The prospect of negotiating a business deal can make even the most confident among us nervous. You want to make the best deal for the company, but you don’t like confrontation, and you worry that the other side will get the better of you. Sleepless nights are not uncommon. If this sounds familiar, take comfort in the fact that it doesn’t have to be this way. Following are some practical tips you can rely on to help you achieve a successful outcome to any business negotiation.
BEFORE NEGOTIATIONS BEGIN
Value your time.
Make sure the person/company you are talking with is actually serious about making a deal. Are they ready to do business, or are they just pumping you for information, with the goal of getting a better deal from another vendor/supplier? One way to gauge the interest of a prospective negotiating counterpart is to apply some gentle pressure, right at the outset. For example, you could ask:
• “Let’s meet in person. Are you free for lunch next week?”
• “How soon would you need ____? What is your timetable for getting started?”
• “Please confirm that this email accurately reflects our conversation.”
If you ask for a modicum of effort, and the other party is vague or noncommittal or unresponsive, take note. You may be dealing with a window shopper, not a buyer.
Team up.
Negotiate as part of a team, if at all possible. Negotiating in pairs (or as a team of three or four), often is a better option than trying to negotiate solo. Negotiating teams can bring diverse perspectives and approaches to the process. Each team member should have a different function in the negotiation, but all must be on the same page as to objectives. Ideally, each team member should represent a different part of the business: procurement/spend management; the user group or business unit that is the subject of or affected by the negotiation; and a legal and/or risk advisor.
Know your objective(s).
What do you want out of this negotiation? If you have more than one goal, make a list, in order of priority (e.g., price, service, support, collaboration, etc.). Try to distinguish what you want from what you need. In other words, identify the deal breakers – the things you must have from the other party in order to close the deal. One note of caution: You don’t need everything. If nothing is negotiable, then what’s the point of talking?
Establish a bottom line.
As you outline your objectives, think carefully about this factor: What is your absolute bottom line – the point at which you will walk away from the deal? Is it a price point; a particular term of service; a deadline or delivery schedule? Whatever it is, don’t reveal your bottom line to the other side, but be prepared to act on it should the negotiations reach that point.
Do your homework.
This is critical. The more you know and the more facts you have at your disposal, the more confident you will be in devising a negotiation strategy and implementing that strategy once talks begin.
• Know the industry. What is the standard rate for XYZ service or goods or parts? What is the standard delivery time? How might current industry trends impact the business you will be negotiating with? How might those trends impact your business?
• Research the company with whom you are negotiating. Spend some time on the company website; review press releases; read articles written about the business and by the business’ leadership; learn all you can about prior business deals the company has made. Who is their competition? What are the strengths/weaknesses of this company relative to the competition?
• Understand the current relationship between your business and the business with whom you are negotiating. Who has the power? Who has leverage? In this context, consider time and money. Does one or both of these factors make you or your counterpart needier or more desperate for a deal than the other?
• Research the company representative who will be sitting across from you at the negotiating table. What does the company website say about this individual? Google his or her name; review his or her Linkedin profile; check social media. Can you find common ground that might help to break the ice at the outset of the negotiations? Can you glean any information about prior deals he or she has negotiated that might help you in this negotiation?
• Understand the role of the person with whom you are negotiating. If he or she is not the final decision-maker, then one of your goals should be to build rapport with this individual because he or she will be your voice inside the company. He or she will be relaying information to the ultimate decision-maker, and you want that information to be positive. You want an ally on the inside. Be prepared to answer questions and make available any requested information, to the extent you can.
Have a Plan A and a Plan B.
You know your bottom line. You know what you need, as opposed to what you want. You have a Plan A – an ideal way you want the negotiations to go. Now come up with a very good Plan B. When you put all your eggs in one basket (or all your hope on this one deal), it weakens your position. Be open-minded, especially at the outset of the negotiation process. For example, if you want to make a deal to supply widgets, seek out more than one potential buyer. If you want to make a deal for widget parts, seek out multiple bids. Having a good alternative (or two) in your back-pocket gives you power, flexibility and peace of mind as the negotiations pick up steam.
Practice.
Review your pitch (your opening salvo) with a trusted colleague, or even a friend or your spouse—someone who understands what is at stake in the negotiations and can role-play the back-and-forth with you.
DURING NEGOTIATIONS
Demonstrate that you take the negotiations seriously.
Dress appropriately (business casual or more formal, as needed). Be on time or, even better, be early.
Project confidence.
You’re not a trained negotiator. So what? You know your business; you’ve done your homework. Take confidence in your preparation, and set an assertive, but positive, tone from the outset.
Look to collaborate, rather than to compete.
Negotiation does not have to be about “besting” the other party. Often, a better tactic is to approach the neg
otiations with an eye toward building a business relationship (or nurturing an existing relationship), rather than closing this one deal. One way to begin building a business relationship during negotiations is to share something about your business values. Are you a family-owned business? How did you get started in the business and why? What motivates you when you come to work every day? Ask the same questions of your negotiation counterpart, and see if you can find common ground or a common purpose.
Listen more than you talk.
One of the most important tools in negotiating is listening. You cannot respond appropriately and move the negotiations forward if you are thinking about your next move, rather than listening to your counterpart. What questions is he or she asking? This will signal what is really important to him or her. Pay attention to non-verbal cues as well — body language and posture, tone of voice, eye contact (or lack thereof).
Think twice before you play hardball.
If you employ a scorched earth, my-way-is-the-only-way approach, you are likely to be met with defensiveness, at best, or an equally hardline position from your negotiating counterpart. You might make a deal, but you are unlikely to build a long-lasting, productive business relationship.
Don’t be afraid to take a break.
If talks reach an impasse, take a break. Come back to the negotiations with fresh eyes. Caution: Don’t let too much time pass. If the deal has momentum, you want to build on that. As time passes, enthusiasm for the deal may wane, and you may find that you cannot revive the stalled negotiations.
Don’t accept their first offer.
The first offer on the table always includes some wiggle room, with the expectation that you will negotiate – i.e., that both sides will give a little and you will meet somewhere near the middle.
Don’t negotiate with yourself.
If you make an offer, don’t make another “move” until the other party responds, specifically, with a counteroffer. Consider these two examples:
The wrong way:
You: We will sell you these widgets for $10/lb. Counterpart: No. That’s too high. I know that’s higher than some of your competitors. We will never pay you $10/lb. You: Our price is higher because we use higher quality materials than our competitors, but if that is too high for you, we could go a little lower. How about $9/lb.?
The right way:
You: We will sell you these widgets for $10/lb. Counterpart: No. That’s too high. I know that’s higher than some of your competitors. We will never pay you $10/lb. You: Our price is higher because we use higher quality materials than our competitors, and our widgets last longer. $10/lb. is a fair price.
That’s it. Stop talking and wait for a response. There is power in this pause.
Keep the scales balanced.
Try to keep the negotiation scales balanced. When you give up something of value, make sure you get something of value in return. For example, maybe you will agree to pay more per unit, but only if the seller agrees to pay for shipping. Maybe you will agree to a strict holiday delivery schedule, but only if the buyer agrees to a flexible delivery schedule for the remainder of the year.
AFTER THE NEGOTIATIONS
Get it in writing ASAP.
Once you have reached a verbal agreement, memorialize it in writing as soon as possible. Every day that passes is an opportunity for something unexpected or out of your control to derail the deal. Get it in writing; get it signed; and get to work
