number and progresses towards my tipping point, and most deals get lost at some point in the negotiations of deal terms. Once I reach my tipping point, it is time to take a break from negotiation, sleep over it, and return with a fresh perspective.
4. Be steady
Our own temperament and impatience must not drive negotiations. I should admit I have had my failures when I was too cautious, conservative, or stubborn and did not let go at the right time. I have lost several deals in negotiation due to concerns about the deal terms. So, keep your calm, maintain a steady disposition, and be patient. In negotiations, time can be our greatest friend and our biggest enemy. Do not enter hastily into a deal; instead, be steady, calm, and collected.
5. Create a peaceful setting
Choose a peaceful setting to negotiate a deal. Find a place where both sides can be relaxed, rather than a stuffy conference room. Avoid places that intimidate you or that you dislike, and make sure from the outset to negotiate a time that works well for you. I am an early riser and a morning person, so mornings with breakfast keep my mind fresh.
6. Listen. Listen. Listen.
I cannot emphasize enough the value of listening while negotiating a deal. Be curious, ask questions, and spend 80% of your initial time listening. This will give you cues to where the other party is heading, as well as their strengths and weaknesses. And it will allow you to think of your stretch goal in moving numbers or adjusting your tipping point.
In 1985, in Kansas, when I had my first brush with a lawsuit thrown at me and faced the wrath of investors, I listened intently to one of the main investors. We met peacefully at a cafeteria, and I listened to what he said and what he wanted. That helped me frame an important question, and I asked him, “If I left all the oil properties in your hands, would you or any of your partners have the skills and time to run it?” He flatly said, “No.” I listened intently and then asked him, “So, how are you going to run these operations, make a profit at a low oil price, and pay off your large loan to the bank?” He said, “I don’t know and am quite worried. Let me talk to the other investors and the bank.” That talk soon led me to a very good deal that set me out on a journey for an even better deal!
7. Observe body language.
Body language and eye contact will give you clues on whether the other party is intently listening, uninterested, drifting, or animated. Your best strategy in a negotiation is to be patient and positive. Keep the same demeanor throughout the conversation; sometimes being emotionless helps!
8. Make bold asks.
Always make bold asks while negotiating and keep your eye on the prize. A jaguar that leaps has a purpose, so likewise make bold asks while keeping an eye on where you want to draw the line and score a win.
9. Be present.
I am not advising you to take a mindfulness class or do yoga before you negotiate a deal, but I would strongly encourage you to be present. You need to be cautious when you discuss numbers and terms with the other side or lenders, as they will often come to you well-prepared, with multiple scenarios that will be advantageous to them. Have a few scenarios in your mind as you drive the conversation forward, and always be present.
10. There are only 3 answers: Yes, No, or Maybe
Your outcome from a negotiation will be one of the following: a resounding yes, a firm no, or a nagging maybe. If you have negotiated well, none of these should make you feel worried. If the answer is a “Maybe,” then give it a day’s rest so you can sleep over it and rethink things. If it is a “Yes,” rejoice with the closing timeline. And if it is a “No,” just take comfort that it was destined not to be. I realized early on in my career that brooding over your losses does not yield anything. Just move on to the next deal and move forward fast!
11. Stay focused on the subject at hand, not the individual
In any negotiation, you are talking to a human being at the other end, and you might encounter several tangents of relationships that you may have with the opposite party directly or otherwise. However, the moment you blink, the negotiation will start to tilt to the other side. Be detached when you begin and be detached when you leave, irrespective of the outcome.
12. Always strive for a win-win.
A well-negotiated deal will make you feel satisfied and will give you an exhilarating feeling. And there is no better business than oil and gas or real estate to make such deals. At the same time, a deal gone bad because of an error in judgment on your part will haunt you for years to come. So always strive for a win-win.
There are no perfect negotiations or methods that can always secure us winning deals. But by practicing some of the key steps above, with consistency and hard work, you can create and make some amazing deals in the future!
Stay tuned to Tip #6: The Hard Out.
Find out more about me in my best -selling book “From dirt roads to black gold.” Note that 100 percent of the proceeds from the sale of this book will help people in need through my foundation, the YBC Foundation.
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