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Strong negotiation skills, once the fundamentals of commerce and the way business was done, had become a somewhat overlooked element in the workplace. But recently, as salary transparency pushes employees and companies to open up discussions about compensation, and CFOs look to keep the cost of products and services from cutting into margins, successfully negotiating transactions has become more important. Those executives who aren’t negotiating properly and productively leave money on the table and spend more than they need to.
In the world of small business lending, where brokers seek funding for small and medium-sized businesses, negotiation is the lifeline to income. Brokers must negotiate with the business they are seeking funding for and with the lenders to source the capital on behalf of their clients. Without good negotiation skills, neither a broker nor a funder could survive in the fast-paced business of high-risk lending.
Leaders from this industry, from funding companies that deal with dozens, sometimes hundreds of brokers daily, shared with CFO at BrokerFair in New York this week their thoughts on how leaders can secure more favorable deals.
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Much like when one makes a high-dollar personal purchase like a vehicle or house, research the market, product, location, sales team, and fees are needed to get the best deal. According to Juan Caban, managing partner of Financial Lynx, this approach can be used in corporate finance, too. Caban believes that good negotiation isn’t about the negotiation itself but the little moments of preparation that lead up to the conversation.
Juan Caban
“I always say when it comes to negotiation, be knowledgeable and prepared ahead of time,” said Caban. “Say you’re going to negotiate a car; you do your research. You see what similar cars are going for, maybe you call a couple of dealerships to see what the inventory is like, and you probably also research on the internet. You need to know what you’re getting into.”
I always let the other party talk first and see where they stand. If they’re unrealistic, I let them know. — Juan Caban, Financial Lynx
According to Caban, getting a good deal is all about the preparation. “You always need to know what you can negotiate and be prepared to do so,” he said. “If you understand beforehand what you can leverage, that’ll put you in a better position when it’s time to discuss prices. I always let the other party talk first and see where they stand. If they’re unrealistic, I let them know. You have to be upfront with what you want and if what they ask for is too far off.”
Regardless of what a CFO is buying, Caban advises them to have a number in their head and construct the conversation and presentation of value around that number with transparency and authenticity. “[A CFO] can say ‘we are more or less here, and you are here’, and put it on [the seller]. Say, ‘So how do we make a deal’?”
The idea of maintaining a relationship with salespeople and their teams can be a major benefit, according to Sonia Alvelo, CEO of Latin Financial. From just staying in touch to sending gifts for holidays, a little effort to build and maintain a professional relationship after a first deal can go a long way.
Sonia Alvelo
“Maintaining communication with the salesperson when buying and afterward can be a big help,” said Alvelo. “Try to make conversation, find out some stuff you have in common with the salesperson, and create an impression that you want to go back to that person again and again for their product.”
You have to make sure that you’ll pay as little as possible, so find the parts of the deal that may seem extra. — Sonia Alvelo, Latin Financial
Although buddying up with a sales team might earn you some friends, Alvelo made it clear that an element of sternness needs to come with a friendly demeanor. “You have to be tough, put your foot down and say how much you’re willing to pay, and sometimes be willing and able to walk away from a deal,” she said.
Alvelo said if she wants something that she knows will cost a lot, she does her due diligence to see what parts can be negotiated. “You have to make sure that you’ll pay as little as possible, so find the parts of the deal that may seem extra,” she said. “Closing costs, certain fees, things that may go unnoticed upfront can make a big difference [in] the overall price of the product.”
Unlike negotiating for B2B products and services, compensation negotiation can be a formality or a hurdle. As salary transparency has taken shape in law and culture, many employees have begun approaching and negotiating compensation without fear of the stigma it once carried. Jay Avigdor, CEO of Velocity Capital Group, says employee compensation should be presented as a package of value to get the most favorable outcome, not just an offering of a salary plus certain benefits.
Using tools like compensation structures, bonus structures, benefits, healthcare, vacation time, and more, Avigdor presents compensation as a grouping of all of those things to show value to an employee who may be stuck on a particular number for their ideal compensation. “One of the things that I try to do when I hire is show the dollar value of those assets to the candidate,” said Avigdor.
Jay Avigdor
“For example, if you are offering somebody $90K, with a 401k match including healthcare, and that person was looking for $110K with benefits, you can just present the package differently. I say it as, ‘I am offering you a salary of $90k, with a 401k worth $5K minimum, and healthcare worth about $12K, so the total value of your package is more than the $110K you’re asking for.’ Put a dollar value on the package, so the candidate realizes that the perks are not just a bonus but something paid for by the employer.”
As for salary transparency and workers sharing their salaries with colleagues, Avigdor and his team have restrictions that prevent that type of thing. According to him, the varying levels of experience and types of work in the industry make employees sharing their salaries bad for business.
“Compensation is a difficult topic to discuss,” Avigdor said. “We do a nondisclosure for all compensation. Our employees sign a document that says they aren’t there talking about their compensation package because certain people’s compensation packages might differ from others, depending on many factors, like a better college degree or more experience in the industry they’re servicing.”
