5 Tips to More Effective Negotiations
The old view that only sales people engage in selling and negotiations is a dated model that doesn’t hold water in today’s environment. It doesn’t matter what you do, you are selling multiple times a day — and most sales involve some level of negotiation.
When you launch your small business, you are in the business of selling. It doesn’t matter your role, what product or service you offer or your distribution channels. Once you decide to embark on an entrepreneurial journey, you have chosen the life of a salesperson. One day you might negotiate with a supplier for more favorable shipping rates or bulk discounts. The next day you might negotiate with the landlord of an office building to secure a lease. Or you might be negotiating salaries of potential employees. It doesn’t matter what you do; you can’t go too far in small business without engaging in a negotiation.
The book that helped me realize this important point and shaped my thinking is To Sell is Human by Daniel Pink. It’s a recommended book for any entrepreneur.
And that’s the point of this post. To understand that you enter into negotiations on a daily basis as well as giving you five tips to have better and more productive negotiations.
How to Become a Better Negotiator:
1. Do Your Homework
Most people that I interact with do not prepare for their negotiations at all. I’ve seen this scenario play out too many times — people look at their schedule and go, “right, I have that call to discuss our pricing with ABC Supplier in 3 minutes”. They then walk into the meeting or grab the phone and start the negotiations. Please don’t do this! Don’t enter your negotiations on a whim. Instead, take a step back and prepare.
The first step is to make sure you have enough knowledge on the subject matter. You obviously don’t need to be an expert, but you should have a passing knowledge of what you are discussing. If that means you need to Google a few terms and read a couple of articles, then that’s what you need to do. Know the basic ins and outs as well as some typical industry jargon.
The level of knowledge that you need before you begin negotiations is entirely dependent on how important this negotiation is to you. If this mission is critical to your company, then you should be spending all the time it takes to get prepared for the negotiation, even if that takes multiple days. If it’s something much less important — like window cleaning — then spending 10 minutes understanding the industry, rates and their competitors is probably sufficient. The key is to modify your preparation to match the level of importance the negotiation has to you and your company.
After you are up to speed on the subject matter, it’s time to understand your counterpart in the negotiation. Who are they — is it a large company or an individual? What does the other side want out of this negotiation? Do they want better pricing, an expanded presence or a raise? The more you know the person on the other side of the table and can understand their motivations, the easier it will be to craft win-win solutions.
Once you know your counterpart, it’s time to take a look inward and understand your primary motivations and goals for the negotiation. What are you looking to achieve here? Be sure to understand your deeper desires, not just your surface level motivations. Again, if you can understand that you are looking for a long-term supplier that will always perform, you aren’t so interested in wringing out every possible concession. Maybe instead of getting a discount on bulk purchases, you can secure more favorable shipping rates or production times. By being aware of your ultimate motivation, you will be better able to craft out-of-the-box solutions that address your actual needs.
2. The Three Pieces of Every Negotiation
As I pointed out in a recent video, Herb Cohen’s book You Can Negotiate Everything is the gold standard for learning the fundamentals of negotiation. In that book, he highlights the three vital pieces of every negotiation. Those are:
Time
Time is probably the most overlooked aspect of negotiations. Have you ever noticed that if you spend a lot of time with a salesperson, their pressure tactics and willingness to throw in extras goes up drastically? That’s because they have pressure to make a certain number of sales each day, week or month. And if you’ve spent four hours with them, they are under intense pressure to convert the time they’ve invested into a sale. That’s why I like to show up close to quitting time — they are much more willing to make a deal at 8 PM than at 10 AM.
Those with a time crunch or deadline are under pressure to get a deal done and as the 11th hour starts approaching, their willingness to reach an agreement and give concessions increases. If you can position yourself (or convince the other party) that you have all the time in the world, the stronger you will be in negotiations.
Information
By understanding the flow of information, you can better position yourself in a negotiation. Are you in possession of a piece of news that only a select few know? How about the other side? Or are all parties on an equal playing field? Is all the information readily available or does it take specialized knowledge and research to uncover?
If one party is privy to more information than the other, that can drastically alter the balance of the negotiation. If you are on the short end of that stick, then make sure you realize this fact and adjust accordingly.
During the actual negotiation, try and gain additional information from the other side. Look for clues in how they are responding to your explanations and offers. Sometimes, your counterpart will let slip a piece of information that was supposed to be confidential. Keep your eyes and ears open at all times to see if you can pick up new facts along the way.
Power
Before engaging, take the time to review if there are any power dynamics at play. Is this person your boss or a subordinate? Are you negotiating from a privileged position due to the prestige of your organization or title? Or are you both on an equal playing field with no one able to claim dominance over the other?
3. What’s Your BATNA?
By understanding your BATNA — Best Alternative To Negotiated Agreement — you can brainstorm and uncover alternative resolutions if you are unable to reach a favorable agreement.
Sometimes you don’t have to come to a resolution. Instead, you can choose to walk away and leave the matter unresolved. Who knows, maybe they have a time constraint that you didn’t uncover and that leads to a more favorable result in the future. Other times, there may be someone else in the organization that you can turn to to help push a mutually agreeable resolution. This is the time to think of creative solutions.
And there are other times where you just need to realize that the person you are negotiating with isn’t your last resort and that you can go elsewhere. The ability to walk away from the table and know you have other options is a powerful one. If you have multiple options, you aren’t worried or stressed about having to reach an agreement. Walking away is seldom used but a powerful tool.
A quick example to illustrate my point. Have you ever been on vacation in another country where haggling was the norm? Let’s say you saw a rug that you wanted because it would tie your living room together. More than likely, that same rug is sold by seven other merchants in a two block radius. In this scenario, your BATNA is probably to walk away from one particular merchant and try your luck with someone else. But, the surprising thing is that once you start walking away from the negotiation, the other side starts dropping their price like crazy to reach a deal. By having the ultimate trump card of not purchasing their wares, you are in a strong negotiating position — one that only gets stronger once you signal that you have given up and are willing to walk away. It’s at these points where you can get a terrific deal!
4. Know Your Bottom Line
Before entering a negotiation — no matter the size or importance — establish your bottom line. That can either be the least you are willing to go or the most you are willing to pay for a particular product or service.
The key, of course, is to stay firm and not let the emotions of the moment override your rational thinking. Know your bottom line and stick to it. I recommend writing your number down in a notepad, so you aren’t tempted by the heat of the moment to adjust your bottom line.
5. Don’t Take Negotiations Too Seriously
For the most part, negotiations do not involve life and death. And I see too many people acting like the opposite is true. Almost always you can walk away from a negotiation if the other side becomes abrasive or abusive.
Also, by taking the negotiation too seriously, you open yourself up to taking it personally. Above all, you must understand that this is business and both parties are looking out for their best interests. If you start taking it personally, that can lead to sour moods, hurt feelings, and strained or fractured relationships. If you catch yourself starting to feel personally attacked, then that’s your cue to take a break and clear the air a bit before proceeding. Remember, it’s all business and keeping a relationship in tact is usually much better than personally attacking, letting emotions control your behavior or demeaning the other side.
I hope that these five tips help you feel more confident before you enter your next negotiation. Did I miss any tips that you think are a must-know? Let me know in the comment section below.
