Bringing legitimate data and analysis gives entrepreneurs leverage at the negotiating table and positions them to achieve the best outcome.
Negotiation is an essential skill for entrepreneurs in creating business relationships that provide value for each party and position you for growth. At its core, negotiating is about reaching terms that create a balance that meets the needs of both parties.
Achieving that balance is a natural struggle as both sides push to secure the best deal. Market and performance data and insight give you the leverage to ensure a fair and favorable outcome.
In this article, we’ll examine why data is the foundation that supports a strong negotiating position, how to employ the data, and how to leverage tech and advisors to collect, analyze and present insights.
Data is vital to supporting your position
Negotiating is a challenging endeavor. It requires a specialized skill set and experience. And in a tough economy where inflation is high, liquidity is low and supply and demand are in flux, it’s more difficult to find terms all parties to a deal (of nearly any type) will accept. You have to work smart to get the terms that will position your business to succeed while satisfying the other party’s expectations.
Some deals fail to produce optimal outcomes when one or both parties don’t have a clear picture of the economic and operating environment. Developing that sight (e.g. situational awareness) by collecting and presenting relevant data boosts each party’s confidence in the terms they can feasibly accept.
Moreover, pursuing a data-backed negotiation strategy ensures you’re making the best decision going into the transaction or agreement and that you know your financial and operational situation — and the criteria for a deal that won’t sink your ship.
What types of data should you collect? Some essential categories include:
- Macro, regional and niche market demand and supply indicators.
- Personal and organizational financials.
- Pro forma financial statements (revenue and expense projections).
- Asset, service and corporate performance benchmarks.
How to leverage data in negotiations
In what types of negotiation is data valuable?
For nearly all forms, but most commonly for entrepreneurs in the process of:
- Swaying investors and partners — raising capital.
- Leasing or buying operating space and equipment.
- Selling and securing products or services.
- Contracting with suppliers/vendors.
- Hiring staff — presenting employment offers.
How can we use this data in negotiations?
Most importantly, leveraging data in the negotiating process helps demonstrate the upside for both parties to the agreement. Even when the agreed terms aren’t ideal or what they were expecting, if they feel the outcome will improve their position and they got the best deal for the circumstances, a contract is more likely.
A crucial role of data in negotiations is supporting bidding and asking value/prices. Market data and performance metrics can demonstrate a sector’s demand and supply factors and relationships. Even if the numbers don’t work in your favor, they ensure all parties are comfortable with the terms. If the price or terms are contentious, comparable analyses based on market pricing and sales data can validate or encourage a reevaluation of pricing.
Objective data provide evidence of feasibility for your proposal and the stated objective. The perceived viability of your venture is fundamental when raising capital and pitching investors. Providing data that supports your market assumptions and projections, including demand fundamentals and market growth, makes your pitch more credible and facilitates investors’ due diligence processes.
Performance metrics pertaining to your assets, products, companies or units highlight your core competencies and illustrate your track record. Important data points include revenue, relative profit among offerings, expense ratios and numerous other KPIs.
Presenting these data points and insights in a polished and upfront manner lets your potential stakeholders know you’re serious, organized and equipped.
Leveraging tech and advisors to source, organize, interpret and report the data
The data and analyses presented are only as credible as the sources, methods, tools and analysts contributing to their aggregation and preparation. Incomplete, inaccurate or irrelevant data will undermine a deal as fast as a sinking foundation.
Therefore, a business or entrepreneur must have the systems, time and expertise to assemble and interpret the data.
To accomplish this, build an integrative strategy comprising data management technology and an internal or external team of analysts and advisors.
Data management and analysis systems, of which there are industry-specific solutions for most sectors, enable entrepreneurs to collect performance and market data continuously and automatically. The results are valid and timely insights available when they’re needed to formulate terms and evaluate counteroffers.
When time is of the essence, the best opportunities go to those who are prepared and ready to act with assurance. If your core competencies( e.g. your strengths or personal value proposition) aren’t in data research and analysis, there’s an opportunity to build an in-house and outside team of experts to bridge the knowledge and experience gap.
Additionally, respected team members enhance your organization’s credibility and capabilities.
Fair and fruitful
Introducing quality data and analyses into negotiations gives credibility to assertions and projections and validates any offers, proposals and ventures.
When offers and counteroffers are supported by objective data that illustrates why the proposed terms are fair and provide the most upside to both parties, reaching an agreement and forming a fruitful business relationship are simpler and more likely.