Building blocks to a successful negotiation
Both sides must want something or else there is no point to be negotiated. Usually one side needs the bargain more than the other. The difference in this wants/needs equation is leverage. You may not have leverage, but you don't need to be at a disadvantage. The key is in your preparation.
You must anticipate how the other side will bargain. Is this someone who is a combative ‘hardball’ type negotiator or a compromiser? You can't change them, but you need to size up the person you are dealing with going in.
Assessing what the other side wants requires pre-negotiation preparation and research into the situation of the other side. You will only be able to estimate what they hope to achieve, but this information gathering is critical to setting your own targets.
Effective negotiators have a knack for developing a reasonable range of expectations but are not reticent about bargaining for a result at the higher end of the range. Know your limits. For example, do you negotiate as a problem solver or are you a competitor? You may need to get beyond your own style in order to get the best result at the best price for you.
Actors often say that every play involves three performances: the one you rehearse; the one you do; and the one you wish you did. The same adage applies to negotiation. No two negotiations are ever alike, and there is no one way to achieve the perfect result. More than anything, effective strategy is a function of planning. In this instance it’s all about the exchange of information.
This is usually a part of the initial stage of a negotiation where the tone of the negotiation is set. What can you say, and what are they telling you? Is the information flowing freely, or is the other side holding back? You should be probing for insight about their issues and goals.
What are the issues? What do you concede and when? One rule of thumb is to make big concessions on the little issues and stick to small, incremental movement on the big ones. This leads to the Commitment to the Bargain.
There is no point in getting the other side to say yes to everything you want if they can't perform or don't have a commitment to perform on the bargain. Unless you end up with a deal that everyone can live with, the deal is sure to fail and all you accomplished was to negotiate yourself into an expensive lawsuit if you don’t walk away soon only to try again another day.
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Ten tips for improving business survival and success
Here are ten aspects of business that the majority of business owners should be seeking to avoid or do less of during the year.
Despite the calls for banks and other funding institutions to lend more to the small business sector it is absolutely vital that you think carefully before taking on or increasing your levels of business or personal debt. Unsustainable national debt was the main cause of the current economic downturn and the burden of debt can ultimately harm or restrict a small business' ability to realise its potential or ability to continue to trade if sales dry up. If you can avoid taking on debt from the outset and rely less on borrowing once you're up and running then make sure you do so by bootstrapping or bartering instead.
Commercial disputes with suppliers, landlords, customers, partners and even employees prove to be costly, unnecessary distractions for tens of thousands of business owners each year. When you become irreversibly embroiled in a dispute they are exhausting for all involved and attempting to resolve them once the dispute has heated up is generally too late to achieve a harmonious outcome or settlement. You need to spot potential areas for commercial disputes and business disagreements as early as possible and settle them straight away. If you let a dispute or disagreement fester, even a little, the poison will inevitably become more venomous and costly.
3) Delays within your business
There is a saying in business that the length of time remaining to complete a project is always exactly equal to the amount of time already spent on it. Delays in projects, production, deliveries or the launch of a new product or marketing campaign invariably mean loss of income and the opportunity to earn. The more instances in which you can identify, reduce or eliminate the potential for delays, the more you will be controlling your costs and increasing your income.
Related to commercial delays are the activities and attitudes of people, especially your employees or sub contractors. If you have an inherently slow, lazy or under-productive member of your team, they could be costing you money every day. If they are unable to improve their productivity with extra support, coaching or training from you then place them on a formal performance review and (following proper legal procedures) they will leave your business.
Not being able to make your mind up about a commercial decision isn't good for your business or your own personal state of mind. Generally speaking, the longer you are in business the better you will become at being more decisive over issues you are not sure about. As a general rule, if you are in doubt about something then don't do it and move on. Or make a decision one way or another quickly, because even if it is the wrong decision it probably will not harm you as much as continued procrastination and inaction.
6) Hype in the market place
Similar to hyped-up statements about enterprise and entrepreneurship being for everyone, you should be suspicious of hype from any of your suppliers or business partners and avoid using hype and superlatives in your own marketing messages. Hype is generally a mask covering defects and unpalatable facts, or a signal that those who spew it do not actually know what they are talking about. As well as being wary of hype from others, remember that others will be suspicious of hype from you. In any business situation you will find that honesty, modesty and realism get noticed and appreciated more by customers, suppliers and staff than hype ever will.
Every business, product or service involves some unavoidable slack, waste and inefficiency that can generally be reduced. In what ways is your business wasteful either in time, unnecessary spending, over-producing or over-stocking? If you look closely enough at every single aspect of your business you will be surprised at how many little ways you can find to be less wasteful - hence reducing your costs - which in turn will either increase your margin or give you room to be more competitive in your pricing.
Being green, carbon neutral and environmentally friendly is great in principle but don't let this become an obsession and get in the way of being able to trade viably. In many ways, being ethical and green can be a distraction and unwelcome cost, although when approached sensibly it can be beneficial to your business finances, external image and trading opportunities. Being green is about being ethical while remaining profitable. After all, environmentally-friendly insolvency or a green bankruptcy is no use to anyone.
In an ideal business situation you will be striving for the best you can achieve, and having a perfect, defect-free product or service should be part of the vision for your business. But perfection in any business is (almost) impossible. Striving for perfection is sensible and should be your driving force. But at the same time recognising that your efforts will fall short of perfection is more realistic and manageable. Not quite reaching perfection this month or this year doesn't necessarily mean that you won't become best-in-class in your particular industry. Continually striving to improve, while remaining humble and occasionally admitting your faults will also get you noticed in the right ways.
10) Social Media
Before the emergence of twitter, Facebook, Pinterest and YouTube how did business owners network or promote themselves around ten years ago? While it is now true that social media networks can provide useful and often productive platforms for business promotion in many sectors, it is important to remember that spending as much time on face-to-face prospecting, picking up the phone, and maintaining your contacts and relationships could make a noticeable difference to your sales.
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Manage your clients’ payment expectations to get paid on time
We all understand that not collecting payments on time has as a severe impact on your cash flow, but let’s not forget also that you are effectively giving your clients, your debtors, interest-free credit, and this also has an impact on your cash flow and your profit.
Whatever the size of your business – start-up, sole trader, micro business, small business or SME – the remedies are the same. Follow these four steps and you will reduce the amount of money owed to you.
Send out the invoice as soon as you ship the goods:
• Call the client the day after you send out the invoice to check the invoice has been received and there are no issues with the goods or services supplied.
• Call the client five days later to carry out the same checks, so that there no excuses on that front.
• Call the client five days before you expect to get paid to make sure your invoice has gone into that month’s payment run.
Pretty obvious really, but it is surprising how many companies are not doing that.
DSO – Days Sales Outstanding - also known as debtor days. This is the average number of days your clients take to pay their invoices. Let’s take a business that has a turnover of £1,000 per day, typical of many small businesses with a couple of employees. If its clients owe them £75,000 then their DSO is 75 days – 75 days at £1,000 per day – that is what it means. So the DSO for your business is just the total debt owed to you divided by your average daily sales.
What does DSO tell us? Well, the £1,000 a day turnover company traded on 30 days terms so it could reasonably expect to get paid in 45 days – the end of the month following the month of the invoice – and it should have debtors of £45,000.
Just imagine the impact on cash flow of reducing the DSO to 45 days – a £30,000 improvement. Even a 10 day reduction in DSO would improve cash flow by £10,000 – certainly worth going for.
One factor that is often ignored is that companies may find they have to borrow to fund the excess credit they give to their customers. Our sample company could have an overdraft of £30,000 – essentially funding the gap between 45 days and 75 days DSO. The cost to them of funding that gap at an interest rate of 12% would be an additional £3,600 in bank interest, not counting the bank charges that go with it. That is an extra £3,600 cost to their business for giving their clients excess credit on interest-free terms – reducing net profit – madness really. You could save the cost of bank interest and increase your profit by improving your DSO and reducing your borrowing.
Strictly speaking DSO does not include your delay in sending out your invoices, but the impact is the same and the easiest way to eliminate that is to send the invoice out as soon as you have shipped the goods or supplied the service.
If you manage your clients’ payment expectations your customers will get to know when you expect to get paid. They will often delay paying their suppliers where they can get away with it to improve their own cash flow, but if you chase them – nicely – they will get to know you expect to be paid on time and they should pay you quicker than other suppliers.
So now go and build your relationship with your customer and improve your cash flow immediately.
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Manage the crisis
In a fast-changing, turbulent, highly competitive business environment, you will have a crisis of some kind every two or three months. You also could have a financial crisis, a family crisis, a personal crisis, or a health crisis with the same frequency.
When the crisis occurs, take charge. Here are the four things you should do immediately.
1. Stop the bleeding. Practice damage control. Put every possible limitation on losses. Preserve cash at all costs.
2. Gather information. Get the facts. Speak to the key people and find out exactly what you are dealing with.
3. Solve the problem. Discipline yourself to think only in terms of solutions, about what you can do immediately to minimize the damages and fix the problem.
4. Become action-oriented. Think in terms of your next step. Often any decision is better than no decision.
Practice thinking ahead. One of the key strategies for business and personal success is "crisis anticipation." This strategy is practiced by top people in every field-executives, managers, entrepreneurs, and leaders, especially military leaders. You practice crisis anticipation by looking into the future three, six, nine, and twelve months ahead and asking, "What could happen to disrupt my business or personal life?"
You need to have a contingency plan for possible emergencies and crises. What steps would you take if something went seriously wrong? What would you do first? What would you do second? How would you react? Develop a scenario—a storyline and a plan—describing how you would handle a negative situation, if it occurred.
A crisis, by definition, is a once-only, unexpected negative event. If there is a recurring crisis in your company or your life, one that repeats itself regularly, especially cash crises, then you are dealing with a deeper problem, usually incompetent or poor organisation. To ensure that the crisis does not repeat itself, after you have resolved that crisis for the first time, do a thorough debriefing on the problem. What exactly happened? How did it happen? What did we learn? What could we do to make sure it doesn't happen again?
Identify the three worst things that could happen in your business in the next year. What could you do today to minimize the damage from these crises?
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The speed of change
It's been a busy time for sourcing professionals (though, when isn't it?) with potentially highly significant political developments in the UK, US and Europe, the announcement from various corners of the globe of some hefty deals.
While more details emerged of how the UK government plans to tackle its planet-sized budgetary deficit and shudders continued to ripple through the Eurozone as Spain's credit rating took a hit and German public opinion hardened against bailing out the continent's more spendthrift economies, across the Atlantic the House of Representatives approved HR4213, legislation aimed partly at closing tax loopholes - including those for organisations "sending jobs overseas". We'll be looking closely at this legislation, and its potential ramifications for outsourcing globally.
All these topics and many more were debated at length by the great and the good of sourcing at SSON's 10th Annual European Shared Services & Outsourcing Week in Edinburgh in 2012 that will impact on 2013 and beyond. Highlights of the event included the G8 "think tank" (in which IBM's Bill Payne was a stand-out contributor); the "Thundering Hooves" of Horses for Sources Live; and The Hackett Group's Tom Bangemann taking home Thought Leader of the Year at the event's annual award ceremony.
One of the main bellwether's for measuring a global economy is the Print Industry. Now let us look at the largest economy in the world, America.
It`s often assumed that the printing industry moves in the same direction as the economy. In 2011/12, the USA commercial printing sector was an $88 billion industry, representing 0.61% of GDP. If the relationship it had with GDP in the year 2000 was maintained the commercial printing industry would have been a $149 billion sector. The statistics from 1993 to 2011, GDP grew by +52%. If the proportion to GDP the print industry had back in 1993 was still intact, the sector would have been a $176 billion industry. There is a missing $88 billion in sales. Business has become a struggle, with downsizing, liquidations/bankruptcies and defensive merger activity by print manufacturers and industry supplies. The power of the commercial print sector has declined rapidly. This factual story is mirrored globally.
When the printing press was invented in 1450, the population of Europe was 50 million people. The literacy rate at the time has been estimated at 1% = to 500,000 people capable of reading what was printed at that time. It took over 100 years to raise the literacy rate to 50%. By then the population was about 70 million people, so it took 100 years for the number of people who could read what was printed to hit 35 million people. Therefore, it took more than 100 years for the number of `users` of print to reach 50 million people.
• It took `radio` 38 years to reach 50 million people
• It took `television` 13 years to reach 50 million people
• It took the `Internet` 4 years to reach 50 million people
• It took the `iPod` 3 years to reach 50 million people
• It took the `iPad` less than 1 year years to reach 50 million people
• Facebook` added 100 million users in 9 months
• iPhone` application downloads hit 1 billion in 9 months
• 73% of children under 10 years old have a mobile phone (communication tool on many platforms) in the UK
The past is a story of the way the future has been disrupted by technology and innovation. The future is to learn about technology and innovation to stay ahead! The growth will be in China (1.35billion) and India (1.25billion) in the future as their populations expand at an alarming rate. These two markets are the fastest growing in the Digital environment.
Let’s now look at the relationship between information and knowledge. In trying to quantify the volume of information/knowledge in print and electronic form I sought some understanding of the inter-relationship of the two. At the turn of the last century our education, information, entertainment and business worlds in the developed countries were based on print. By 1998, our lives still revolved around print, but television, telecommunications and computers were usurping print's media monopoly of information distribution. By 2025, print will play a reduced role in communication and society, but it will still play a role in some form. The generalised volume of information in print and electronic forms between the years 1998 to 2025 will change dramatically. Therefore the future of print depends on whom you ask!
If you ask people in the Printing Industry, they will say `print will be around forever`. But, you ask a school student and you get a ‘different’ opinion. Unfortunately, your view of the future is clouded by your feelings about paper and technology ‘today’. When you ask the wider global population about their opinions concerning the future of print and ask them to envision new generations in the future and not themselves in the future, then these different generations have different perceptions about reading, print and communications.
The future prediction is based on computer use, mobile phones and the Internet, all as metaphors for ‘new’ forms of communication, the future generations have a tending more towards the screen than the page. Children routinely accept electronic substitutes for paper because we buy them more electronic items than paper items. Therefore, this and the next generation may finally bring about the paperless office due to the change in our ‘habits’, about 100 years after it was first articulated that paper was not needed.
The biggest challenge facing the printing industry today has become what almost seems like a "war on print" by those who produce and disseminate content. The advertising and marketing industry enthuses about online and even newer media 24/7-and has even taken to referring to print as "offline media." What the industry needs is not only to fight back and remind people of the effectiveness of print, but also to come to the same conclusion as its most successful customers: `that print walks hand-in-hand with other media.’
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