Negotiating for Success

Few things have more impact on the long-term success of your business than your ability to negotiate successful deals with customers, vendors, bankers and other key constituencies.

Yet, most CEOs leave money on the table during their most important business deals because they usually take the wrong approach to the negotiating process.

Rather than approaching negotiations as a mutual problem-solving process, they see it as a kind of mental and verbal sparring session, where the side with the sharpest mind, toughest resolve and most aggressive tactics emerges as the victor. Such an approach leads to win-lose or a lose-lose outcome and their companies suffer in the end.

Adopting a more productive negotiating mindset requires bearing the following in mind:

Negotiations involve exchanging information and resources in order to satisfy the different and sometimes conflicting needs of two or more parties.

Negotiating is cooperative rather than competitive.  Negotiating focuses on what is right rather than who is right and it creates long-term deals and relationships.

Honest, ethical negotiators never try to manipulate or deceive the other side.

The bottom line is that negotiating business deals has nothing to do with bargaining, compromise and competition. To create win-win outcomes, both sides must:

  • Strive to understand the other person’s wants and needs
  • Identify and attempt to solve the other person’s problems as well as their own
  • Adopt a mindset of flexibility rather than rigidity
  • Focus on “enlarging the pie” rather than dividing it up
  • Always aim for win-win outcomes

Following these principles will dramatically increase your chances of negotiating deals that benefit both sides and lead to positive long-term relationships.

Understand the other side. Gather as much information as possible about the other person’s situation. Specifically, you need to know:

  • Any existing time, industry and/or financial pressures
  • Their corporate goals and objectives
  • Their specific goals for the negotiation
  • Their options if they don’t make the deal with you
  • The personal goals of the negotiator
  • Who makes the final decision on the deal

Smart negotiators spend time on research since the more information you have, the greater your ability to solve the other person’s problem to your advantage.  Also, find out with whom you are negotiating and establish the honesty and ethics of the person.  The more you know about how the other side might respond during the negotiation, the greater your chances of creating the outcome you want.  Many will say they want a win-win outcome but their negotiating style and strategy often prove otherwise.

Plan your approach. A planned approach starts with having a clear understanding of your own position. To clarify your position, identify the best possible outcome, the worst acceptable outcome and the expected outcome.  This establishes your acceptable range of outcomes.  The best negotiators also establish the point at which they walk away and what they will do if they cannot reach agreement.

Build the relationship. Take the time to build the relationship before getting into the specifics of the deal.  The key to most negotiations is building communication, relationship and trust because those elements most often determine the outcome rather than just price, terms and conditions.  You build communication, relationship and trust by exchanging information, active listening, asking questions and acknowledging the other person’s needs.

Solve their problem. To create a true win-win deal, solve the other person’s problem as well as your own. In order to solve the other person’s problem identify their items of value by asking open-ended questions and determine their desired outcome.

Enlarge the pie. Expanded-resource negotiations involve finding ways to exchange things of varying value so that each side walks away with a positive outcome. To expand the resources:

  • Gather as much information as possible about the other side before starting the negotiations.
  • Identify items of value for both sides and list them in order of priority.
  • During the negotiations get creative about ways to introduce and exchange items of value so that each side have their needs met.
  • Stay focused on the desired outcome for the deal.

Make the numbers work. The rationale behind the numbers always counts more than the actual numbers. The more you know about the method the other side uses to reach their conclusions, the better your chances of reaching a win-win deal. You can question all assumptions, show how you are different and focus on the risks as well as the benefits of doing business with you.

One final key to successful negotiation is to never feel you have to make the deal.  It is a good idea to know what other options you have.