Many people believe that negotiations are "all or nothing," and that there has to be one winner and one loser. Nothing could be further from the truth. While the goal of negotiation is most certainly getting what you want, the fact is that the best deals (the ones that stick) incorporate terms and ideas from both parties.
In this article, we'll provide some tactics and tips that good negotiators use to get what they want. These suggestions may be used in virtually any negotiation process.
- Negotiating a deal is an essential part of doing business, and relies just as much on personality and soft skills as it does on quantitative analysis and valuation.
- The very first step before sitting at the negotiating table is to prepare. Learn about who you'll be dealing with, do your due diligence, and prepare psychologically.
- When negotiations begin, optimize your strategy based on how the deal will be done: in person; over the phone; or through email.
- Don't accept a bad deal. If your negotiations fail, keep calm and walk away, being careful not to burn any bridges.
Before the Negotiation
Before entering any formal negotiation, it is important for an individual to think about what they want to achieve from the process. To that end, it makes sense to put on paper specific goals or desirable outcomes. Be optimistic. Ask yourself what would be a "home run" in your deal? This could be as simple as the other party conceding entirely to your wishes.
Next, individuals should identify several fall-back positions that they'd be comfortable with that would still get the deal done. The idea is to have thought out as many scenarios as possible.
The next task should be to identify (or try to identify) any potential weaknesses in the opposing party's position. For example, if in a real estate transaction, one party knows that the other party has to sell a certain property or face a liquidity crisis, this is valuable information that can be used in negotiation. Identification of weaknesses is important. That's because it might allow the party that has done its homework to capitalize on the other party's weaknesses and turn negotiations in its favor. At the very least, help both parties to identify an area of middle ground better.
Another pre-negotiation exercise — and it is something that most people don't do but should — is to come up with a list of reasons why their proposal would also be beneficial to the opposing party. The logic is to bring up the key points of this list in the actual negotiation with the counterparty in the hope that the points will advance the cause and/or help to identify some common ground.
Again, using real estate as an example, perhaps one party (in this case a company) could argue that its bid for a particular property is more favorable than others (even though it's lower in terms of dollars) because it is an all-cash offer, as opposed to a riskier financing or a stock swap. By explicitly pointing out the advantages to both parties, the negotiator increases the odds of getting the deal done.
Ideally, each party should identify its goals and objectives at the outset. This allows each participant in the negotiation to know where the other stands. It also establishes a basis for a give-and-take conversation. At this point, each party may offer its fall-back proposals and counter-proposals to hammer out a deal.
That said, beyond the initial back-and-forth of proposals, there are also other things that negotiators can do to enhance their chances of turning the deal in their favor.
Let's use body language analysis as an example.
Was your proposal well received? Positive signs include nodding of the head and direct eye contact. Negative signs include folding of the arms (across the chest), aversion of eye contact, or a subtle head shake as if to say "no." Pay attention next time you ask someone a question. You'll see that more often than not, a person's body language can yield a lot of information regarding their underlying feelings.
If negotiation is done over the phone, body language can't be determined. This means that the negotiator must do his best to analyze his counterpart's voice. As a general rule, extended pauses usually mean that the opposing party is hesitant or is pondering the offer. However, sudden exclamations or an unusually quick response (in a pleasant voice) may indicate that the opposing party is quite favorable to the proposal and needs a little nudge to seal the deal.
By E-Mail or Mail
Negotiations done through e-mail or the mail (such as residential real estate transactions) are a different animal altogether.
Here are some tips:
- Words or phrases that leave ambiguity may signal that a party is open to a given proposal. Look specifically for words such as "can," "possibly," "perhaps," "maybe," or "acceptable." Also, if the party uses a phrase such as "anxiously awaiting your reply" or "looking forward to it," this may be a signal that the party is enthusiastic and/or optimistic that an agreement may soon be reached.
- When the opposing party makes an initial offer or a counter-proposal, see if you can incorporate some of those ideas with your own and then seal the deal on the spot. If compromise on a particular issue is not possible, propose other alternatives that you think would be favorable to both parties.
- Finally, a more formal contract reflecting the terms agreed upon during the negotiation is a must. To that end, have an attorney draft a formal contract soon after the negotiation process is completed and make certain that all parties sign it on time.
No Agreement? No Worries
If an agreement cannot be reached in one sitting or one phone call, leave the door open to future negotiations. If possible, schedule further meetings. Don't worry, if worded your request appropriately won't appear overly anxious. To the contrary, it will come across as though you sincerely believe that a deal can be worked out and that you are willing to work to make that happen.
In between negotiations, try to review what took place during the initial meeting mentally. Did the opposing party reveal any weaknesses? Did they imply that other factors may have an impact on the deal? Pondering these questions before the next meeting can give the negotiator a leg up on their counterpart.
The Bottom Line
Not every negotiation can reach a deal that all sides are happy with. Whatever happens, f an agreement can't be reached, agree to part as friends. Never, under any circumstances, burn your bridges. You never know when you might have to cross those rivers again.