Monday, March 11, 2013

Let's Make a Deal: Why and What You Should Know

For anyone in the music industry, there will come a time when you will have to negotiate with another party. It could be to work out appropriate compensation for a performance gig, to broker a fair and mutually beneficial record label contract, or anything in between. For this reason, it’s a good idea to understand the art of negotiating and how to accomplish the goal of getting the best deal while still preserving the relationship of the person or parties with whom you are dealing.

There are many sources from which to get this education on negotiating. I will be reviewing three of these sources for this blog article to get you started on your way to feeling prepared to handle any deal-making session in which you may find yourself.

The first source comes from a podcast created by Elkay Corporate Advisors, whose business mission statement is “helping individuals, entrepreneurs, and business achieve success”. The interview in the podcast is with Greg Williams who is an internationally known negotiator. In his interview, he discusses the need for proper preparation for a negotiation. Greg says, “In any negotiation, if you do not put your emotions in the negotiation, you will be better prepared to walk away from the negotiation.” In other words, if you are emotionally involved, you will be more likely to make concessions that you may not otherwise make if you were able to be more objective. Greg also emphasizes how important it is to develop a plan prior to heading into a negotiation. He suggests that background preparation is critical in setting yourself up for a desired outcome. Being prepared is also another way to make sure that you can keep the negotiations based on objective criteria. It’s hard to argue against an industry standard or statistics, as they are facts, not opinions. This use of objective criteria will assist you in staying away from emotions during a negotiation. Greg also discusses how body language and facial expressions can be just as powerful during a negotiation as the words that are spoken, if not more so at times. I encourage you to listen to the entire podcast to see what tips you can glean from this ‘Master Negotiator’.

The goal of any negotiation is to create a mutually beneficial agreement for both parties. This not only leaves both parties feeling as if they got something they wanted, but this also preserves the relationship between the parties for further potential negotiations. In searching YouTube, I found a great lecture given by Joel Peterson at Stanford Business School called “Conducting Effective Negotiations”. One of the concepts (and there are many as this video is an hour lecture) Joel illustrates is having “Rules of the Road” or ROR. He gives an example of how he wanted to be seen as a negotiator who didn’t move on price. If he wanted to do a deal for a million dollars, he would get it at a million and nothing less. After several serial negotiations with one particular person with whom he negotiated 300 deals in his career, at about 50 deals in, the other party caught on to his strategy. The other party said to Joel that he simply FELT BETTER if he could negotiate a price. So he told Joel that if he was going to want a million dollars on a particular deal, to just start the negotiations at 8% to 10% higher than where he wanted the deal to be made. So Joel did this and the two were able to make 250 more deals over the span of 20 years using this mutually beneficial arrangement. Once Joel found out what the other party’s underlying interests were, it became easier to negotiate based on those interests. If you’d like to view the entire video to learn more about Joel’s experience and knowledge, I’ve included it for you here:

Finally, no blog post about negotiation would be complete without including something about a BATNA. BATNA is an acronym for Best Alternative To a Negotiated Agreement. This concept is one that will likely determine the fundamental dynamics of your negotiation. Obviously when you go into a negotiation, you and the other party are BOTH looking to get something out of the exchange. But what if your negotiations break down? What if they fail? This concept is discussed well in a video on YouTube from a company called The Voluntary Life. It’s useful to have a BATNA, as it allows you to understand what your worst-case scenario is if the deal does not happen. In other words, what are you going to do if you can’t reach an agreement? If you have a BATNA that says your company will completely fail if you don’t make a certain deal, then you are already entering that deal in a weak position. You also must think of what the other party’s BATNA would be. This will allow you to work out with what position the other party comes to the table. Using a BATNA allows you to come to the negotiation table with a clear picture of what will happen if you need to walk away. You can listen to this and many other helpful concepts from The Voluntary Life by clicking the video below:

I encourage any entrepreneur reading this blog to further educate yourself on negotiating. If you are in the music industry, you will need to have good negotiation skills to protect your own interests and build relationships with other parties that can potentially help move your career forward. If you don’t get the education now as you enter the industry, I promise you that there will come a time when you’ll wish you would’ve heeded my advice. Thanks for reading, and happy deal-making!

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