Some people are born negotiators, and some acquire this valuable skill along the way while others dread the activity altogether. Since negotiating is a fact of life for most entrepreneurs and CEOs, it’s important to understand a few basic principles and be better prepared the next time one enters into a round of discussions.
Have a game plan.
Prior to the outset of negotiations, you should have a preferred outcome in mind, as well as an idea of what’s minimally acceptable. What do you absolutely need to have? What are you willing to pay? If you’re negotiating the purchase of a particular service but have no idea what this service should cost, you’re at a distinct disadvantage (The seller is unlikely to come forward with an objective appraisal). Always have an approximate sense of a product’s going market price; this way, you can modify your offer depending upon how the negotiations proceed.
Know your opponent.
Do some basic research about the person you’re negotiating with so you can make an educated guess about their goals and fallback positions as well as the resources and advantages they might bring to the table. By preparing ahead of time, you can anticipate the likely response you’ll get from your opponent. This enables you to consider areas where you’re willing to compromise or bargain for leverage.
Make the first offer.
If you’re the seller in a particular situation, be the first to toss out a figure. Studies show that by setting the “anchor” for negotiations, sellers often end up with a final price that’s higher than in situations where the buyer makes the first offer. That’s because a buyer’s initial offer is typically low, thus setting a lower anchor for negotiations that follow.
Use silence as part of your game plan.
Negotiating can be a nerve-wracking experience, and when people are nervous, they tend to talk a lot. After you make an offer and the seller has vigorously declined, don’t rush to respond. The other person will seek to fill the uncomfortable silence by explaining why he rejected your proposal—and what he says may offer insights into his position you wouldn’t otherwise have. Follow up with some open-ended questions to get more information about what he’s looking for. All this will help strengthen your negotiating game plan.
Give your opponent some wiggle room.
Overly aggressive tactics—particularly those designed to force the other person into a corner—are usually unsuccessful. They only serve to ratchet up the tension (and potential animosity) between negotiating parties, making a compromise settlement harder to achieve. If you reject every offer made to you, the other person may finally see no alternative to ending negotiations.
Be ready to walk away yourself.
If your opponent makes an unacceptable low-ball offer, you should be ready to walk away. Yes, this may end negotiations or your opponent could be bluffing and be ready to back down himself. Keep in mind that many negotiations reach a successful conclusion only after several rounds of discussion. The next session may prove to be the one where you reach a more favorable conclusion.
See negotiations as part of an ongoing relationship.
Of course you want negotiations to go your way, but it’s self-defeating to try and “crush” your opponent. The most successful negotiations involve give-and-take on both sides, and an outcome where each party comes away having received something of value. If this is a person with whom you see future opportunities, do what you can to make the experience a win-win for both sides. In the long run, that’s the best strategy for you and your business.
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