5 Steps to Successful Negotiations

By: Brooke M. Dukes

Negotiating is a part of everyday life, but in business, it's absolutely critical to your success. Poor negotiation is the downfall of many professionals. 

There are five key steps to successful negotiations.

1. Research

Successful negotiators do their homework and take the emotion out of the process. It is critical that you prepare for negotiations. The process begins before the first email, call, or in-person meeting. The research you do at that time will set you up to quickly build rapport, align and influence your audience. Areas to research about your potential client include:

• Career achievements, current position accomplishments, and any personal interests
• Company milestones, accomplishments, and awards
• If possible, talk to business associates who have previously worked with this person to gain insight
• Research any challenges the company, industry, and prospect may be experiencing, then clearly understand all the ways your solution offers value and solves those challenges
• Gather any accessible budget information before you go into negotiations
• Learn whether they are considering working with your competitors; if so, what are their offerings and pricing?

During the course of negotiations, the goal may change based on variations in scope and other unforeseen actions by either party. While your ultimate goal should be realistic, this should not constrain your first offer or counter-offer.

Before you start negotiations, ensure that your prospect is fully empowered to make binding commitments; you don't want to find yourself in a position where you believe you've struck a deal, only to discover that your agreement must be approved by someone higher in the chain of command.

2. Find the Leverage

One of the objectives of doing your research is to find leverage you can use during negotiations. You want to take maximum advantage of your strengths; if you're the only source available or your offering is in short supply, you have tremendous leverage across the board. 

• Demonstrate your knowledge and expertise of the negotiation subject matter and process early on; establish yourself as the expert they want to work with 
• Consider the common tactic of trading one element for another--such as a lower price for a more relaxed schedule

Last week, we talked about the first two critical steps in negotiations: doing research and finding your leverage points. We know that mastering the negotiation process is essential in your business success, so this week, we share the final three steps to successful negotiations.  

3. Have a Strategy

The first offer is usually the most important and the benchmark by which all subsequent offers will be judged and compared. You'll never get what you don't ask for, so always have something to give away without hurting your negotiating position.

If you are bidding a project, consider including some nice-to-have items that aren't critical to the success of the project. For example, you could include spare parts that may or may not be needed in the end. If the buyer takes those items out to reduce the overall cost, you haven't lost anything, but it may help the buyer reach his target price. These value adds will help divert the other party from attacking the meat of your proposal. 

Of course, this strategy must be viewed in the context and in consideration of what other bidders may be doing. If you know that the only way to win the bid is to provide a barebones cost, this strategy may not be appropriate. 

Watch for clues such as body movement, speech patterns, and reactions to what you say. Be patient even if the prospect isn't; this can be difficult for those with a passion for instant gratification, but the last thing you want is for the prospect to think you're under the gun to finish quickly.

From a contractual standpoint, a counter-offer automatically rejects all previous offers. If your offer is rejected, do not submit a new offer; always insist on a counter-offer to force your prospect to move his/her position before you make another offer. 

4. The Offer

This is the time when confidence is most needed. There are two rules in negotiations: the first to speak loses, and the person with the most certainty and confidence will influence the other. 

To avoid misunderstandings, offers should be presented in writing and include all elements of the deal. The basis of the offer should include:

• Price
• Scope of work
• Quantities of goods or services
• Delivery schedule
• Performance incentives, if any
• Warranties, if any
• Terms and conditions

5. Win-Win Solution

Understanding the value you offer and the challenge your product or service is solving is more important than understanding the value you receive. Be prepared to give up little things in exchange for the big things you don't want to concede. Know your limits and how far you're willing to go on all aspects of the deal. The most effective negotiations happen when both parties prevent irrational behavior from interfering with their outcome. Once the negotiation is completed, you want to be able to maintain a beneficial working relationship.

By mastering these five steps of successful negotiations, you can avoid the downfalls that hinder the growth of many professionals. 

Identify what's holding you back, determine where you want to go, and create a strategy to get there.