Negotiating is an inescapable part of doing business. No matter who you work with — suppliers, customers, partners, lenders, employees — you need to know how to get what you want without losing the relationship.
Before you begin your next negotiation, familiarize yourself with these 5 strategies.
1. Advance research
Learn as much as you can about the person and organization you’ll be dealing with. What are their strengths and weaknesses? Where do they stand in their industry? How are they affected by their competitors? In what areas are the most likely to compromise?
Now analyze your own assets. Why should they do a deal with you instead of your competitor? The answer isn’t necessarily money. Maybe you provide higher quality, faster turnaround, or better customer service.
Finally, find out what the typical terms are for the type of deal you’ll be making. You don’t want to go into it with ridiculously high — or low — expectations.
2. Decide what you will compromise on
Small business owners often find themselves in the position of needing the deal more than the other party does. This has nothing to do with the quality of your business, only its size. So keep your pride out of it and see what areas you’re prepared to give on.
Make a list of conditions that are least important to you. If necessary during the negotiation, you can concede these items without losing too much of the deal’s value. When the other party sees that you’re willing to compromise, they’ll likely do the same.
3. Collaborate, don’t compete
Never lose sight of the fact that you want the negotiation to result in a business relationship, not an enemy. The ideal deal would be one where both parties benefit equally. Thus, the collaborative forms of negotiation, rather than aggressive ones, are more likely to be successful.
Discuss goals and needs at the beginning of the process. Once both sides feel confident that they understand the other’s position, there can be given and take until a solution is found that adds value to both businesses.
4. Make the first offer
Conventional wisdom says you should do the opposite: wait for the other party to tip their hand, then counter with your own offer. However, studies show that the person who makes the first offer usually gets closer to its target price.
The reason behind this is the psychological principle of “anchoring.” Once that first number is stated, both parties work around it and are instinctively reluctant to move too far from it.
If you don’t manage to speak first, protect yourself against the other person’s anchoring tactic. Even if the terms mentioned are very far from what you had in mind, don’t be afraid to say so. Reset the negotiation with your own offer, and perhaps a joke to the effect of, “You were just testing me, weren’t you?”
5. Make realistic counter offers
No matter how outrageously high/low the first offer, don’t go too far in the opposite direction too fast. And don’t accept the first offer, even if it’s what you wanted. People feel more satisfied with the deal when they feel that they’ve driven a hard bargain. Take small steps toward the final deal.
With these 5 negotiating skills in your pocket, you’ll be able to do more than cut a great deal; you’ll build valuable long-term relationships for your small business.