The opinions expressed by Entrepreneur members are their own.
Negotiation is an essential skill for entrepreneurs in creating business relationships that provide value to each party and position you for growth. At its core, negotiation is about reaching conditions that create a balance that meets the needs of both parties.
Striking this balance is a natural struggle as both parties strive to get the best possible deal. Market and performance data and insights give you the ability to deliver a fair and favorable outcome.
In this article, we’ll look at why data is the foundation that sustains a strong negotiating position, how to use data, and how to use technology and consultants to gather, analyze, and present ideas.
RELATED: The art of negotiation is misunderstood. Here are a few little-known tactics that I use to win.
Data is vital to supporting your position
Negotiations are a difficult task. It requires a special set of skills and experience. And in a tight economy, when inflation is high, liquidity is low, and supply and demand are constantly changing, it is more difficult to find terms that will be acceptable to all parties to a transaction (virtually any type). You have to work smart to get the conditions that will help your business succeed while meeting the expectations of the other side.
Some transactions do not produce optimal results if one or both parties do not have a clear understanding of the economic and operating environment. Developing this perspective (such as situational awareness) by collecting and presenting relevant data increases each party’s confidence in the terms they can accept.
In addition, using a data-driven negotiation strategy ensures that you are making the best decision when entering into a deal or agreement, and that you know your financial and operational situation, as well as the criteria for a deal that won’t sink your ship.
What types of data should be collected? Some main categories include:
- Macro, regional and niche market indicators of supply and demand.
- Personal and organizational finance.
- Preliminary financial reporting (forecasts of income and expenses).
- Assessment of assets, services and corporate performance.
Connected: 5 Steps to Mastering the Art of Negotiation
How to use data in negotiations
In what types of negotiations is data valuable?
For almost all forms, but most often for entrepreneurs in the process:
- Encourage investors and partners to raise capital.
- Rent or purchase of production space and equipment.
- Selling and protecting products or services.
- Conclusion of contracts with suppliers/suppliers.
- Recruitment – Submission of job offers.
How can we use this data in negotiations?
Most importantly, the use of data in the negotiation process helps to demonstrate the benefits for both sides of the agreement. Even when the terms agreed upon are not ideal or do not meet their expectations, if they feel that the outcome will improve their position and they have received the best deal for the circumstances, the contract is more likely.
The critical role of data in negotiations is to support bidding and asking value/prices. Market data and performance indicators can show supply and demand factors in a sector and the relationship between them. Even if the numbers don’t work in your favor, they ensure that all parties are happy with the terms. If the price or terms are in dispute, a comparable analysis based on market prices and sales data may confirm or encourage a reassessment of pricing.
On the subject: Negotiation expert shares Elon Musk’s deal tactics on Twitter that every entrepreneur should know
Objective data testifies to the possibility of your proposal and the stated goal. The perceived viability of your business is fundamental to raising capital and attracting investors. Providing data that supports your market assumptions and forecasts, including fundamental demand and market growth data, adds credibility to your presentation and facilitates investor due diligence processes.
Performance metrics related to your assets, products, companies or divisions highlight your core competencies and illustrate your track record. Important data includes revenue, relative profits among offerings, expense ratios, and many other key performance indicators.
Providing these data points and insights in a polished and open manner lets your potential stakeholders know that you are serious, organized and prepared.
Connected: 4 things to do during negotiations
Use of technology and consultants to acquire, organize, interpret and present data
The data and analysis presented are only as credible as the sources, methods, tools, and analytics that assist in their collection and preparation. Incomplete, inaccurate, or irrelevant data will undermine a trade as quickly as a sinking foundation.
Therefore, a business or entrepreneur must have the systems, time, and expertise to collect and interpret data.
To do this, develop an integrative strategy that includes data management technology and an internal or external team of analysts and consultants.
Data management and analysis systems, which include industry solutions for most sectors, allow entrepreneurs to continuously and automatically collect performance and market data. Results are valid and timely information is available when needed to formulate conditions and evaluate counteroffers.
When time is of the essence, the best opportunities are given to those who are prepared and ready to act confidently. If your core competencies (such as your strengths or personal value proposition) are not related to research and data analysis, there is an opportunity to create an internal and external team of experts to fill the gap in knowledge and experience.
In addition, respected team members add credibility to your organization and its capabilities.
Connected: Make your next negotiation win-win. 3 tips on how to do it.
fair and fruitful
The introduction of qualitative data and analyzes into negotiations gives credibility to statements and forecasts and validates any proposals, proposals and undertakings.
When offers and counteroffers are backed by objective evidence that shows why the terms offered are fair and provide the greatest benefit to both parties, reaching an agreement and forming a fruitful business relationship becomes easier and more likely.