We negotiate to settle our differences and come to a compromise or agreement while avoiding argument and dispute. Whether we know it or not, negotiation is an essential part of our lives, and it’s especially so for anyone involved in a business.
A supplier needs to know how to negotiate, and so does a buyer. But despite what most people think, you don’t have to be nasty to be good at negotiation. In fact, you can achieve the best possible outcome for your position (or an organization you represent) by using some basic, established strategies. So here are 4 negotiation strategies every businessman should know.
1. Do Your Homework
Before any business negotiation, always do thorough research. Try to avoid an impromptu negotiation to the best of your ability and when you get the opportunity, come to the table understanding as much as you can about the company you’re negotiating with, along with the industry it’s in. You should try to do the following:
Learn the main concepts and terms of representatives from the other company is likely to use. This way, you won’t get confused, misunderstand, or get intimidated by jargon. For example, a casino might use terms like Slot Handle and Rolling Chip Volume while a fast-food chain will often say Comps and Early Birds. However, if something does come up that you don’t understand, ask for clarification.
Get a sense of their strengths and weaknesses. They’ll help you predict the course of the negotiation. You can understand their strengths and weaknesses by getting to know their products or services, their industry and their opponents.
Finally, understand your own position in the negotiation. You should know why they want to do business with you. Once you do, try to focus on your positives.
2. Understand the Dynamics
If you want the best outcome, you need to understand the dynamics of the deal. You need to know the following thoroughly:
Who has the leverage in the negotiation? Who wants the deal more?
What alternatives does the other side have?
What timing constraints is the other side under?
Is the other side going to be getting a significant payment from you? In that case, the leverage will tend to be on your side.
3. Anchor, but Don’t Get Anchored
What’s anchoring? When one side in the negotiation takes control of it by being the first one to say a number, it’s called anchoring. By saying your number first, you can take control of the negotiation since the first number becomes a reference point for the conversation going forward.
However, you should be careful of this tactic being against you. The other party might open with an extreme number in the hopes that you’ll be anchored by it. If you feel that the number quoted is too extreme, but you feel uncomfortable in moving them from their original position, know that you’ve been anchored. In such cases, it’s best to let them know that they’re a long way apart. It’ll send a clear message that you’re not here to be steamrolled.
4. Know Your Area of Compromise
There is one other thing that you need to do apart from your homework before entering a negotiation. You need to where you can make compromises. If you’re a small business owner, you may need the deal more than your partner, but that doesn’t mean you concede to every condition put up by the other side.
Be realistic about what you need from the deal to make it worth your time, effort, and money. Recognize the opportunities where you can make concessions for your partner, but don’t whine about it. Just make sure they can see that you’re moving. It’ll motivate them to make their own concessions as well. Eventually, you’ll both arrive at a point you’re both comfortable with, and that is the very definition of a business negotiation.