In the best-selling business book, Good to Great, by Jim Collins – a key phrase and concept that is introduced and reinforced is the importance of management remaining in control and having the right person with the appropriate skills steering the bus (directing the future of the business). While the visual of a bus careening out of control down a highway may feel akin to how many businesses are managed, it need not be that way.
A successful colleague of mine shared a story recently that pointed out the importance of having the steering wheel in her hands and a knowledge of the roadmap to get to the destination desired. Five years ago, she entered the world of entrepreneurship and opened her business with a partner. At the time, real estate was at the peak and she paid an exorbitant amount per foot to set up her business. Given that she was an “unproven risk” to the leasing agent, the contact was heavily slanted to protect the interests of the landlord. Now, five years later – the dynamic has changed. The business has continued to grow, has never missed a payment and is an ideal tenant. Further, the real estate market has changed so that comparable leases today would be about 60% of the per square foot costs currently being charged.
My colleague did her research by starting to compare opportunities a full year before her lease was up. She did her homework on traffic patterns, where competitors were established in relation to her current business and at future sites, she determined competitive square footage costs for new and existing structures, and made sure to identify historical industry performance of current customers continuing to frequent businesses post-move to assess the impact to her business should she decide to relocate.
Beginning the Dialogue
Rather than just plan to box up all of the contents of her business and assume that she was going to have to move, she reached out to the current landlord to start the discussion well ahead of when the decision would need to be reached. Here is where she was confronted with the first roadblock. Numerous phone calls and emails went unreturned. Months of attempts to went without a response. In the meantime, she continued to educate herself and develop relationships with prospective landlords should she ultimately decide to move.
Finally, the leasing agent for the landlord returned her call and attempted to put her off with the following:
- We are a very large, national firm with numerous properties to manage (as if that has any relevance to my colleague’s business or should be a factor in how she pursues her business relationships?).
- We have a lot of leases to negotiate that come due before yours – we have plenty of time (they may have plenty of time, but my colleague did not care to wait and was not going to be “forced into a decision” to stay because there was no time to take alternative action).
- When the time is right, we will contact you with our lease and we can discuss it then (actually, she knew what the “going rate” is for real estate and there was very little to discuss or to negotiate. All she needed to know was what was the cost and the discussion was going to a real short one. Further, she decides as the customer when she is ready to buy – not the landlord who is selling).
The lease has not been signed for the new term just yet as my colleague is still working on securing some additional details from the prospective new landlord and will wait to see what offer the existing landlord provides. However, given how she has been treated to date – the probability of her moving has increased dramatically because the landlord has allowed a level of conflict to enter the discussion and has forgotten who has the leverage in this relationship given the change in real estate values.
The business lessons are woven throughout this exchange.
- Neither party should ever take the other for granted or assume that the other party will accept the previous parameters of a contract that is not reflective of the current environment.
- Refusing to talk with the other party allows for competition to gain an advantage by forming relationships that otherwise would never have developed.
- Deciding to attempt to strong-arm the other party in a negotiation just invites confrontation and unnecessary conflict.
- Time can be an ally or an adversary in negotiations. Not recognizing how to use it to your advantage can backfire.
The best business owners can learn a lot by remembering that the bus and all the passengers are under their control and knowing the roads and highways that will get them to their ultimate destination need not be left to chance.