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Negotiating in a Nutshell

Negotiating in a Nutshell

Almost everything we do in our day to day lives is a negotiation, from conversations with the significant other in our life, to communicating with our children, to our day to day conversations with ourselves, whether we are buying something or selling something; regardless if it is personal or professional we are always negotiating. But in business it’s absolutely critical to your success. Poor negotiation can potentially cripple a business just as quickly as losing key customers. While most negotiating strategies seem like common sense, it’s not uncommon for people to get caught up in the emotion of the moment and ignore their basic instincts. You will hear me say time and time again, there is no room for emotion in business, well emotion, luck and magic have no place in a successful negotiation either. In order to be successful in negotiation, it takes iron will, a strong gut, preparation, planning, homework, street smarts and unwavering discipline. These few tools will unleash your ability to get the best deal possible under any circumstances, time and time again.
While experienced sales people and negotiators will sometimes refer to their methods as the “negotiating game,” it’s really a misnomer for a process in which the stakes are often extremely high. Think about it, many of you are “solopreneurs”, small business owners, independent contractors. Your lively hood depends on whether or not you make a sale. You have bills to pay, rent or mortgage due and mouths to feed. I am going to share with you one of the most important rules in negotiating check your ego at the door and keep your eye on the big picture at all times. It’s is all about business and remember my #1 rule about business, there is no room for emotion in business.

Preparation is Non Negotiable

Know about the person or persons you’re negotiating with so you can leverage your strengths and the other person’s weaknesses. If the other party is very experienced, that means he also has a history that could contain useful information. If at all possible, talk to business associates who have dealt with this person before. When I was in the Army, we called this recon. We would never make a move until we reconned the land, the terrain, the “enemy” so to speak. People have different personality styles, different behavioral styles, and different processing styles and they also develop patterns and certain styles that you may be able to use to your advantage.
If you are a buyer, make sure you are completely familiar with the product, service or solution that will be negotiated. If the other party senses you are weak on such details, you may be a prime target for a negotiation strategy or technique designed to create anxiety and uncertainty and elicit emotion. Understanding the other person’s thought processes, psychology, mindset plays a crucial role in your ability to make the most of the other party’s lack of preparation and anticipate their next move.
Both parties have a price target or goal in mind before they start. Assuming the role of the influencing negotiator you want to ensure that your projected outcome is based on realistic expectations considering all the possibilities that will probably come to the surface. These may include budget limitations, direction from other parties and possibly other decision makers not involved, pressure to make their own goals, and a multitude of other external forces. It’s important to remember that during a negotiation, the goal may change based on the interaction and the push / pull of both parties and the actual negotiation process. Although your ultimate desired outcome should be realistic, it’s very fair to say this doesn’t have to be reflected in your first proposal or counteroffer. Have you ever heard of the old sayings “tee it high and let it fly” or “tee it low and let it go” or another golden oldie “never leave money on the table”. These sayings exist because every negotiation has a starting process, a starting point, shoot for the moon, gauge the other parties reactions utilizing your sensory acquity skills and look for micro expressions. As the influencing person in the negotiating process it is important for you to master the art reading people, understanding peoples programming and mastering the art of lead, pace and follow.
Before you start the negotiation, ensure that the other party is fully empowered to make binding commitments. You don’t want to find yourself in a position where you believe you’ve struck a deal, only to discover that your agreement must be approved by someone higher in the chain of command.
Having a Strategy is a Necessity
There are basic principles that apply to every negotiation. The first offer is usually the most important and the benchmark by which all subsequent offers will be judged and compared. Always remember, you’ll never get what you don’t ask for, so make your first offer bold and aggressive. The asking price is just that, and will typically include a pad or margin to give away during negotiations. You want to take all of that and hopefully more, so if you are the buyer start lower than the seller expects and if you are the seller start higher than the buyer expects. Don’t worry about insulting the other party. As long as your offer is not ridiculous, the other side will continue the negotiations in hopes of settling at a better number. As a business owner and a sales person, there is nothing worse than realizing that you left a lot of money on the table. Have you ever presented a proposal and the other person jumped on it and never blinked an eye, and later on you might have had a realization that you could have offered much more. All I can say to that is somebody did their homework and somebody did not.
As a buyer, do not disclose your budget or any other factor or strategy in your negotiating position. A favorite ploy of salesmen is to reshuffle the product specifications, schedule and other parameters in order to sell you an inferior product to fit your budget. You want the best product you can get for the money you have to spend, so employ a strategy that maintains the possibility of spending less than you had originally planned and getting more than you had originally hoped. On the other side of the negotiation, as a salesperson, do not disclose your lowest price or another other of your strategies either. A favorite ploy of buyers is to utilize the fear of loss, the walk away. Remember, this is a negotiation. There is an expectation of both parties for there to be movement on both sides. There is always a buyer and there is always a seller. That being said the person who is looking to purchase something isn’t always the buyer. You may be sitting there say, “huh, that makes no sense.” No matter who is the purchaser, the strongest influencer (negotiator), is the one who is doing the selling. So if the buyer is the stronger negotiator, then the person selling the products will be the one “buying into” the buyers negotiation strategy. It is important to maintain the position of influencer at all times, during the negotiation process, no matter if you are leading, pacing or following or as I often refer to it as, the negotiation dance.
Regardless if you are selling or purchasing a product, service or solution; always, always, always make sure you have something to give away without hurting your negotiating position. If you’re submitting a price proposal to a buyer, consider inserting a little extra something for the other party to be impressed over. For example, consider including some nice-to-have items that aren’t critical to your bottom line. You could also include spare parts or accessories that may or may not be needed in the end, but made them feel like they got just a little bit more and it may be something that they may end up coming back in the future to buy more of because they got accustomed to having it as well. If the buyer takes those items out to reduce the overall cost, you haven’t lost anything but it may help the buyer reach their targeted outcome. These types of distractions will help you to divert the other party from going after the meat of your proposal. If you know that the only way to win the bid is to provide a bare bones cost, then this strategy may not be appropriate.
I referred to sensory acquity and micro expressions earlier, watch for clues such as body movement, speech patterns and reactions to what you say. Regardless if you are the buyer or seller, always be prepared to suspend or cancel negotiations if you feel things are getting nowhere or the other party seems stuck in their position. There is nothing worse than wasting each other’s time. Express your reluctance to continue and the reasons why and it is ok if the other party wonders if you are ever coming back. If they are on the hook to cut a deal, they will feel the pressure to move. Be patient even if the other party isn’t. This can be difficult for those with a passion for instant gratification, but the last thing you want is for the other party to think you’re under the gun to finish quickly. Remember, there is no room for emotion in business.
From a contractual standpoint, a counteroffer automatically rejects all previous offers. Once an offer is made, you should expect an acceptance or rejection of your offer, or a counteroffer that keeps the negotiation open. If your offer is rejected and you are asked to submit a new and better offer, do not fall into that trap. If you do that, you mind as well be negotiating with yourself, and you should never do this, negotiations are 2 sided, don’t work both sides. You have your hands full with doing your job as the negotiating party, let them do theirs. If the last offer on the table is yours, always insist on a counteroffer to force the other party to move his/her position before you make another offer.
Find the Leverage Points
In addition to understanding the other person’s weaknesses, concentrate on taking maximum advantage of your strengths. If you’re the only source available for a particular product, you have tremendous leverage across the board. If economic conditions have created a market in which the product you’re selling is in great demand and low supply, that gives you more bargaining power to name your price. If you are the buyer in a depressed economy, you normally have the advantage of too much supply and lower demand. The real estate market is a classic example of what happens when supply and demand are out of balanced, market prices fluctuate dramatically either drastically lower or higher.
Establish a strong foundation early in the process by demonstrating your knowledge and expertise of the subject matter. This may intimidate those on the other side and put them on their heels before they have a chance to establish their own credibility. Playing catch-up in a tough negotiation can be challenging, so it’s much better to take the initiative and steer the process in the direction you want.
Making the Offer
An offer is more than just a dollar amount. If you make an offer without nailing down all of the specifics, you may find out later that there was no consensus, no meeting of the minds with the other party. The basis of the offer should include: offered price, statement of work to be completed, identification and quantities of the products, services or solutions, delivery schedule, performance incentives (if any), warranties (if any), terms and conditions, and any necessary supporting documentation.
Trading one element for another–such as a lower price for a more relaxed schedule–is a common tactic. These bargaining chips should be kept in your hip pocket until you need them to close the deal and get the price you want. While your primary focus is normally on price, you should always keep all the other components of the deal in the forefront of your mind. Remember….Everything, including the fine print, is open to change because everything is always negotiable. To avoid misunderstandings, offers should be presented in writing and include all of the agreed upon factors.
Go For a Win-Win Solution
Throughout the negotiation, try to determine what you believe to be an acceptable outcome for both parties. It may be a combination of different things that aren’t necessarily tied solely to price. For example, the delivery date may be the most important thing to the other party, while quality may be your primary driver.
Understanding the other side’s priorities is just as important as understanding your own, so figure out what you would do if you were in their shoes. When constructing your offers, attempt to satisfy some of his priorities if doing so doesn’t weaken your overall position. Be prepared to give up the little things in exchange for the big things you don’t want to concede. Know your limits and how far you’re willing to go on all aspects of the deal.
While you have the power to influence the negotiation process in your favor, your goal should be to secure a good deal without extracting the last pound of flesh from the other party. This is especially true if you will be negotiating with the same party on a recurring basis. The most effective negotiators are professionals who know their business and don’t let personalities and irrational behavior interfere with their mission. They are capable of making the other party believe they got the best deal they could under the circumstances.
Once the negotiation is completed, you want to be able to work effectively with those in the other party during contract performance. If they are threatened and pounded into submission, they probably won’t negotiate with you again, possibly cutting off any future business. While heated confrontation is a common occurrence during negotiations, at some point collaboration and compromise are needed to get a deal.
Closing the Deal
Successful negotiation requires an impeccable sense of timing, creativity, keen awareness and the ability to anticipate the other party’s next move. Negotiation is similar to chess in that each move should be designed to set up not only your next move, but several moves down the line. Generally, your moves should get progressively smaller, and you can expect the same from the other party.
Always have the outcome in mind as you plan your strategy, and be prepared at some point to split the remaining difference. It’s almost inevitable when both parties are close but can’t seem to make that last leap to one side or another, compromise is always important in negotiations. It’s important for both sides to feel like winners. That’s why all the offers leading up to that point are so important: they will set the stage for the final handshake, the done deal, the closed sale.

By: Stacey O’Byrne, Founder of Pivot Point Advantage

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