Negotiation 101

The process of achieving agreement through discussion (en.wiktionary.org/wiki/negotiation)

Negotiation is one of those things that scares people.  Our moms have taught us that we need to be polite, thankful and subservient to power.  While your mom may have been right in teaching you social skills, negotiation is a business process.You need to be strong, knowledgeable and flexible as you try to come to agreement, whether it is for a salary increase, buying a car or selling a company.

First off, you need to do your homework.  What is that car really worth?  What do people with my level of experience actually get paid?  You may be surprised at the results of your research.  Next, you need to think about what you offer to the deal.  Is it a trade in, is it more responsibility, is it a contact list and potential sales leads?  What is the total value of these to the deal?  Are there intangibles? List them.  Are you willing to give something else to get the deal?  What is your BATNA (Best Alternative To a Negotiated Agreement)? What could you throw into the deal that has little value to you, but higher value to the other party? What do you know about the company across the table?  Find out about budget, financial status, reputation of dealing with vendors, corporate news, where this project fits into corporate strategic planning etc. How does the other side’s negotiator personally win – is  it saving money, is it ensuring that the project gets done correctly, is it building a vendor network? The more you know about both sides, the better you will be able to develop a strategy. Plan out your negotiating strategy in writing, so you have a guide.

A common mistake is to make the deal personal.  You think “If I don’t get this deal, then how will I face my spouse?” or you think ” I will demand the best price and won’t back down”. Wrong move. Don’t get angry or throw out “Take it or leave it” offers.  Now is the time for some of mom’s social skills to come into play.  Be calm.  Be strong. Take a deep breath before replying. The voice of reason usually will prevail in a negotiation.

Ok, so now you are calm and reasonable.  The other party asks you to make an offer.  You never want to make the first offer.  Now I realize that someone needs to make the first offer, but look for a way where you come to the first offer in a cooperative way. For example, when negotiating a contract for consulting services, I might ask the company what is the budget for the project.  That might give me an opportunity to look at whether I want to do an hourly type of contract or provide a fixed bid, which gives the client some additional comfort from fear of going overbudget. If you knew the budget for the project and also asked questions about the company’s level of risk tolerance, you could provide a more compelling case for winning the project.

Understanding that this is a negotiation, you need to ask for more than you reasonably expect to receive.  While I don’t like the term compromise because it makes it seem like you are already giving up something, your offer will most likely be reduced (in value to you) throughout the negotiation process.  Be prepared for this by understanding your limits and thinking creatively about what other items can be included in an agreement.

In a negotiation, you need to understand that you own your position.  You can make this deal happen or you can walk away.  The other party owns his position.  He also holds the right to walk.  If he walks, your deal is dead.  The goal is to find the place where both parties are a little uncomfortable, but both get rewarded in some way.

Having said that you own your position, my next statement is a bit incongruous. The final decision should never rest with you.  This is the reason that the CEO or chairman of companies do not normally negotiate deals.  You always want to have an out to say that your partners need to review the deal or the chairman has the ability to approve any deal that you come up with.  This will allow you to take a deal home and think through the options without being pressed for an answer in front of the other party. While you don’t want to make minor changes at this stage, you do want to reserve the ability to pull out completely if with a clear mind, you find a deal unacceptable.

Now, both parties have agreed to the deal.  The negotiation is still not done.  There is the writing of a contract to codify the terms and conditions of the deal.  In most cases, there will be a standard document that will be presented to be signed by both parties.  If you have not done this before, please, please get a lawyer to review any legal documents.  Make sure that you understand that you can make changes to any document and if the other party agrees, you have a valid contract.  Even if you are signing a pre-printed contract (like, say for a new car), if you don’t like a term, you can cross it out or make changes.  If the other party wants to complete the deal, they can choose to accept your change.  Otherwise, you may need to negotiate terms and conditions.

The final point is that a successful negotiation will leave both parties feeling better off than if the deal had not been done.  People like doing business with people that they like.  If you have squeezed every drop of blood out of the deal and “won”, you may have created a monster.  Be prepared for the client from hell.

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