By: Entrepreneur.com Staff, a Special to Overdrive
If you’re in business, you’re a negotiator. You have no choice. Business doesn’t happen unless two or more people enter into a transaction. This can be as simple as buying inventory or as complicated as a merger of two public companies. Without transactions, business doesn’t happen, and every transaction involves a certain amount of negotiation. When you’re in business, negotiating the best possible deals is a high, if not the highest, priority. As a business owner, you can’t know enough about negotiating.
It’s a lot easier to describe what negotiation “isn’t” than what it is. Let’s get some things straight upfront. Negotiation is not:
- A search for truth, justice and the American way.
- A friendly discussion at the corner of Starbucks.
- A quest for the perfect solution to a business problem.
Make no mistake: Negotiation is a game. The goal in negotiation is to win — to get the best deal you can. Period.
To get ready for any negotiation, you must do three things:
Know your bargaining position.
In every negotiation, someone is in a stronger position and someone is in a weaker position. Where are you? In any negotiation, the side that needs the deal more is the side that gives up the most — precisely because they need the deal and can’t afford to have the other side walk away from the table.
Know how the other side perceives its position.
It isn’t enough to know what your real bargaining position is. You also have to consider how each side perceives its position. As any poker player knows, sometimes a mediocre hand can be a winning hand if it’s played properly. If your negotiating position isn’t great but you see the other side is worried about losing the deal, you can’t go wrong by coming on strong and playing to the other side’s fears.
Assess your bargaining style.
Are you aggressive or passive by nature? I hate to say it, but in 25 years of studying lawyers, I’ve found that those who are naturally aggressive, fearless and downright ornery tend to make the best negotiators. People are afraid of them, want to avoid their nasty behaviors and give them what they want. To truly succeed at negotiating, it helps if you can find your inner Rottweiler. Remember, it’s a game.
Now that you’re psychologically ready to sit down at the bargaining table, it’s time to figure out what you need to get out of the deal.
Sit down with a sheet of paper, fold it down the middle, and label each half “deal points” and “trading points.” Then list all the points you need to reach agreement on.
Deal points are those you must win — if you can’t get those, you walk from the table and look for another deal. For example, if you paid $1,000 for a painting and need to get a 20 percent return on your inventory to stay afloat, getting a purchase price of at least $1,200 is one of your deal points.
Any point that isn’t a deal point is a trading point — nice if you can get it, but you can live without it if you sense it’s a deal point for the other person.
In a negotiation, your goal is to get all your deal points and as many of your trading points as possible, recognizing that often you’ll have to yield one or more trading points to get your deal points.
Be realistic when identifying your deal points. A lot of things you negotiate for aren’t really life or death for your business. If you aren’t sure if you really need something or not, it’s a trading point.