Improve Your Negotiation Skills

Introduction:

Do you have what it takes to be a successful negotiator? During negotiations the investor will be looking for certain rates of return, exit strategies and other conditions based on how he or she values the potential of your opportunity. At the same time, you'll be looking for certain terms and conditions that you need to maintain control of your business.
Because you and the investor will have different points of view, skirmishes are likely to occur during negotiations. But if you deal effectively with these differences you can influence the results of the negotiation to get what you want and reach an agreement that's mutually beneficial to you and the investor. There are a number of outcomes that could occur as a result of negotiations. Depending on how you address the negotiations, you will reach one of the following outcomes.

Win-Win:

Both parties achieve their goals and are satisfied with the outcome. For example, both you and the investor are happy with the terms of the negotiation contract.

 

Win-Lose:

One party achieves the goal at the expense of the other party. For example, the investor is happy with the terms of the contract, but you believe the investor will have too much control of your business.

Lose-Lose:

Both parties are dissatisfied with the terms of the negotiated contract. For example, you feel that the investor is demanding too high a return, and the investor feels that your valuation of your goodwill is exaggerated. The two of you cannot agree on these points, but they are the only items that are preventing you from signing the deal, so you leave them in and close the deal.

CRN SKILLS:

Five basic principles:

• Be hard on the problem and soft on the person
• Focus on needs, not positions
• Emphasize common ground
• Be inventive about options
• Make clear agreements

Where possible prepare in advance. Consider what your needs are and what the other person's are. Consider outcomes that would address more of what you both want. Commit yourself to a win/win approach, even if tactics used by the other person seem unfair. Be clear that your task will be to steer the negotiation in a positive direction. To do so you may need to do some of the following:

Reframe:

Ask a question to reframe. (e.g. "If we succeed in resolving this problem,. what differences would you notice? "Request checking of understanding. ("Please tell me what you heard me/them say.") Request something she/he said to be re-stated more positively, or as an "I" statement. Re-interpret an attack on the person as an attack on the issue.

Respond not React:

• Manage your emotions.
• Let some accusations, attacks, threats or ultimatums pass.
• Make it possible for the other party to back down without feeling humiliated (e.g. by identifying changed circumstances which could justify a changed position on the issue.)

Re-focus on the issue:

Maintain the relationship and try to resolve the issue. (e.g. "What's fair for both of us? "Summaries how far you've got. Review common ground and agreement so far. Focus on being partners solving the problem, not opponents. Divide the issue into parts. Address a less difficult aspect when stuck. Invite trading ("If you will, then I will") Explore best and worst alternatives to negotiating an acceptable agreement between you.

Identify Unfair Tactics:

Name the behavior as a tactic. Address the motive for using the tactic. Chance the physical circumstances. Have a break. Change locations, seating arrangements etc. Go into smaller groups. Meet privately. Call for meeting to end now and resume later, perhaps "to give an opportunity for reflection".

There are different styles of negotiation, depending on circumstances.

Where you do not expect to deal with people ever again and you do not need their goodwill, then it may be appropriate to "play hardball", seeking to win a negotiation while the other person loses out. Many people go through this when they buy or sell a house – this is why house-buying can be such a confrontational and unpleasant experience.

 Similarly, where there is a great deal at stake in a negotiation, then it may be appropriate to prepare in detail and legitimate "gamesmanship" to gain advantage. Anyone who has been involved with large sales negotiations will be familiar with this.

 Neither of these approaches is usually much good for resolving disputes with people with whom you have an ongoing relationship: If one person plays hardball, then this disadvantages the other person – this may, quite fairly, lead to reprisal later. Similarly, using tricks and manipulation during a negotiation can undermine trust and damage teamwork. While a manipulative person may not get caught out if negotiation is infrequent, this is not the case when people work together routinely. Here, honesty and openness are almost always the best policies.

 Preparing for a successful negotiation…

Depending on the scale of the disagreement, some preparation may be appropriate for conducting a successful negotiation.

 For small disagreements, excessive preparation can be counter-productive because it takes time that is better used elsewhere. It can also be seen as manipulative because, just as it strengthens your position, it can weaken the other person’s.

 However, if you need to resolve a major disagreement, then make sure you prepare thoroughly. Using our free worksheet, think through the following points before you start negotiating:

• Goals: what do you want to get out of the negotiation? What do you think the other person wants?
   
• Trades: What do you and the other person have that you can trade? What do you each have that the other wants? What are you each comfortable giving away?
   
• Alternatives: if you don’t reach agreement with the other person, what alternatives do you have? Are these good or bad? How much does it matter if you do not reach agreement? Does failure to reach an agreement cut you out of future opportunities? And what alternatives might the other person have?
   
• Relationships: what is the history of the relationship? Could or should this history impact the negotiation? Will there be any hidden issues that may influence the negotiation? How will you handle these?
   
• Expected outcomes: what outcome will people be expecting from this negotiation? What has the outcome been in the past, and what precedents have been set?
   
• The consequences: what are the consequences for you of winning or losing this negotiation? What are the consequences for the other person?
   
• Power: who has what power in the relationship? Who controls resources? Who stands to lose the most if agreement isn’t reached? What power does the other person have to deliver what you hope for?
   
• Possible solutions: based on all of the considerations, what possible compromises might there be?

Negotiating successfully…

The negotiation itself is a careful exploration of your position and the other person’s position, with the goal of finding a mutually acceptable compromise that gives you both as much of what you want as possible. People's positions are rarely as fundamentally opposed as they may initially appear - the other person may have very different goals from the ones you expect!

In an ideal situation, you will find that the other person wants what you are prepared to trade, and that you are prepared to give what the other person wants.
If this is not the case and one person must give way, then it is fair for this person to try to negotiate some form of compensation for doing so – the scale of this compensation will often depend on the many of the factors we discussed above. Ultimately, both sides should feel comfortable with the final solution if the agreement is to be considered win-win.

Only consider win-lose negotiation if you don't need to have an ongoing relationship with the other party as, having lost, they are unlikely to want to work with you again. Equally, you should expect that if they need to fulfill some part of a deal in which you have "won," they may be uncooperative and legalistic about the way they do this.

Improve your negotiating:

•	Do your research: Clarify your own objectives and make sure you understand what your opposite number wants from the deal. For example, by doing some basic research into a potential supplier, you can work out how valuable your custom is to them.
•	Decide what is negotiable: Before you start to negotiate, draw up a list of factors that are most important to you. Decide what you are (and aren't) prepared to compromise on. Key factors might include price, payment terms, volume or delivery dates. Establish your preferred outcome, but remain realistic, because if you're not prepared to compromise some negotiations won't last long.
•	Plan your strategy: You need to plan your strategy in writing before beginning negotiations. This will help you set clear goals and work out where you will draw the line and walk away from the deal. Decide the overall approach that you will adopt. Be clear about the type of deal you want and the priority you will give it. Write down your negotiating strengths and how you might use them to get the concessions you require. Consider ways of defending the weaker parts of your argument and negating the supplier's main strengths.
•	Select the best team: Once you've decided on your strategy it is essential that you get your negotiating team right. Make sure it has skills in all the required areas and, where necessary, use a specialist to negotiate in areas outside your expertise.
•	Choose the right time and place for negotiation: Ideally select a time and place where you are not under pressure to close the deal.
•	Outline your requirements: Open negotiations by outlining your requirements or terms and conditions and try to get your opposite number to reveal their starting point for discussions.
•	Ask questions and listen closely to answers: Asking questions will help you understand what your opposite number wants to achieve. You may be able to get them to reveal how flexible they are on certain issues.

•	Don't reveal your negotiating position and avoid making unnecessary concessions: If you have to make concessions - look for reciprocation. Concessions should only be made to help you get the things you value. You should also avoid appearing too keen to do a deal. Consider what offer the other party in the negotiations is likely to make and how you'll respond.
•	Be aware of negotiating tactics: You need to be aware of common negotiating tactics. If the other party keeps referring to urgent deadlines or a person they need to confer with, they might be playing games. Don't be forced into making rushed decisions or unnecessary concessions, such as false deadlines. Each time a point is agreed, clarify that you've understood it correctly and write it down.
•	Draw up a contract: Once all the points have been negotiated and a deal has been agreed, it's best to get a written contract drawn up and signed by both parties. While verbal contracts are legally binding, they are difficult to prove in court. Most business owners would view a good deal as one that meets all their requirements, but you should also consider other factors such as whether you want to do business with a particular firm again. Although getting the best possible deal in the short-term is important, a good relationship in the future may help you get even cheaper prices or other perks, such as priority delivery.