Despite the fact that as a species we have walked on the moon and even developed the capability of destroying the Earth through nuclear armageddon, we still negotiate and bargain as we did in ancient times. If a five thousand year old Babylonian were to dress in a business suit and sit opposite most small business owners there is little reason to believe that his or her methods of negotiating would differ from the small business owner. It is as though time has stood still. Most small business owners don’t take negotiation skills as something that they need to really work on. Dr Chester L. Karras put it best when he said:-
“In business you don’t get what you deserve, you get what you negotiate.”
In this blog I want to list the 5 phases of a successful negotiation as a starting place for small business owners to think about how they negotiate.
- Planning, Everything is negotiable.
As in everything else in business, planning is key. In fact the failure to plan before beginning negotiations almost always leads to unsuccessful outcomes. As Abraham Lincoln said:-
“If I had nine hours to cut down a tree, I would spend 6 hours sharpening my Axe”
You need to develop clear ideas as to the perfect outcome, but be prepared to be flexible. Visualise the perfect outcome, make notes and plan this outcome on paper:-
- Define the price
- Terms etc
What’s the highest or very best you can achieve, what is acceptable, what is your lowest or ultimate fall back position? Make a decision to define your highest defensible position, define with clarity what’s the absolute minimum you are prepared to accept. In any negotiation clarity will always defeat vagueness.
Remember that 80 percent of your success in negotiating depends upon the quality of your preparation. Poor Negotiators are unprepared.
- Creating a Friendly Environment.
Meet in comfortable surroundings, with good lighting, clean air and access to satisfactory refreshments. Try and create a relaxed, rather than a hurried pace. Try and position yourselves around round tables and try to avoid adversarial positions. If you sit opposite somebody there is a tendency to engage in battle. Its difficult to argue with the person sitting next to you. Finally, arrange the meeting on your home ground or on neutral ground. Try not to attend negotiations at the other parties home ground.
- Opening positioning statements: Both parties state what they’re looking for.
Start with a firm and friendly handshake. Try to establish friendship and a cordial climate, make a decision to be co-operative as well as business like. Do not go too far, too quickly. Eventually address the questions: Why are we here, what do we do and how long have we got? Once both parties have established good first impressions and agreed to proceed in a cordial and co-operative manner one party now outlines their position. At the planning stage you already defined the highest defensible bid, you have positive expectations. You decided what to bid and how to put the bid, and how to respond to the bid of the other side. You’ll be asked for clarification and you’ll ask them to clarify their position, in both cases you should have prepared a responses in the planning phase with the aim of moving towards common ground.
“When a man tells me he’s going to put all his cards on the table, I always look up his sleeve” Lord Leslie Hore Belisha
- Bargaining. Trading concessions with a view to reconciliation.
Having collected a tremendous amount of information from the other party, you are now prepared to bargain, trading concessions with the other side with a view to reaching a common agreement or settlement. Incorrect assumptions are the reason for most failures. Test your assumptions, what are they, what were your original assumptions that may now have changed? Have you worked out what the ideal outcome is for the other side? What are the critical issues for yourself? What are the critical issues for the other side?
You need to be patient and persistent. Keep searching and don’t ruch into any settlement. Try to avoid fixed positions and don’t let the other side lose face. Always offer a concession in exchange for a concession. Surrender something which is unimportant to you for something which is important to you. If you hit a snag try and move on to something else, keep agreeing on everything on which you can agree. Finally be prepared to make counter offers.
“Speak when you are angry and you will make the best speech you’ll ever regret.” Ambrose Bierce.
- Agreement: Both parties agree to a settlement and perhaps further co-operation.
You finalise the deal and arrive at some sort of settlement. The end usually arrives very quickly. Sieze on the agreement as soon as it is completed. Re state what the agreement is, some people suggest that you should argue on one final point about which you’re happy to concede to the other side, letting them feel that they have got a great deal. Finally congratulate the other side on the excellent deal that they have negotiated.
If the deal fails the negotiation fails, be prepared to make a second effort. If you need to reopen negotiations you can always start on the basis of new information, new orders from the boss, new price information. One final point you should note, be aware that as you near the end or you may have completed the negotiations, some skilled negotiators will try and gain major concessions from you. Of course you could try the same approach yourself. I would not advocate an approach such as this since you are usually looking for a future relationship with the other side. It’s generally not worth the risk.