Over the years I’ve learned five really important rules for successful negotiations. I’ve personally used these rules in literally thousands of formal negotiation sessions and have written great deals and formed long term relationships because of them.
1. Make sure that both sides feel that they’ve accomplished something in the negotiations.
2. Don’t fight for a small point so long you damage your ability to win the large ones.
3. Know going in what your ‘must haves’ are, the rest are optional.
4. Let the other person quote a number first.
5. Always… be in a position to walk away from the table if a good deal can’t be struck.
Let me elaborate a little on each of the rules:
Rule 1
Negotiations are a give and take process. If you are trying to cultivate a relationship with someone and plan to do business with them again, be in a collaborative mindset. Whether you are negotiating the terms of a consulting project, buying a car or trying to secure that antique table at a flea market, each party has to feel good about the process or it will be a one time thing. If you drive such a hard bargain every time that the other party feels as though they were taken advantage of, word will quickly spread about your business tactics and sooner rather than later you will find it difficult to find someone willing to work with you. Give a little, get a little, and everyone gets a deal that they feel good about.
Rule 2
A long time ago I was in negotiations to buy someone out of a business arrangement. Every time we would leave the bargaining table with what we though was a deal, the person would call or email the next day with ‘one more thing’ or a ‘slight change’. To make matters worse, this person would not speak directly to me, instead they used their attorney who then contacted my attorney… driving up the cost of the process and making the lawyers rich. After this had happened four separate times, over items that were actually worth less than the attorney’s fees we were being charged to talk about it, I called a final one-on-one, lawyer-free, negotiation session where we sat for three hours, did the give and take and then agreed that no more changes could be made without the deal being called off. The result… a good deal for everyone… except the attorneys.
Rule 3
Anytime you walk into a negotiation you need to know your bottom line, the one or two things you absolutely must get from the negotiation to satisfy your business needs, financial needs or in some cases your ego needs. You will most likely have a list of 5–10 things you’d like to have…only the ‘must haves’ are in concrete, the rest have to be negotiable. Many people view a negotiation session as a kill or be killed situation. Sometimes to get to a workable deal you give a little more than the other party, in other deals the reverse is true.
As long as your ‘must haves’ are met you secured a good deal, enjoy it.
Rule 4
When you are in negotiation to buy anything, let the other person put out a number first. It’s still amazing to me that when buying anything from a car to a toaster that people answer the question posed by a salesperson “so, what do you want your monthly payment to be?” My answer has always been “the absolute lowest one possible, now what’s your price on the ____?”
Do your research in advance, know what the price points should be and wait, (be comfortable with long periods of awkward silence) … a number will eventually be put on the table and often it’s at or lower than you expected.
Rule 5
(My cardinal rule) Anytime I agree to enter into negotiations, I’ve already thought through the first four rules in my head and have my benchmarks set. I am always prepared to walk away from a deal, a project, a house or other purchase if my basic ‘must have’ benchmarks can’t be met. Now let me be clear, I don’t want to walk away from the deal, otherwise I wouldn’t have agreed to sit and negotiate… but I’m prepared to if we can’t create a good deal (See Rule #1). By putting yourself in the position to walk away from ANY deal, you avoid the sense of desperation that can cloud your judgment, the emotional responses tied to your wanting the deal to go through and this skill will keep you from getting into situations that you should have passed on.
Happy negotiation !
