Getting the Right Deal (Creative Industries): A Sound Guide in Negotiation

GETTING THE RIGHT DEAL

A SOUND GUIDE IN NEGOTIATION

Whatever product or service you offer, it is important that you have a good understanding of negotiation skills. Poor negotiation in the short-term can mean massive problems in the long-term.

INTRODUCTION

Negotiation is a process whereby two or more parties discuss conflicting issues with the aim of arriving at a point of mutual agreement. Negotiation, by its very nature, means to compromise. Usually when two parties wish to enter into an agreement, a contract between the parties outlining the terms and conditions of the agreement is mutually agreed. It is highly unlikely that both parties from the outset would be expecting exactly the same terms and conditions. Hence there is the need to negotiate, to find the common ground, to reach a compromise situation that both parties find acceptable.

Strong negotiation skills are fundamental to achieving and sustaining career and business success. Those who want to get better results need to develop effective negotiation skills. A lack of ability in this area can be the single largest contributor to preventing people getting what they want. So negotiation is vital to control and direct events to your own advantage and to achieve a better quality of business, with fewer expensive concessions.

Today's increasingly competitive music business environment is changing the nature of the buyer/supplier relationship. As a result, there has never been a greater need to develop conflict resolving negotiating techniques to defend you against the tough operators in the music business.

Some hardened negotiators learn about your negotiation skill-level from their interaction with you. They also learn your limitations and techniques in post negotiation analysis. It is best to be prepared and avoid exposing your position as this might give the other party an undue advantage.

PLANNING TO NEGOTIATE

It can be a good idea to allocate a negotiator, for example your solicitor, if you are not willing to fulfil this role yourself. However, be aware of the cost of employing someone to negotiate for you. Alternatively, you may wish to have a number of people supporting you in the process (for example, your business partners) creating a 'negotiating team'.

So how do you accomplish the overarching goal i.e. get the deal you want?

For the best results, begin with effective preparation. Find out who you are dealing with and ask yourself some fundamental questions before you enter into negotiation.

1. What do they want from you?

2. What do you have?

3. Do you need them?

4. Who else might want it?

5. Does anybody else have what you have?

6. What might someone else be prepared to give for it?

7. Are you willing to concede anything and why?

Information is important as both parties need "facts" to support their arguments. Negotiators have to collect the information they need, analyse it and if it is not just you negotiating make sure that each member of the negotiating team has a say in its interpretation. The chances of success are improved if you can predict what you will hear from the opposition. You must be prepared not only to put forward your own arguments, but respond to arguments put to you by them.

Estimate the importance of negotiating in the first place. You can do this by determining what the effects will be if no agreement is reached. This will highlight what the real issues are that you are negotiating. It will make you think about what you have got to lose, whether you are pushing in the right areas and what happens if you walk away.

You need to consider if you are in as strong a position as you first thought. Take for example, if you are an artist, how many management companies are interested in representing you? How many labels are attempting to sign you? Or, if you are a manager, are you really in a position to take on this responsibility? Can you deliver what is required?

An appreciation of value of what it is your buying or selling is vitally important. Whatever you are offering, it has to be of value to the person you are negotiating with. It has to be good for both parties or it will be a non-starter. Realise the importance of the differences between cost, price and value, and work with these.

For example, cost is how much the concessions may cost you, price is how much you want to charge for it and value is what its worth to the other party. Take this simple plumbing analogy; the cost of a tap washer is 10p, the price to fit it is 10 minutes of time, which is £10, the value to the other party is that it doesn't ruin their bathroom carpet and destroy the living room ceiling plaster at £500+ to repair. Therefore, I am charging you closer to £500 than the £10.10p.

With this information collected formulate a strategy. This will help you to achieve your objectives. Developing a strategy could include the following stages:

• Creating/agreeing objectives
• Allocating roles - e.g. chairperson etc
• Prepare your case and consider the opposing team's position
• Create an agenda

It is also a good idea to have a Plan B or even C & D. If both parties agree on their plan B, it can be much more beneficial as both sides feel as though they have gained some ground or have achieved something of value.

CONDUCTING NEGOTIATION

Each side has goals, interests, personalities and persuasive abilities, and once engaged in the process, itself becomes a factor. Don't assume you are strong and they are weak or vice-versa. Remember, the goal is to complete the deal you want. Create your own agenda or draw up an outline of what you want to discuss. This has an influence on the outcome of the negotiations and ensures that you do not miss any vital points of what you want to achieve. Take notes as you go along, as this will help keep clear what you've already agreed. If you have to make concessions, make them in reverse order of importance (you should be aware of any concessions from the planning stage), but only in order to gain something in return.

The Vital Do's and Don'ts

Don't negotiate unless you need to. If you think what you have to offer is such good value then stick to your guns. Consider it non-negotiable. Always evaluate your needs honestly and buy/sell hard; never, if possible, negotiate as it always requires compromise, which costs. Some people are tempted to negotiate too soon; just because the other party assumes they are at the "negotiation phase" doesn't make it so. Work out your ideal position, don't be afraid to state it straight away and stick to it unless you feel you need to move.

Never accept the first offer. There are a few reasons for this. There is almost always a different or better offer behind it. Don't forget who you are negotiating with will instinctively or professionally, with their opening stance, be leaning towards their ideal position with probable room for manoeuvre. For example "We would like to offer you a 1-album deal with nothing up front". Of course, that's only what they'd "like" to offer; what you get might be better if you refuse this.

Also, be aware, that you can sometimes annoy the other party by breaking this rule; if you accept too quickly they will think they should have asked for more or less, resulting in a new perception of a lose/win conclusion (they lost, you won). Equally important is the reverse approach; never make the first offer (if you can help it). Try to get from the other party what their ideal or target price/position is.

Listen more and talk less. Good negotiators lead by listening, not talking. Let them ramble on even if its rubbish and frustrating. You must bide your time and bite your tongue. Continued silence will provide you with the opportunity to pick off their position by them leaking their position by talking too much. Also, don't forget, whilst you are listening you can't leak your own position and give them the advantage.

Never ever negotiate with yourself. People regularly try to second guess the other party and in doing so minimise their own expectations i.e. "I want a 3-album deal and to be paid £10,000 up front. But maybe they don't have that much? If I ask for 'around' £10k, and 'perhaps' a 2-album deal, it might sound less aggressive". The principal you should remember is that of high ball, low ball. If you are going into the negotiation asking for the highest price (high ball), be sure you go in at your highest price. Don't question yourself. Equally they might come back with their lowest offer (low ball). The negotiation process will lead you to an acceptable middle ground.

Don't offer free gifts. Always ask for something in return, as no one values a free gift for long (it immediately decreases in value once it has been offered); a free gift today becomes tomorrows starting point i.e. if they say they want you to perform for a lower fee, only accept it if they will pay cash in advance. Don't forget free gifts are not always money, but can be the disclosure of useful information or even giving up your time too easily.

Never disclose your bottom line: not before you start, not during the discussion and never after a successful win-win conclusion. You will insult the person you've just done the deal with and that good relationship you've just created will be in tatters.

Never make a quick deal: a bargaining reply is always a good response such as, sounds good to me, let me think about it or can I call you back? This way, you're not giving anything away and keeping the other party happy at the same time. A quick deal can often end up in regret.

Check your understanding: It's often a good idea to check your understanding of their offer, by repeating it back to them. It may be that the other party thinks that they have seen an advantage for themselves (or mistake by you) that you have missed, so give yourself time to check the proposed agreement thoroughly. If you are negotiating in person, never be afraid to take a short break and leave the room to read a proposal or get another person to view or give you some feedback on a contract.

CONCLUDING NEGOTIATION

The decision about what to offer may have been the most difficult and important task in the whole process. The negotiation process is certain to produce a revised offer, which eventually will have been accepted or rejected. Preparing a brief written statement before the negotiation has ended will make it clear what both parties have decided, if agreement has been reached.

Closing - make sure you sense it, but don't rush; begin to summarise. Be aware of the last minute amendment; if this occurs establish what has been agreed is agreed. If it is agreed, then leave.

Remember, up to this point agreement may only have been reached between negotiators. This is of no value unless the groups represented by the negotiators accept it and make it work. Only when the terms have been agreed by the negotiators and the parties they represent, can the negotiating process be considered complete. It is then the joint responsibility of both parties to carry out and monitor the agreement.

You must have heard the saying 'the contract's not worth the paper it's written on'. Don't use this as an excuse to change your mind on an agreement you've made in principle, but not yet signed. A verbal agreement is legally binding; it is just that it is more difficult for those involved to establish the terms relying on oral evidence of agreements. If witnesses are present (for example solicitors) it may be possible to provide evidence of the agreement having been made. The best solution is to ensure that you state that the agreement is subject to contract. If you can, use a specialist lawyer to ensure any written agreement is clear on the terms you have agreed and is legally binding.

If you successfully address the above points then the result should be a competitive agreement that both parties are happy to roll with. The marks of a successful negotiation should pave the way for one agreement to lead into the next.


This Sound Guide is based on the '10 Rules of Negotiation' by Alan McCarthy, Managing Director of The Resource Development Centre

Further Reading

Music Deals: A guide to making contracts in the UK popular music industry: Harrison

Getting to Yes: The Secret to Successful Negotiation: Roger Fisher, William Ury, Bruce Patton

The Secrets of Successful Negotiation: Effective Strategies For Enhancing Your Negotiating Power: Juliet Nierenberg, Irene S. Ross

Start with No: The Negotiating Tools That the Pros Don't Want You to Know: Jim Camp

Further Information

www.mindtools.com/CommSkll/NegotiationSkills.htm

www.bizhelp24.com/personal_development/negotiation_skills.shtml

www.negotiationskills.com/. Fighting Fires Without Burning Bridges

www.bcentral.co.uk/issues/administration/financialmanagement/negotiatingapurchase.mspx

Specialist Solicitors

Brabners Chaffe Street: 0151 227 3185

Francis.McEntegart@brabnerscs.com, www.brabnerschaffestreet.com

Sheridans: 0207 079 0100, info@sheridans.co.uk, www.sheridans.co.uk

PFK Legal: Mark Forman, 0151 242 0744

mark.forman@pfklegal.com, www.pfklegal.com

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