So today I want to talk to you about negotiation. If you want to be a successful entrepreneur or just genuinely successful in life, then one of the skills you are going to have to embrace is the ability to negotiate.
Let’s start by asking the very simple question, what is negotiation? In its simplest form, it’s about trying to reach an agreement and that could be anything from haggling over the price of your new house to sorting out who’s going to be the nominated driver on a night out!
Negotiation is actually something that many of us do without noticing. We try to get into a position that suits us best by perhaps moving somebody else’s position. That is negotiation in its simplest form.
So ask yourself the question, do you like to negotiate? If you’ve answered yes, then great, you’ll probably already be pretty good at it, right? But if you don’t like negotiating, then you might’ve stumbled across something that’s holding you back, even if you hadn’t noticed it.
I’m always up for a bit of negotiation. It’s a sign that we’re getting close to a deal and to be honest, if people don’t want to negotiate, it’s possibly a sign that I haven’t pushed hard enough in the first place.
Now, the first thing I would say about negotiation is that you have to have a really clear idea of where you want to end up or where you are happy to end up. If I use an example of you wanting to sell your old car – you advertise it for 10 thousand, but you’ve got no idea what it’s worth and you haven’t got any idea of what sort of figure that you would accept.
If someone comes along, has a look and says, I’ll offer you five grand for it, then what do you do now? Maybe you just say no, after all, it’s only half of what you’re asking for, or the next thing you might want to do is make a counter offer.
The trouble is though, if you haven’t got a clue what you actually want or if you panic, you might end up thinking the lowest offer you’ll take is eight thousand or seven thousand or six thousand and you’ll just end up somewhere in the middle.
Now, the person you are negotiating with is now rubbing their hands because they’ve just knocked four, three, two thousand off the price and they might not have even known this would happen because they were just putting in a cheeky offer. All they are trying to do is negotiate somewhere away from your original asking price.
So, the number one rule in negotiation is have a clear idea of where you want to end up, otherwise you’re going to end up closer to where the other person wants to be.
Rule number two is I want you to think about what you are prepared to give up, what you’re prepared to sacrifice in order to strike a deal and it doesn’t just have to be financial implications.
If we go back to the car example, imagine that you’ve obeyed rule number one and you know that you start off at 10, but the lowest price you’re prepared to go to is nine.
Now if you think about rule number two, think about what conditions that you’re putting on the deal. For example, if your minimum price is nine thousand, you could subject that to the buyer paying cash and being able to complete the deal by the weekend.
You need to let the buyer know what your conditions are at the same time as you talk about the price. So for example, when they make their offer and you come back and at nine thousand, you might say, I’ll accept nine thousand two hundred, but you need to pay for it in full with cash collection by the weekend. Being really clear on the price and the conditions means that you’ve given the buyer the opportunity to achieve what they want, provided that they fulfil your conditions.
Life isn’t always that easy though, right? So you think you’ve got the making of a good deal, but the other person still won’t agree. So what do you do next?
This is my rule number three, understand the value of concession.
Now concessions are things that you are going to use to help you get the deal over the line.
Back to the car example, I’ve asked for two conditions to be met, I want cash and I want collection by the weekend.
At the moment, I don’t know if either of those are achievable for the buyer, but the chances are for that buyer, one of the conditions might be easier to meet than the other one. So, the important thing to do at this stage is to have that discussion and find out which of these are the most valuable to them. And, ask if you were to change one of the conditions, which one would help them out the most and which one of those would help you get the deal closed?
You might agree on the price of nine thousand for cash payment and collection by the weekend, but you could ask the buyer if you could do anything to make it easier and ask which option that would be. To hang onto the car for a few more days? Or to take part cash, part electronic transfer?
Sometimes we call this the conditional clause. It’s a conditional clause because you’re using that phrase’ if I could’ and not promising anything. I’m just suggesting how I might be able to change things around to help make this feasible.
Now, if the buyer is struggling to get the car collected by the weekend, then the offer of keeping it for a few more days is going to really appeal to them. If they’re struggling to get to the bank and withdraw all of the cash, then maybe the offer of the part electronic payment is going to be what helps them.
What I’ve done is I’ve given them the choice to choose which of those is the most valuable to them. You have to remember, negotiation is all about reaching an agreement that’s acceptable for you and also acceptable for the other party. In a good negotiation, both sides are going to come away feeling like they’ve won. One might be happier than the other, but neither is going to feel hard done by.
This is really important, especially if you hope to do more business with that person in future.
So remember the three golden rules. Number one, always know where you are happy to end up when you start the negotiation.
Number two, be really clear on the conditions that you want to apply to the deal. Then finally, number three, understand the value of any concessions that you make and use the ones that the other person is gonna find the most valuable to them.
If you apply these rules, you will find negotiating a lot easier, better for both parties, and actually, what you could find is that it’s better for business!