Negotiation is part and parcel of the interaction of human beings on this planet. Individuals of different backgrounds, education, class, religion, and sex — to name just a few — have different ways of viewing the world. So when they need to do business together, they have to negotiate their way to understanding each other and reaching necessary compromises.
As vice president of global business development and licensing for Novartis, Milton Grannatt did lots of negotiating involving acquisition and licensing. The keys to success for him were business knowledge and simple courtesy during discussions.
Grannatt, a volunteer for SCORE — the nonprofit organization dedicated to helping small businesses get off the ground — will speak on “Mastering the Skills of Negotiation,” Tuesday, March 26, from 6:30 to 8:30 p.m., at the South Brunswick Public Library, 110 Kingston Lane, Monmouth Junction. For information, contact SCORE at email@example.com or 609-393-0505.
For small businesses engaged in negotiations, whether with a potential employee, a supplier, a purchaser, or with a bank to secure financing, Grannatt offers a few pointers:
Be able to acknowledge someone else’s lack of enthusiasm for your concept. People come into business relations with a perspective based on their own agendas, and the perspective of a business partner may well differ from your own. “People are going to see tremendous upsides with their own business,” says Grannatt, “but it is possible that a banker would be somewhat less enthusiastic.”
Most business negotiations are not one-off transactions like buying a house or a car, but should be helping to develop continuing relationships that will allow the small business to thrive. “In terms of business dealings, you are always going to the bank and dealing with the same suppliers, so you have to be building a cooperative relationship,” says Grannatt. Hence, the other person’s viewpoint must be acknowledged and taken into account during a negotiation. “You are trying to move from a potential confrontation to cooperation and building a long-term relationship.”
Most often business negotiations have to do with assessing value; for example, during negotiations for the purchase of someone’s retail establishment, a value must be attached both to the inventory and the entire business. “You definitely want to be able to get a reasonable price,” says Grannatt, but then he adds, “If you need to have this person help you get going, you have to be able to do it in a polite, courteous, efficient fashion where you are not offending the person either by offering too little or nickel and dime-ing them to death at the end.”
Don’t be rigid around price. When trying to sell a store, for example, don’t take an all-or-nothing stance on price. “You have to assess the environment — what your business is worth and what someone will pay for it — before you become obstinate about your position,” says Grannatt.
Do your homework by creating a strong business plan. The best response to a negotiating partner who has some doubts is simple, yet not all that easy. “Have a clear and well-reasoned business plan so that you can point to your answers in business language,” says Grannatt.
In a funding situation, for example, the question is typically “Why should I believe that you are going to be able to deliver on this?” A business owner should be able to point, in black and white, to the size of the overall market and to the relatively small percentage that the business hopes to garner, by competing in a way that makes sense — through better service or price, or greater convenience.
Grannatt has consulted with several starting businesses, for example, that want to provide a service similar to the Geek Squad at Best Buy, but in the office or at home. If they can provide better service at the same price, then they may have a real opportunity, he says. But if they need to answer a bank’s question about whether this is a good idea, they will need to do the necessary marketing research to find out what the total market is for this service and what portion of it they would likely be able to get.
Grannatt grew up in Ewing, where his father owned an insurance agency. He earned both a bachelor’s degree and a doctorate in economics from Lehigh University; in his dissertation he looked at the impact of building height restrictions. He met his wife, Pat, in graduate school; and she is retired after 30 years as a professor of sociology at the College of New Jersey.
His first real job was at Chase Manhattan Bank, writing articles for its economic newspaper. Then he moved to more transactional work at Lex Service, a London-based company that bought electronics distribution companies in the United States and ultimately became the second largest distributor, finally selling out to Arrow. Ten years later he moved to Sterling Drug, where he did strategic planning for five years, until it was sold to Sanofi. His last position was at Sandoz (which ultimately became Novartis), where he stayed for 20 years.
Grannatt is now retired but will soon be joining the board of a publicly traded Japanese pharmaceutical company.
Most business negotiations tend to be mathematical, showing how value will be shared between parties, says Grannatt, and not particularly emotional. In the pharmaceutical industry, where he spent much of his career, a drug has some inherent value based on sales, cost of development, and profitability. If the value is, say, $100, the issue is how much the seller is getting versus how much the acquirer should get. This value must be split, because the businesses will likely want to deal with each other again. “The solution is never $100-$0,” says Grannatt. “It is probably closer to $50-$50 or $60-$40.”