Journey of a Serial Entrepreneur

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How to get from where you are to where you want to be

5 Steps to Better Negotiations

“Any business arrangement that is not profitable to the other person will in the end prove unprofitable for you. The bargain that yields mutual satisfaction is the only one that is apt to be repeated.” B. C. Forbes

Most of us take part in some form of negotiation everyday. In life, skilled negotiators are able to close better deals, and reach mutually acceptable agreements faster. Ever since I undertook this entrepreneurial journey, negotiations seem to have become common place. I have come a long way from my early negotiations, at that time, very often I did not get the best deal possible . Experience however is a great teacher, and although I have made many mistakes in the past, I have also learnt much, which has honed my negotiation skills . Listed below are some key steps to be undertaken during negotiations, to ensure that a mutually acceptable agreement is reached quickly, fairly and efficiently.

1. Motivations & Interests: At the heart of every negotiation, each side has a set of motivations and interests which enable them to take  certain positions on issues. Before beginning the negotiations, identify  your personal motivations and interests for resolving the issue at hand. Internal clarity helps greatly to communicate your message. Next, we need to understand the other side’s position, as also why they have taken it. What are their motivations and interests on the particular issue? The initial round or rounds of negotiation need to include candid discussion to ensure as clear a picture as possible. To read specific examples please click here.

2. Focus on the Problem: The entire objective of negotiating is to find a mutually acceptable consensus. To ensure that this objective is achieved, we need to keep the process as simple as possible. This requires us to understand each other’s perceptions to ensure that we are on the same page. It also requires us to keep emotional baggage off the table. Lastly, we need to ensure that during the negotiation process both parties communicate clearly, and listen attentively. At the same time, we need to be aware of non verbal communications as well. Being focused on the issue and not deviating ,greatly improves the speed at which to reach an agreement. To read more specific examples please click here.

3. Develop Options: The objective of the option development phase is to arrive at a set of mutually viable and beneficial options. To reach this objective much collaborative work is required. We need to have several candid sessions whose sole purpose is to chart out maximum number of options. Each side has to ensure that its position’s and interests are clearly communicated, with the entire focus on how to maximize expectations by working together on a macro level. To read more specific examples of developing options please click here.

4. Alternatives: These are options which form our backup options if negotiations break down and agreement cannot be reached. Before the negotiation process, one should clearly list down all the available alternatives related to the issue at hand. Then list down possible alternatives that the other side may have. This gives a better understanding of how much room there is to negotiate. Alternatives are vital negotiation tools and need to be used tactfully to ensure that a fair agreement is reached. To read more specific examples of alternatives please click here.

5. Objective Criterion: These are benchmarks which provide a fair assessment to rate particular options against. Negotiations which use objective criterion’s usually result in fairer agreements. Therefore it is important that before one begins negotiations, criterions are researched and decided upon. Whether it is for purchasing a business or negotiating a salary increase, one needs to identify quantifiable metrics which can help make the decision making process easier and fairer.To read more specific examples please click here.

Negotiations are usually not very straight forward. Much of the time, emotions get in the way which complicates matters dramatically and frankly confuses both sides on procedural matters. To say that we need to keep all emotion out of the picture is not possible. What we need to do is to exercise a great deal of self control, and constantly put ourselves in the shoes of the other side. Only once we begin to see negotiations as a two-sided process will we be able to progress to becoming a more skilled negotiator. I wish you the best of luck in all your future negotiations.

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Objective Criterions

“Here’s the rule for bargains: ”Do other men, for they would do you.” That’s the true business precept.” Charles Dickens

Most of us have at some time, played the high-lowball game during negotiations. For example, a while ago I was attempting to buy a domain I wanted. The seller had a listed price of $500, I put in a lowball offer of a $100 dollars straight off the bat. The $100 I offered, had no actual basis and was nearer to the $200 or so I wanted to actually pay for the domain. The seller and I had a number of correspondences back and forth, and a deal was struck around $230. Did I get a good price? Was my reservation price, one that had a logic basis? Unfortunately I could not answer any of these questions.

It therefore got me thinking, that having objective criterions are necessary to ensure that both sides get an optimal deal. In the case of the above example, companies such as Sedo are able to calculate the true worth of a domain through several established criterions that include, estimate of the domain name’s value, list of recent comparable sales, search engine friendliness, branding potential, legal situation and even, possible buyers. This estimation establishes the true worth of a domain. If the had seller relied and gone with such a report from a trusted authority, stating the domain estimate at $500, I would have had very little room to negotiate a price which was substantially lower. We can therefore see, that by adding objective criterion’s to negotiations, we can optimize the value created on the whole.

It is therefore recommended, that whenever you enter into a negotiation, be it changing terms of payments with your supplier, a salary increase for your staff or the sale of your business to a private equity firm, do research regarding the metrics that can be used fairly, to add objectivity to the negotiations. It is important that the criterions proposed are acceptable to both sides. A key characteristic of skilled negotiators is, they are always prepared. They know their underlying interests, the options available,  available alternatives, and a list of objective criterions to reach an optimal agreement for both sides.

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5 Steps on How to Make a Decision

“When you cannot make up your mind which of two evenly balanced courses of action you should take – choose the bolder.” William Joseph Slim

Over the course of this last week I have talked about the decision making process. This process can help us in making difficult decisions. The process forces us to take action and to move from one step to the next in a continuous flow. Standing still has to be avoided at all times. From a business perspective, not being able to make critical decisions or to keep delaying them, will eventually lose you any competitive advantage you may have had. The world unfortunately does not wait for us to find the right time or right opportunity to make a decision. Listed below is a methodology I use for decision making:

1. Objective Clarification: The first step when making a decision is to look at the larger picture. Decision making is not an isolated process of just meeting specific needs, it is one in which broader goals and aims have to be taken into consideration for the future. It is only after clarifying what we hope to gain or learn from the decision we take, do we move to the next step. To learn more on how to clarify objectives behind a decision please click here.

2. Data Collection: The second step involves getting all the facts and figures required to make a decision. This could include, research, surveys, feedbacks or any other form of data collection which would provide us with information to help make a decision. The truth is, it is not possible to have all the facts and figures specially in a time bound situation. Life is about making optimal choices based on, often incomplete information. One must not let lack of data hinder us from making decisions. To learn more about data collection please click here.

3. Listing Options: Once we have adequate data about decisions we have to make, the next step in the process is to develop a list of alternatives. The purpose of this list is to put down on paper different options available.There will always be several possible alternatives available when one has to make a decision.Making an endless list of possible alternatives is not wise, and frankly, will waste a lot of time. Be specific in what you want and develop your alternative list accordingly. To learn more about developing an option list please click here.

4. Evaluating Options: I use a simple model which helps rank options according to our objectives and weight-ages given to specific factors. This enables us to rank each option in an unbiased manner and helps to gauge how they compare against each other on a holistic level. This model is developed on the basis of the prior 3 steps discussed. To learn more about the model and how to use it for your decision making process please click here.

5. Making a Decision: After successfully completing the four steps outlined above, we reach a point where we should have enough information to make a decision. Most of the time, we will not have all the information required, life is all about making optimal choices based on incomplete information. We should not let this affect our decision making process. Once a decision has been made, one needs to take responsibility for it and ensure follow through. To learn more about the final step in the decision making process please click here.

If one were to look back at life, there are bound to be decisions which, in retrospect were not the correct one. The important thing to remember is not the fact that one made a wrong choice, but whether we learned from the mistake or not. We should not let past failures inhibit us from making similar decisions in the future. If one were to take such an approach,  very little progress forward would be made. As mentioned earlier, life is short, we need to have the courage of our decisions, confidence to trust our gut instincts, and keep moving forward. I wish you all the very best on all your life decisions in the future.

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Can you make a decision?

“In any moment of decision, the best thing you can do is the right thing, the next best thing is the wrong thing, and the worst thing you can do is nothing.” Theodore Roosevelt

After weighing all possible alternatives, a decision making point is reached. This stage in the decision making process is where many individuals face problems. Some of the reasons I come across quite regularly for this are; there is inadequate information, I have received mixed reviews from feedback which has further confused me, I want to put this decision off for a while to think about it more, I cannot make this decision alone and, what if I make the wrong decision? These are all valid reasons to put off making a decision. However, if this becomes a recurring pattern in life, then, very little progress would be made when a difficult problem arose. 

Once our homework is done, and we believe we have adequate information about the decision at hand, we have to take a leap of faith. Waiting for the perfect situation, the perfect business opportunity or the perfect partner will invariably hold you back. We have to be proactive and want to move forward, this not only increases confidence, it provides invaluable experience and feedback. It is in moments of decision that we find out who we really are, and what we are made of. Use these opportunities to showcase your skills and abilities rather than shying away from taking responsibility. 

Once a decision is made, the next most important aspect of this entire process is, follow through. We have to be a 100% committed to the decision we make, and take full responsibility for it. This is not a time for excuses or getting cold feet. We must prove to ourselves, as to those affected by the decision that we have what it takes to execute the decision. If one makes a habit of changing one’s minds after taking a decision, this reflects poorly on character and value systems. In business, such a person would be deemed unreliable, and lacking the confidence required to take responsibility. Hence, next time you are put in a position to make a decision, do your homework well ,and when ready, make the decision and follow through. As an added benefit, the feeling one experiences after making a correct decision is amazing, and should be the end goal every time!

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Ranking your Options

“Choice of aim is clearly a matter of clarification of values, especially on the choice between possible options.” W. Edwards Deming

 Once we have developed a list of alternatives, the next step in the decision making process is to rank them. The ranking process requires basic elements to keep it simple, yet effective. The first element required is developing a criterion list to assess all your possible alternatives against. Listed below, you see an example alternatives list I have created for the laptop example I mentioned yesterday. For this example I singled out what I felt were the most important factors. The same example can be adjusted for just about any decision. Whether you are assessing a new car, business idea, partner, employee or a potential investment opportunity. Develop a list of criterions against which you can assess all the available alternatives. It is important to rank all the alternatives against chosen criterions. 

The next element that is required is, assigning weight ages according to your preferences. I used a 10 point scale for this example, however, there are other ranking scales, and I have personally used a 100 point scale as well. This depends entirely on the complexity of the decision, and the number of criterions being used to assess each alternative. The next aspect is to assign specific scores to each option, based on the criterion. I have used a 5 point scale for the assessment in the example below, 5 meaning, very satisfied and vice versa. After you grade each criterion, multiply the scale score with the assigned weight-ages. Finally, add each options total score, and you have a decision based on resulting total scores for each alternative.

Laptop Rankings

A further complexity to the model above,  particularly when making business decisions, is to add a risk component. I left this component out of the above example to make it easier to understand. Adding a risk component can help you weigh the risk-reward ratio of each alternative. This has been very helpful to me when assessing different business opportunities. The model described above, brings together all the factors we have spoken about in the last couple of days. It is important to understand the logic behind each of the components, and the manner we arrived at this stage. Once we have a total score, we are ready to move to the last stage of the decision making process.

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