Elements of Effective Negotiation (Part Three)
By Michael Walsh
What’s missing too often in negotiation?
Preparation. There are three primary reasons why negotiators are
unprepared:
1. They assume that "just talking" is low risk.
2. They think that preparation takes too much time.
3. People don’t know how to prepare well.
There is a systematic approach available to preparing for a negotiation. By following the seven steps listed below, you will find that you can prepare for a negotiation within a 20 minute time
period:
1. Focus on interests (rather than just positions)
2. Options – spend time clarifying many in advance
3. Alternatives – be clear on your Plan B and your worst case scenario
4. Legitimacy – use external standards to keep it fair. I was once in a share purchase negotiation where the vendor pulled out part way through because the clause stating the interest on the amount outstanding was listed at 8%. Instead we changed it to prime + 2% and the vendor was happy again. At the time, prime was 6%, so it made no difference to the actual deal, except to protect the vendor
is rates rose. Using an outside source legitimized that portion
of the arrangement.
5. Communication – listening, clarity in speaking. Be careful to say only what you mean. We had one client once who was buying the rights to a phone number from a third party. He had decided that we would pay up to $20,000 for this number, but wanted to pay as little as possible. The third party wanted access to our client to do more business in the future. We were negotiating with the third party at the level of between $8,000 and $10,000 with additional provisions to provide the third party with access to our client (which was no problem for the client). Everything was going fine, until the client let it drop that there was no way he could go higher than $20,000 for the rights under question. His little "faux pas" in the discussion cost him dearly. The third party immediately got inflexible, requiring $20,000 (instead of the $10,000 she was previously seeking) in addition to access. The client, realizing he was beaten, consummated the deal and learned the value of watching what is communicated at the negotiation table.
6. Relationship – will the outcome damage or enhance the relationship? Good outcomes enhance relationships. By looking at this item and asking yourself the question, "Will this outcome damage or enhance the relationship?" sometimes that is enough to check, and subsequently alter strategies, and the results as well.
7. Commitment – think through in advance what specific promises you are willing to make and what you require of the other party. Too often we see situations where after a long negotiation, one party says, "If you just take out this one clause (or add this one
clause) we have a deal." The only problem is that the clause in question may change the entire workability of the deal. This is where good deals turn bad, or where deals are lost unnecessarily.
Unprepared people promise too much without thinking, or hold back and lose the deal.
Sudden Preparation Template
Here is a list of 8 questions you can ask yourself when preparing for a negotiation. These questions form a template to generate quick preparation for any negotiation.
1. What are my intended outcomes (interests)?
2. What are the other person’s (possible) interests?
3. What are some of the options of agreement?
4. What is my Plan B?
5. What is my worst case scenario?
6. What are some possible external standards?
7. What is/are my reserve price / terms / limits?
8. What is my game plan?
By following these steps, you will be better prepared for your negotiations while you seek to gain and keep more customers at a profit, as you grow your business consistent with your goals and commitments in life.
Filed under Business Development by Michael Walsh.
