Some farmers seem to think negotiating is a full-contact sport. But it’s more than a game — it’s serious business.
Nothing feels better than talking your way into a great deal, like getting your dealer to lop a few thousand off the price of a new combine. Heck, some of us even get a charge out of haggling over a two-dollar bracelet on the beach in Mexico.
But the people you’re negotiating with often have an advantage. They’re highly trained.
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Ag retailers and financial institutions routinely ship their staff off to intense negotiating courses to sharpen their skills.
Should you sign up for a course too? It might not be a bad idea. More than many businesses, farmers negotiate almost every transaction, and your negotiating skills can easily make the difference between profit and loss.
If you’ve been keeping the farm afloat for a while, it’s proof you know the basics when it comes to negotiating.
The question is, can you get better?
The answer is, yes.
CHALLENGE #1:
Which works out better? When you try to win, or when you try to make the other guy lose?
Most advice on becoming a better negotiator starts with looking for a “win-win” solution. Yet at first glance, this doesn’t seem like such a helpful tip. Why not try to be the only winner?
But there are benefits to making sure the people you do business with will walk away happy (of course, not too happy).
It fosters a long-term relationship with the other party, based on trust and integrity. Maybe the next time they have a good deal on offer, they’ll call you first.
You’ll build a reputation as a fair negotiator and a reasonable person to deal with. Other fair dealers will be eager to have your business. You’ll also help keep your suppliers, buyers and neighbours in business, so they’ll be there when you need them.
Peter Neufeldt, president of Peak Performance Consulting in Regina, firmly believes in working toward a win-win outcome, and stresses that successful negotiators look at the needs of both parties.
“Some people consider negotiation as ‘getting my way,’” Neufeldt says. “These people may win in the short run, but in the long run, they’re going to be losers.”
Neufeldt sees trust and integrity as the keys to forming the relationships that are fundamental for creating long-term relationships with suppliers, buyers, employees and neighbours. “There are four potential outcomes in any negotiating situation,” he says. You might walk away feeling that you won, while the other party lost. Or you might lose while the other party wins. You could both lose (or not make a deal), or, ideally, you can both benefit and leave the table happy.
CHALLENGE #2:
What’s the best way to prepare for a negotiation?
The best negotiators are the farmers who research these three areas before they get out the brass knuckles.
Know your own operation. “An expert businessman understands his costs,” says Jason Hintze, who as sales manager at Western Sales, a John Deere dealership at Rosetown, is on the front line negotiating with farmers across a wide swath of Saskatchewan. “Once you understand your per-acre costs, profitability becomes easier to measure, and you know exactly what you need from a deal.” If you don’t know what you can afford to pay, how can you know if you’ve won?
Know the other party’s operation. This is harder, but the more you know about the other party’s cost structure and business tactics, the easier it will be to understand their bargaining position, to know what offers they’re likely to find appealing, and to reach an agreement that benefits both you and them.
Know the market. Track the going rate for what you’re buying or selling. You wouldn’t buy a used sprayer without checking prices, so why pay land rent without studying local trends?
Rachel Kraynick of the Saskatchewan Ministry of Agriculture says “Farmers are terrific negotiators, especially when times are tough. Gathering information before they start negotiating really contributes to this.” Then let the other side know you know, says Kraynick. “It’s important to lay the facts out.” Challenge #3:
Is it better to focus on price, or to negotiate terms?
Price has an advantage. It’s easier to know exactly where you stand. The trouble is, price isn’t the whole picture. Quality is crucial to the value you get for what you pay. So are terms. Often too, the best deal may not involve any cash at all.
It’s easy to make the mistake of thinking that the negotiation is about how to share a fixed pie. Instead, there are times when creative alternatives might increase the pie’s size.
The rule is, you’re more likely to reap these benefits if you make a point of being open to looking at them. Before you even begin negotiations, Peter Neufeldt suggests you set aside time to brainstorm creative arrangements that might be positive for both parties.
In equipment sales, Jason Hintze says negotiation isn’t always about the dollar amount. “Both the dealership and the customers have gone beyond price,” Hintze says. “There is a big difference between price and value.”
Most farmers would agree with Hintze when he says “You need to consider the value of good service, or the benefits of having fewer breakdowns with newer equipment.”
Value for money is one obvious aspect to consider. There are also all kinds of other non-price elements that can be useful at the negotiating table. Rachel Kraynick says her clients have negotiated all kinds of arrangements that involved non-monetary items. “Farmers are very creative,” she says. “A farmer who needs his hired hands to work extra hours might negotiate an arrangement that doesn’t involve money. Maybe the hired hand could use a piece of the farmer’s equipment for his own personal use. Or, in another example, a farmer could offer to put up some fence for a neighbour in exchange for the right to graze cattle on the neighbour’s land.”
CHALLENGE #4:
Is walking away a good pressure move?
Here’s a bit of jargon that it’s useful to know. Peter Neufeldt simply calls it BATNA, standing for your “best alternative to a negotiated agreement,” and he believes that good negotiators figure it out before they start talking.
What’s your fallback position if the talks don’t work out?
“You can’t always come to an agreement,” Neufeldt says. “You need to know what your alternatives are, and what they will cost.” For instance, if you can’t agree with the local terminal when it comes to grading your grain, how much will it cost you to haul further to another buyer?
Having a feasible back-up plan (your BATNA) before you start negotiating is like an insurance policy. Neufeldt advises that whether you should come to a final agreement at the bargaining table depends on the attractiveness of your BATNA. If you have a Plan B you can live with, reaching an agreement is much less critical.
Also consider the other party’s BATNA. If you’re the only tourist on the beach, that bracelet vendor isn’t going to leave you alone. If you’re a leader in your area, perhaps your business is worth more to the local fertilizer dealer.
An unappealing BATNA may push the dealer to negotiate terms in your favour. Or, maybe you negotiated so aggressively with the dealer the last four times you went in to buy chemicals, he’d be relieved if you take your business elsewhere.
CHALLENGE #5:
Is it better to be friendly, or keep a bit of an edge?
Just be yourself. While we may think that hard-headed negotiators have the upper hand, it’s essential to bring your own personality and sense of integrity to your business negotiations.
“Some people are very aggressive,” says Peter Neufeldt. “I was told about a farmer who got so belligerent at his local terminal that the staff finally asked him to take his grain elsewhere. They said ‘we’d rather not have you as a customer.’ I wouldn’t call that negotiating. I’d call it badgering.”
For many farmers, doing business in a way that garners respect in the community is almost as important as running a profitable operation.
Says Neufeldt: “Despite a general level of selfishness in society, farmers are generally great examples of demonstrating respect and helping each other.”
Sometimes it’s the person you’re sitting across from who seems to be trying to browbeat you into submission. Neufeldt suggests you realize that there are some people you simply can’t negotiate with.
They’re the people who make forceful assertions, who attack your ideas, or who even resort to direct attacks on you.
So if you can’t negotiate with them, don’t.
CHALLENGE #6:
How wrong is it to shift your position after the talks start?
Not wrong at all. Peter Neufeldt recommends you be open
to persuasion.
That isn’t a negotiating ploy. It’s a sign that you are interested in coming to a good agreement. Principled negotiation involves being open to persuasion when it’s merited by new, objective, accurate information.
Training can help you know when to compromise. Many provincial governments offer short courses in negotiating — sometimes in conjunction with other business or interpersonal skills.
So investing a few hours to do a bit of reading might help keep your business in the black. Or at least it can help you save that 10 per cent on a silver Mexican bracelet.
And remember, if you can’t save that 10 per cent, you can always negotiate with your feet.
No matter how good you get at negotiating, you will never be able to reach an agreement every time.
There will always be times when walking away is your best option.
Know when it’s time to leave. Then stand up, shake hands, and start implementing your BATNA.CG
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“ I wouldn’t call that negotiating, I’d call it badgering.”
–Peter Neufeldt
