There are almost as many ways to negotiate as there are deals to be negotiated. Tactics that prove effective in one deal might not work in the next, and what works for one wheeler and dealer may not for another. While nothing is absolute, the following case study can illustrate how one expert looked at a situation then exerted his influence in negotiations.
With Florida's Key West Key Lime Pie Co. something as seemingly innocuous as pie crust affected the negotiations when selling a stake in that business.
When Marcus Lemonis of "The Profit" visited the company and met with its owners, Jim Brush and Alison Sloat, he was shocked to discover that the crust was store bought. Why should that make a difference?
Lemonis' top negotiating tips lay out the mistakes made by Jim and Alison, and why the crusts on their desserts matters.
1. Always know the facts.
The first one is basic, but important. "If you haven't done your due diligence, you're going to be at a significant disadvantage," Lemonis said. The owners of Key West Key Lime Pie thought they knew how he was going to negotiate, and didn't focus on knowing their numbers and the facts behind the numbers. This "was a great opportunity for me to devalue their business," Lemonis said.
2. Always know your leverage.
In addition to thinking they knew their numbers (and being wrong about that), Jim and Alison thought they had a valuable proprietary recipe for their pies. But they used a crust that anyone can get at the store, and Lemonis said, "everybody knows the most important part of a pie is the crust."
"So their leverage flew out the window," Lemonis said. In addition, he thinks Jim and Alison were unaware of where they were lacking and thought they were negotiating from a position of strength. "And if you don't know your leverage, and you don't know where to find it, you're gonna fail very quickly in negotiating."
3. Don't talk too much.
It's true what they say about having two ears and one mouth, especially in negotiating. Sometimes less is more, Lemonis said, and the more you talk, the more opportunities there are to trip yourself up. "Listen to what their hot buttons are. It's a little like playing chess. In order for you to make your next move you have to truly understand what their move was. And if all you're doing is talking you're never gonna understand the next move."
4. Don't assume that the first offer is the worst offer.
It may seem counterintuitive, but for Lemonis, his first offer is his best offer. "It's better to assume that people are genuine in their first offer. I like to negotiate and sit down with people and have them really feel like I put a lot of thought and a lot of foresight into what I'm offering them. And when I make that offer I give them the rationale and the reasoning for my offer."
He finds the pushback on the first offer annoying, although he concedes that there are times the other party has figures or analysis he wasn't aware of or didn't consider, but says most cases is just arguing for argument's sake, because it's expected in negotiating.
Two subtips: Think through what the other person really offered before you respond, and make sure you react with facts and figures that support your position, not just to defuse or defeat their position.
5. Never misrepresent the facts.
This is the most important tip when negotiating with Lemonis. "The worst thing you can do in a negotiation, and I see people do this all the time, is to withhold information," he said. The truth always comes out, and with it the deal crumbles or must be renegotiated.
With Key West Key Lime Pie, it comes back to not being forthcoming about the crust. "They thought that the pomp and circumstance of Key West and Key limes was gonna make a difference. But in the end the product is the only thing that matters."
The company showed what not to do when negotiating with Lemonis in particular.
—By Colleen Kane and Jeanine Ibrahim.
For more tips to overhaul your biz, tune into CNBC's "The Profit," a reality series with multimillionaire Marcus Lemonis taking control of struggling companies.