Negotiation is something that we do all the time and is not only used for business purposes. For example, we use it in our social lives perhaps for deciding a time to meet, or where to go on a rainy day.
Negotiation is usually considered as a compromise to settle an argument or issue to benefit ourselves as much as possible.
Communication is always the link that will be used to negotiate the issue/argument whether it is face-to-face, on the telephone or in writing. Remember, negotiation is not always between two people: it can involve several members from two parties.
There are many reasons why you may want to negotiate and there are several ways to approach it. The following is a few things that you may want to consider.
If your reason for negotiation is seen as ‘beating’ the opposition, it is known as ‘Distributive negotiation’. This way, you must be prepared to use persuasive tactics and you may not end up with maximum benefit. This is because your agreement is not being directed to a certain compromise and both parties are looking for a different outcome.
Should you feel your negotiation is much more ‘friendly’ with both parties aiming to reach agreement, it is known as ‘Integrative negotiation’. This way usually brings an outcome where you will both benefit highly.
Negotiation, in a business context, can be used for selling, purchasing, staff (e.g. contracts), borrowing (e.g. loans) and transactions, along with anything else that you feel are applicable for your business.
Planning and How to Negotiate
Before you decide to negotiate, it is a good idea to prepare. What is it exactly that you want to negotiate? Set out your objectives (e.g. I want more time to pay off the loan). You have to take into account how it will benefit the other party by offering some sort of reward or incentive (explained later).
What is involved (money, sales, time, conditions, discounts, terms, etc)? Know your extremes: how much extra can you afford to give to settle an agreement? Although you are not aiming to give out the maximum, it is worth knowing so that you will not go out of your limits.
Know what your opposition is trying to achieve by their negotiation. This is useful information that could be used to your benefit and may well be used to reach a final agreement.
Consider what is valuable to your business, not the costs. You may end up losing something in the negotiation that is more valuable to your business than money. It could be a reliable client or your company reputation.
It is important that you approach the other party directly to make an appointment to negotiate should it be in person, writing or by phone (not through a phone operator, receptionist, assistant etc) as this will allow you to set the agenda in advance, and improve the prospects of the other party preparing sufficiently enough to make a decision on the day. Try to be fairly open about your reason for contact or they may lose interest instantly and not follow up on the appointment. Save all your comments for the actual appointment- don’t give away anything that will give them a chance to prepare too thoroughly: it’s not war, but it is business!
So, it’s time to negotiate and you’ve prepared well. What else must you have? Two things: confidence and power. Your power will come from your ability to influence. For example, you may be the buyer (but not always a strong position), or have something that the other party wants, or you may be able to give an intention to penalize if the other party fails to meet the agreement (as is the way with construction). As briefly mentioned above, you may be able to give a reward or an incentive. For example, you may be selling kitchen knives and as part of the package you are giving a knife sharpener and a storage unit away free as an incentive.
It is always important that you keep the negotiation in your control: this can mean within your price range, your delivery time or your profit margin. If you fail to do so, you will end up on the wrong side of the agreement, and with nothing more out of the deal other than maintaining trading relationships.
When negotiating, aim as high as you feel necessary in order to gain the best deal for yourself. The other party may bring this down but it is a good tactic, as it is always easier to play down than to gain.
Make sure that you remain flexible throughout the negotiation in case the opposition decides to change the direction of the agreement (they may want different incentives or even change their objectives). This is where your preparation comes to good use: knowing your limits and the other party’s needs. If you’re a quick thinker then you’ve got an advantage. You’ll need to turn it around quickly if things start to go against you without putting your objectives at risk.
Confidence comes from knowing your business, your product, what its worth, and being able to communicate this well to the other party: these people are almost impossible to get the better of, as some of you will know only too well.
Coming to an Agreement in Negotiation
Coming to an Agreement
Once you have come to a final agreement, it is important that you have it down in writing along with both parties’ signature: this is not always possible or practical. Before it is signed, or formally ordered, it is wise not to say anything about the terms agreed because your next sentence could break the agreement: the best sales-people never over sell – well, not until they have to!
If it is a sale/purchase that you are making, then officially, it isn’t a sale until you/they have actually ordered the product/service. Usually, this will be an Order Form with a purchase order number. In most other negotiations, one party sending a letter and fax to the other in which the agreement is outlined (to a sufficient degree) will form a legal basis.
If the other party then amends the conditions in the agreement in writing to you, those amended terms then become part of the agreement, UNLESS you disagree in writing, and so on…
We use negotiation in everything we do but you have to be sure that it is done in the best way possible to achieve maximum benefit. The most important part is planning: preparing well will give you an advantage when negotiating.
Only use the knowledge and experience you need to achieve your objective: having the business owner negotiating the supply of pencils is over-kill, and leaves you little room to power-bargain with the same supply company when you want them to supply you with, say, colour photo-copiers.
Have confidence and be sure that you can keep control at all times. Aim highly, but don’t underestimate the opposition. They too may have just read the same advice. If you’re selling something, be persuasive and offer some incentive to keep the customer interested.
Don’t close an agreement until you are happy. This could be difficult if you have been put in a ‘corner’ but this would perhaps be an effect of poor preparation.