When to negotiate a small business deal?

We would like to share few tips for small, home and micro business owners regarding negotiation of small business deal.
Before embarking on any negotiation, you need to be highly prepared to comprehend your client.  There is a nice word “Blind Will” mostly used in business negotiation.  If you have ‘blind’ will, it will automatically help you give the upper hand to the other party.
You need to be very clear about your own motivations for entering business negotiation and also try to understand what the other party will be looking to gain from your service.
You should never give away or concede anything without getting something back from the other party in return. Evaluation skill is important at every stage of the negotiation. At every stage you need to weigh up whether a deal is even possible. While dealing, you make sure that the persons have enough authority to complete the deal, otherwise it is wastage of your valuable time. And ultimately you have to back out.
When it comes time to close the deal, make absolutely certain that all parties agree on the terms. The consequences of any deal are likely to last for some period of time (perhaps permanently) so it is essential that there are no misunderstandings or ill feelings.

Know about the consumer behavior and shopping decision before starting your small business

Before making your small business marketing strategy, you should know about consumer behavior and their marketing decision. The consumers think, feel, reason, and select between different alternatives such as brands, products, and retailers, before purchasing the products or services. And there is also a psychology of how the consumer is influenced by his or her environment (e.g., culture, family, signs, and media. This defines that how consumer motivation and decision strategies differ between products that differ in their level of importance or interest that they entail for the consumer, how marketers can adapt and improve their marketing campaigns and marketing strategies to more effectively reach the consumer.

A few trends that impact the market these days:

• ·        How rapid the product (or service) is going to be
• ·        What is the likely impact on consumption and its growth / trends?
• ·        Changing family structure and its future trend
• ·        Demographic changes of consumers in coming years
• ·        How is it going to impact shopping behaviors?
• ·        How is it going to impact the spending power and hence consumption?

It is true that spending habits varies on different sections of society and different demographic areas. But it is changing due to their growing disposable income, relative increase in the younger population and the change in attitude towards shopping.

In urban areas, rapid advances witnessed by India in areas like education, communication, information technology, transportation and retail gave created a sense of freedom in the minds of people. These advances have led to a paradigm shift in the way Indian consumers behave today. Consumers are seeking convenience at their doorstep for regular purchases, but are willing to travel to exclusive destinations for valuable items. With Indian consumers maturing to self-service formats, reliance on salesmen is on the decline.

But in case of rural market, rural consumers are fundamentally very different from urban consumers. A majority of them are farmers and naturally, the rural spending basket differs from urban spending, as it not only consists of personal and household items but also occupational expenditure like fertilizers, seeds, pesticides and so on. 

Consumer facing companies in sectors like goods, financial products, healthcare, consumer durables, personal care, household products and apparels need to be aware of such discontinuities taking place in their consumer base. It would be imperative for them to revisit their strategies to avoid being caught off guard.

Small businesses help in preparing for a more consumerist society

According to a study by the Mckinsey Global Institute, each consumer in India will spend over Rs. 200 a day, on an average, by the year 2025, steered by a ten-fold increase in the country’s middle class population and a three-fold jump in house income during this period. The aggregate consumer spending could more than quadruple to Rs. 70 trillion by 2025, from about Rs. 17 trillion in 2005. So it is understandable that Consumerism is likely to dominate the Indian market in the next few years.

India’s rapid economic growth has set the stage for fundamental change among the country’s consumers. The same energy that has lifted hundreds of millions of Indians out of desperate poverty is creating a massive middle class centred in the cities. Twenty years ago, urban India’s lifestyles and buying trends were a far cry from what we see today.

With limited choices, consumers purchased commodities from the few brands available. In 1991 India threw her doors open to international trade, and the situation changed dramatically and so did consumerism in India. Today, consumers are spoilt for choice and fully acknowledge that they rule the market. Manufacturers cater to their whims and give the consumer complete control of market trends. Despite India having a low per capita income, it still remains a lucrative market, even for costly products.

One of the key reasons is that small businesses are playing a major role to help in preparing a consumerist society for India’s large population. Small business makes India a consumption-led economy based country where public spending per Gross Capital formation is 40% while private consumption is 60%; among them, retail consumption is 62% whereas nonretail consumption is 38%.

If India’s small business can continue its recent growth, Indian consumer tends to associate himself with products that communicate the message of family values, traditions, care and affection.

Let us tell you activity wise what do small businesses serve at all?

Small Businesses are spread throughout the country and are economically significant in every region, although the balance of large and small businesses varies from region to region. These kinds of business form a very significant component of the Indian economy, in terms of employment to the Exchequer, and the role they play in the social and enterprise infrastructure.

But the question is what kind of services exactly they perform to carry out the economy of the countries like India?

·         Trading and repair services:  This is one of the predominant service activities in the country and consists of 13.95 Million enterprises, constituting over 61 per cent of the total service enterprises.

·         Hotels and restaurants: There are about 1.43 Million enterprises engaged in this activity.

·         Transport, storage and communication: There are about 3.18 Million enterprises engaged in this activity.

·         Financial intermediation: Around 0.14 Million enterprises fall under this activity.

·         Real estate, renting and business activities: 0.61 Million enterprises are engaged in this activities and a significant proportion fall under the category of micro, small and medium enterprises.

·         Education: Education services include 0.46 Million institutions who are engaged in research and development, teaching and training service.  

·         Health and social work: There are about 0.64 million entrepreneurs engaged in this activity.

·         Other Community, social and personal service: There are about 2.32 million enterprises engaged in this activity.

What are the limitations of Small business start-ups?

Owning a small business gives one the independence and freedom most people cannot enjoy. Owning a small business can also give the ability to connect with many other small-business owners through networking.

But before starting a small business one has to understand the limitations of small business start-ups, which are:

·         Low capital base,

·         Concentration of functions in one or two persons

·         Inadequate exposure to international environment

·         Inability to face impact of WTO regime

·         Inadequate contribution towards R & D

·         Lack of professionalism

And we have seen that due to slow down of economy in India and abroad, and particularly USA and European Union and enhanced competition from China, few small businesses have been facing a tough time. But those who have strong technological base international business outlook, competitive spirit, willingness to restructure themselves, could withstand the present challenges and come out with shining colours to make their own contribution to the Indian economy.