Negotiations are hard. Both sides usually have opposing positions and at some point negotiations become tiring.
One of the best things you can do in a negotiation is to have a strategy to get to the outcome you desire.
In fact, having a good strategy in negotiations provides a compound effect. Not only do you negotiate faster and more effectively you can often speed up the process and avoid “deal fatigue.”
It’s my belief, having been involved in thousands of negotiations, your preparation and strategy the beginning can often decide if you get a deal done. Working as a corporate lawyer for a career means I basically negotiate for other people for a living so I’ve seen the good, the bad and the ugly.
So as I am prepping for a few speeches early this year on negotiations I thought I’d condense my thoughts for you, the business owner and leader. Of course I hope you’ll join me at a conference or one of my workshops – but here’s some of the high points you would see and as much detail as I can reasonably convey in a quick article.
Here’s 7 steps to take your negotiations to the next level.
Step 1: Understand Your Position
Few negotiators take the time to understand their own position before they get deep into the process.
Several questions you might want to ask yourself as you head into a negotiation:
How bad do I need this deal?
What is my upside if this deal happens?
How soon do I need this deal?
How hard will it be to do my side of the deal?
How much time do I have for negotiation?
Who is the right person on my team to negotiate?
The key is to know yourself well. Understand your needs, motivations and desires before you get into the discussions (or deeper in the discussions) with the other side.
Step 2: Understand Your Alternatives
At the Harvard negotiation school they’ll famously tell you to know your “BATNA.” That’s your Best Alternative To a Negotiated Agreement.
Or what I call your walk-away.
As I say “the person that can’t walk-away from the negotiation loses.”
It’s critical to know what you will do if you don’t get the deal you want. What is your fall-back? What does that alternative look like?
It’s a great idea to have a safe fall-back that you trust as you go into a negotiation.
For instance if you are negotiating to bring in a new employee having an alternate that you know you can trust if you can’t get the one you are negotiating with would give you a lot of power in the negotiation.
Step 3: Better Your Position
As you examine your position and your alternatives it is a great time to better your position before you go into the negotiation.
The classic example would be buying a car. If you have a car, can get to work and accomplish what you need to accomplish with your current car you have little “pain.”
At that point getting a new car is a nice to have but certainly not a need.
If you flip the situation and you have no car and you need to get to work tomorrow you are in a much weaker negotiation position. You are now highly motivated to buy a car.
But if you can borrow a car for a while, find alternative transportation or find ways to accomplish the things you need to without a car – you’ve just taken power back.
What can you do, in your current position, to get positioned to be a more effective negotiator?
Step 4: Understand Their Needs And Wants
We took time to understand our needs and wants. We want to do the same for the other side too. What do they need? What do they want? What do they want out of this negotiation?
While it’s sometimes difficult to know what the other side wants it is often the case that we can make an educated guess.
Collect as much information as you can on the other side and determine why they want the deal with you. Some of this might be in public statements they have made to you or others. Some of this might be based on understanding their business.
The more you can understand their “why” the better you can negotiate to get what you want. You can also tailor your offerings to their particular needs as we get later in the negotiations.
Step 5: Understand Their Alternatives
We examined our walk-aways earlier. What are theirs? What can they do if this deal doesn’t happen?
The walk-aways often show us the relative power of the parties.
If the other side really needs our product or service we know we can help them and we have negotiation power.
If the other side doesn’t need us we know we have little to no leverage.
I, personally, learn a lot in this phase. If I know the other side thinks my services are a commodity (like by saying they can get someone else to do it for a lower rate) I often know that I need to correct this perception or end the negotiations.
We learn a lot by understanding where our counterparty is and it is a dis-service to not investigate it.
Step 6: Set The Table For A Good Negotiation
With all of the preparation work coming together the next key step is to set-up for a good negotiation.
The time and complexity that goes into the negotiation will usually be a function of its importance.
Sometimes travel and dedicated meeting rooms are needed. If so we want to have agreements, up front, on who is coming to the negotiation, how many hours or days the negotiations will last, etc.
Regardless of whether we are meeting by phone, video or in person we want dedicated time and a distraction free environment.
We also want to know who the key decision makers are and when they’ll make a decision. Often on bigger deals with negotiate with a representative that has to go back to the final decision maker. The time to know that is up-front.
We also want to know time constraints. In one fabled negotiation story a negotiator went overseas to get a deal done in a week. But the other side was ready to negotiate for months. How weak was the position of the traveling negotiator in that case?
You’ll also want to set some limits on yourself before you go into the heat of the negotiations. Write down boundaries – maximum and minimum prices, timelines, etc. – before you start the negotiation. If, somehow, the negotiations get spun against you it’s time for you to walk away (and probably explore your walk-away options).
Step 7: Work The Process
Negotiation is a process. Once you have laid the foundation then you need to work the process.
Some view negotiation as a game. Some are more open.
You’ll learn a lot about your counterparty in the process. The key is you have to be open to the process and knowing it’s not a straight-line.
As you negotiate more often you’ll understand this ebb and flow better. And you’ll be more powerful.
But the key is whether it’s your first negotiation or millionth is to know you are in a process and see it as such. If you can get to the point where you can step back from your own involvement in the negotiation and see the interplay of both sides – almost as if you are watching from above – you are well on your way to success.
What To Do Next
I bet you are doing some things right – and some things wrong – in negotiations. Use this 7 step guide as a tool to get better in your next negotiation.
With the right preparation and forethought my bet is you’ll have better outcomes.
NOTE: This article is a piece develop a small portion of the content of the book tentatively called The Journey: Finding Your Place From Entrepreneur to CEO being co-authored by The Our Shawn McBride and Ann Gatty. If you want updates on the book including the possibility of joining our release team or getting one of the first copies please join our mailing list here.
DISCLAIMER: This article talks about legal issues. I am a lawyer licensed in multiple US jurisdictions, but I am not your lawyer unless we have signed an engagement agreement. Please view this material as educational and general in nature (as it is). Consult counsel you have retained for advice on your specific facts and circumstances and applicable laws. Do not rely on the statements in this article as legal advice.
By: The Our Shawn McBride, is the business nerd and long-time business attorney that focuses on changes of ownership in businesses. He works with business owners that know their business is about more than themselves to get ready for their future through keynotes, training and personalized solutions. In furtherance of this he hosts The Future Done Right(TM) Show where he collects, digests and gives lessons and insights on The Future of Business. If you want regular content on the future of business subscribe to get new blog posts from us here.
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The Our Shawn is based in DeLand, Florida (between Orlando, Florida and Daytona Beach, Florida) and Dallas, Texas where he keeps offices. You can also find Shawn on webinars or traveling nationally or internationally for speaking engagements.
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