Everything You Ever Wanted To Know About Negotiating:
Negotiating – The Myths & Realities
We have all been there at some stage in our business lives, the dreaded negotiation with your most awkward client. He regularly screws you to the floor each year on price and everything else you have to offer! Pretty quickly you see every negotiation as a battle and all your self-confidence goes.
There are a lot of myths surrounding negotiating which don’t help if you are faced with handling such a situation for the first time. But as with many myths, there is usually a very different reality.
Myth: It can be a daunting ordeal
You mention to your trusted partner or member of staff that you are off to negotiate next year’s big contract. What do they say? “Good luck!” The majority of people think that negotiating is a dirty and tough task, a necessary evil.
Reality: Not if you plan
As with all things in life, we fear the unknown, especially if we are unprepared. The reality of negotiating is that with adequate preparation comes confidence. Before your meeting sit down and ask yourself the following questions:
1. What do you want out of this negotiation?
2. What is your lowest, acceptable and best price?
3. What are you prepared to give away if necessary?
4. What do you know about the other company’s position in the deal?
5. If you don’t know much, what questions can you ask to improve your understanding?
6. Thorough preparation is a great confidence booster. See the negotiation as a presentation and plan your approach and questions before hand.
Myth: Negotiators are born
There is such a mystic surrounding negotiation and the skills needed to be good at it, that most people think you either have it at birth or you don’t.
Reality: Negotiators can be made
Like any skill in business, negotiation skills can be learnt and put into practice. There are lots of books, tapes and seminars you can attend on this subject. Negotiation is a structured process and once you understand how it all works the task becomes easier. But as with any new skill you have to practice, practice, practice and this is where most people fall down. Having acquired a new skill you have put in the training but it can be done.
Myth: To strike a deal you have to concede on price
The perception is that many negotiations end up with one of the parties always having to concede on price just to secure the deal.
Reality: There are other items you can concede on
The reality in any negotiation is that price is not always the deciding factor. There is usually something else that the other party wants in addition to, or instead of, a lower price. It could be that they need the product or service quickly and may be prepared to pay a premium for a fast delivery. They may want the product changed slightly to meet their specifications. They may like some on-site support for implementation.
In your research and questioning it’s up to you to find out what they really want. Dig deep and find it because every part of the deal is negotiable, not just the price. Once you have hit upon it, before conceding on price, throw it into the pot. Remember, this could be something which means very little to you but a lot to them.
Myth: If their first offer is what you want, say yes
After your sales pitch your client comes back and immediately offers exactly what you wanted. He’s got what he wants and so do you. Done deal!
Reality: Always counter the first offer
If you accept immediately there are 2 problems:
1. Your customer will think he has had a bad deal, “He accepted straight away! I could have had a much better deal. I’m sure I went in too high.” With these thoughts going through his mind he won’t feel totally happy with the deal and the chance of cancellation or no future business is higher
2. It’s likely that this your customer’s opening bid. Opening bids are usually on the low side and used as a starting point. Accepting now, even if it’s what you were looking for, could mean you throwing away a higher price
There are instances where the customer will say “I don’t negotiate. This is the price I’m prepared to pay.” He has set the rules, so as long as you are happy with the price, go for it!
Myth: Negotiating is a competition with only one winner
If you have a competitive streak this is how you will see a negotiation – something to win or lose. Non-competitive people who believe this myth automatically lower their defenses and quickly cave in to the stronger player.
Reality: There should be 2 winners
Negotiation is not a competition. The ideal outcome should be win-win, where both sides feel they achieved something out of the whole process – one got a sale at a price he wanted and the other got a purchase at a price he wanted.
Win-win outcomes leave the door open for building strong relationships which will lead to more business in the future. Win-lose outcomes mean that one side will be reluctant to deal again. If, by your very nature, you are a competitive person, temper this and accept the reality that the negotiation process has to have 2 winners.
Myth: If you walk away, that’s it
You have found the perfect product, but you don’t get the price or deal you are looking for. However, you are afraid about losing the opportunity, so you decide to go for it anyway, at any price.
Reality: Opportunities often come around again
Accepting a deal through fear is not a position you want to be in. You will always have a nagging doubt that you paid too much or gave away something which you should not have. Be strong enough to walk away from a deal if it’s not what you are after.
You have to learn to detach yourself from the underlying deal and avoid getting emotionally involved with the product or service. Just concentrate on getting the best result. Being emotionally detached means you can walk away with no doubts. You may find that a few days later the seller will be back banging on your door with another offer. Remember that opportunities always pop up and walking away is not a failure.
Negotiation Tips For Newbies
Experienced negotiators are a hard thing to find these days. Although it’s not easy to become a professional negotiator since it requires knowledge and experience, anyone can be a better negotiator in every field of our lives. Some rules must be adapted in order to succeed that.
Do not try to be pleasant. It’s true that most people want to be pleasant and popular, but this is not appropriate in negotiation process. During the negotiations you will have to say “No” many times and displease your “opponent”. If you can’t accept that then let someone else do that job.
Stay focused. Chit chat is the last thing you need. Remain on your primary goals you have set and do not let the conversation go beyond that. Don’t be the one who talks more. The more you talk the more your opponent will know.
You have to be prepared before the procedure. Learn everything for the other side, their financial status, older negotiation results, other deals they have done, the arguments you expect they could possibly develop.
Where the negotiations take place? This is critical. There is a debate on that. Some people believe that negotiating in your base will make you feel better and more comfortable during the process. Some other think that negotiating in your “opponent’s” base can provide you valuable information for who he could be and what can you except. The third view specifies the need of a neutral place. All could be right or wrong.
Go for the higher offer. If you plan to sell your house $100.000 you should not start the offer at $100.000. You have to start from more. In that way you will have more space for shifts. You have to set these goals before the beginning of the negotiations.
Focus on your strong arguments and on the other side’s week arguments. Doing this, you will have the upper hand and you will gain more in the outcome of the negotiation. Do not let happen the opposite! If not, you will lose more than you expected in the first place.
Avoid the early concessions. Try to be the last who give up. You should expect your opponent negotiator to make the first move.
Don’t accept the first offer. The first offer is not the last, almost never. You will get a better one if you insist.
Try the “salami” tactic. Don’t ask for the whole thing but a tiny piece. Since there is not going to be an objection from the other side then you can ask for another tiny piece. This tactic is popular in diplomacy between countries, but it can be adapted to individuals too.
Don’t be impatient. If the deal is very important, be prepared for long and tiring negotiation process. If you are in hurry to close it, you will have to give more in order to do that.
Do not accept no always as an answer. It’s been proved that no can be transformed to yes with the appropriate arguments.
It’s not a personal matter. The other negotiator is a human too. There is no need to take it personal and get angry if it’s not going as you wanted to be. You can be a tough negotiator without being hostile.
Avoid the big lies. You won’t be believable. You can twist around but lying will lead to dead end.
Negotiation Skills You Need To Know
One of the most important negotiation skills you can develop is to get in the habit of finding the other side’s deadline. Time is of the essence. It even says as much on most business and real estate contracts. What does this mean in negotiating? It means that whoever controls or understands the elements of time involved in a negotiation has the better position.
Many years ago I was looking at a truck for sale. I asked the owner why he was selling (always a good idea). He told me that the IRS was coming after him and he needed to sell the truck by the weekend (It was Tuesday). When do you think you would be able to negotiate the best price on the truck? Maybe right now, but certainly on Friday if the truck is still available. On Friday he would be desperate to get what he could from the truck before it was seized by the IRS.
Using Deadlines As A Negotiation Tool
This guy wasn’t using good negotiation skills. He gave away too much information. More specifically, he gave away his deadline. One of the most important things to understand in negotiating is deadlines.
The 2 things to remember about them are:
1. Don’t give away your deadline/deadlines.
2. Find the other side’s deadline/deadlines.
Find out whatever you can about any relevant deadlines. Sometimes there isn’t a clear deadline, or there are several deadlines for different parts of the negotiation. Whatever the case, the more information you can gather about those deadlines, the better.
How do you use that information once you have it? The crudest method is to simply delay and wait until the last moment to negotiate. This only works if the other side doesn’t walk away, and if your own deadline permits it. It also requires that there are not others who can take your place (as is clearly the case with a truck for sale – it might not be there Friday).
A bit of sophistication is required to use this information effectively. You may want to start by identifying what is most important to you in the negotiation. For example, if you are buying an apartment building, is the price or the terms the crucial element for you?
Let’s assume that price is most important to you. When you wrote the offer, you put some price on it, but you have inspections and other contingencies that allow for everything to be renegotiated. The process of inspections and negotiations ties up the property, so your competition is excluded for the moment. Then you learn that owner really wants to sell by the start of the school year, because he will be moving with his children.
Work on everything else in the negotiations except the price. Have inspections done, agree on what will be included with the property, etc. As the seller’s “deadline” approaches, he will be getting anxious to close the deal. Then you let him know you’re ready to close quickly. Of course, you’ll need the price adjusted due to the results of the inspections.
At this point the seller has the choice of throwing away the whole deal. This means starting over, and not moving when he wanted to. Alternately, he can be happy that he got what he wants most – a quick close. This means giving you your price.
This points up the importance of getting information on the other’s deadline, but also the importance of not revealing your own. When I was a real estate agent, I heard the story of a man who sold his property for a large profit. He had to pay $80,000 in capital gains taxes unless he rolled the money into another property, as a “title 31 exchange.” He had 60 days to close on the new property.
Imagine the abuse he would open himself to if, with 10 days to go, the seller learned of his deadline and the cost of the buyer missing it. He could threaten to delay closing unless the buyer paid $10,000 extra for some old coin-operated washing machines, for example. Overpay by a few thousand or lose $80,000. What do you think he would do?
For an everyday example of using deadlines, try buying your next car towards the end of the month. Many times, there are quotas that dealerships want to meet for the month, and bonuses that salesmen get for monthly volume. Saying “I’ll think about it and come back on whatever day”, can get them dropping the price fast.
“The words we say, determine the price we are paid.” Michael “MJ The Terrible” Johnson – Founder & Owner – Masters of Money, LLC.
The Ultimate Persuasion Technique – https://www.mastersofmoney.com/theultimatepersuasiontechnique/