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Sunday, September 27, 2020

The primary role of a shipbroker in a firm negotiation

 

Response to my LinkedIn Poll 

Shipbroker negotiations 

Which one is the most important?

The primary role of a shipbroker 'in a firm negotiation' is 

a) To get the best price and terms for their principal
b) To pass on offers and counter offers in a timely and accurate manner
c) To bring a successful negotiation to a close as quickly as possible

Which one is the most important and why?

We had a great response from lots of experienced people in the industry 

Results from the poll are 

A) - best price and terms                            56%
B) - pass on offers and counter                  13%
C) - Obtain a successful and quick deal     31%

Brilliant - and like most things in life the truth is a matter of opinion. 

Here is my take on the answer that I think best suits the role of a shipbroker (and why)

My answer is C - The primary role of a shipbroker in a firm negotiation is to bring a successful negotiation to a close as quickly as possible. 

Here is my justification  

At its most basic this is the only answer that prioritised fixing - which is why a broker is hired in the first place. Secondly, I have sneakily included the word 'successful' - which can be interpreted than more than just fixing (eg Happy Principals). Finally, in the hectic world of international tramp shipping - time is of an essence. 

++

The is an old saying 'a quick deal is a good deal' and its true but not for the reasons that you may think. 

This has nothing to do with 'churning' or aggressively getting parties to accept things they otherwise should not. 

This is more a reflection of 25 years of negotiating shipping deals myself and also watching the best. Interestingly before I became a shipbroker, I spent my college years (5 of them) doing a retail sales job (to pay for beer and nightclubs) and in my academic career I also teach sales and marketing...

Here's my view. The best brokers (sales people, negotiators) have knack of getting things done 'relatively' quickly. Quicker than average or bad brokers. 

In my eyes, doing a quick deal has less to do with watching the clock and more about being the result of effective and highly advanced negotiation skills. In my course 'the VS dry cargo chartering and shipbroking certificate', I teach my students that every communication is an opportunity to bring the parties closer together - and hence should not be wasted. I have seen many brokers (and principals) lose deals because they have missed golden opportunities to solve obvious problems - quickly...

You will also note a quick deal is relative....so I'm not interested in absolutes like 20 minutes, or 1 day or 3 days....some deals take time!

BUT a good broker will pretty much always be quicker (eg; help complete a deal in 3 days compared to an average broker 6 days...or the bad broker might even lose the deal).

Why is time important?

1. The longer a negotiation goes the more likely it is that something will change that can upset the deal...

2. If a deal is taking a long time....the questions begs 'what's the hold up?'. A good broker is one that actively is looking for solutions to problems. In-fact a fixing machine pre-empts any foreseeable issue and can stop it from festering into something larger inevitablypushing the principals further apart - rather than closer.

This skill is a function of knowledge and empathy. Being able to put yourself in your principals' shoes can make you millions.

Principals shouldn't enter into firm negotiations if they aren't in a position to fix...so if there is a problem it's in everyone's interest to figure it out as quickly as possible. If one of the parties is stalling.....then figure out why and solve the problem!

3. The ability to 'close a deal'...

Despite the labels, Brokers, charterers and shipowners are people and people are different. Some 'people' are actually very cautious (some may say indecisive) negotiators and need a broker to get them over the line emotionally and financially...as uncomfortable as this may sound - it's the truth. 

Hopefully I don't need to convince anyone that it is a skill to 'close a deal'. This has been written about and studied for years (and it's a good thing) - parties can move on and be efficient in their next task....(another ship or another cargo).

One could argue that the greatest service a broker can provide is to 'get the deal done!' A stressed shipowner and/or charterer needs brokers who 'get the deal done'!

Relevance of closing the deal: case in point. Many shipping companies are now investing in sales courses for their chartering team. Many traditional chartering companies now employ people who have titles like 'business development, and 'sales executive'. This was not the case 10 short years ago. 

Finally, an uncomfortable truth (for the principals who are reading - I was a principal too remember) is that internally a broker is measured by 'revenue generated' not by 'did the broker successfully agree to everything his client says even if they missed the deal'...I have never seen that metric.

Before everyone screams!! There have been a number of occasions over 30 years that I advised clients not to take deals. 
  1. If the deal is obviously bad (poor rates, terrible terms)
  2. If the deal is with a bad counter party, 
  3. If the counter party is pushing a clause that exposes them to too much risk
No Deal!

And guess what? This is part of the brokers role - to figure that out very quickly and advise the client - so that they/we can pursue better deals. An average broker will not flag a potential large problem that will ultimately see the deal fail. A waste of time and energy for everyone and 4 days too late (market has changed, other potential matches have disappeared...etc etc)

Every communication counts - Get the deal done!

VS

The VS Dry Cargo Chartering and Shipbroking certificate..


Teaching you the things that others won't, don't..(and can't)



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