Reference no: EM132115162

Everything Is Negotiable, and Negotiation Is Everything

Some people argue that business is all about negotiation. While customers go into stores, find price tags, and pay the amount all the time, deals between businesses and even deals between businesses and consumers are often handled through a negotiation. Negotiations are discussions aimed at com- ing to an agreement about a particular outcome.

The ideal goal in a business negotiation is for each side to feel it got what it wanted. Leaving one side feeling a loss, particularly if someone thinks he or she lost and the other side won, only paves the way for future bad feelings, bad reputations, and bad negotiations. Often small businesses entering into negotiations worry that their youth, lack of experience, lack of track record, or lack of resources mean that there is no way they can win. Experience has shown that small businesses, even new small businesses, can do well in negotiations.

Use these four steps to structure a negotiation to achieve a winning solution for you and the other party: prepare, position, propose, and pounce.

? Prepare what you need to achieve, what you are ready to give up, and what it takes to close rapidly once agreement is reached. Learn as much as you can about the other side, its track record, current situation, and possible needs.

? Position by putting your best foot forward, show confidence in yourself, your firm, and your prospects. Don’t lie or mislead, but do not apologize. All businesses started small. With the right deals some small businesses grow large and bring their trading partners along with them. Talk about where you see your business in a couple of months or years. Position your firm as a good partner with which the other firm can ally.

? Propose solutions that provide value and balance for both you and the other party. This is often the hardest part of the negotiating process, but it is also the aspect which has received the most attention. Consider using these techniques for finding mutually winning propositions:

? Seek to create value: Listen to what drives the other side’s needs and seek alternative ways to solve the problem. For example, it says it needs money, but it may be able to work with more time, more flexibility, or a preferred treatment later. Adding new acceptable factors enlarges the negotiated pie.

? Seek long-term solutions: Today you are small, but tomorrow you may be bigger, so think longer term.

? Seek balance: Ideally, each side’s contributions should closely balance. Where close bal- ance is not easily achieved initially, structure contingent contracts to ensure balance later. For example, pay a small amount now to get started, but agree to pay a larger amount (e.g., a balloon payment) or a percentage of sales when sales reach a higher level.

? Seek mutual safety: Where risk is faced, consider sharing risks and rewards so each party is providing some of the safety net for the other, and each shows commitment to the deal working out.

? Seek outcomes commensurate with investment: Scale returns or considerations accord- ing to the size of the contribution of the party to your success. Aim to satisfy people or organizations that are major factors in your business, and realize you cannot accommodate every small contributors’ every need.

? Pounce when agreement on any part of the negotiation appears at hand; move to close the deal on that issue. When you have an agreement, even on small issues, pounce on it as a positive outcome, an indicator of future deals to be made. Then get the deal down in writing. When stalled, ask the other party how to move forward.

One fear some people have is being dealt a dirty trick by the other side. Preparation and a long- term view help here. A dirty trick only works when the other party can be confident you will not be able to retaliate or tell others about the dirty trick, since publicizing it will ruin negotiations with others. One-time deals are more prone to dirty tricks; long-term arrangements make them harder to sustain. Also, knowing if the other party has done dirty tricks in the past can help you prepare for them. Being well networked (and letting the other party know you are) can also help since if you are tricked, you can let others know, making the chance of the other party playing dirty tricks on others much less.

What makes all negotiations work is honesty. No one expects you to give up your secrets, but to build trust, you need to offer some information that helps the other side determine where to start negotiating. The optimal strategy is called tit-tit-tat.9 Give up one piece of information on what you need or are willing to offer. Wait for an equal response. If you get one, your negotiation is off to a good start. If you do not get a response, offer one more piece of information. Wait for a response. If you do not get one, bring up the point that so far in the negotiation you have made all the overtures. If the other side is serious about coming to a fair deal, it needs to step up to the table and start talking seriously. If not, then it is clear it is not interested in striking a fair deal, and the negotiation must obviously be over.10

Along these lines, another negotiating tactic that lets you be open about your goals without giv- ing away your secrets involves prioritizing your goals. Let us say you know three key goals you hope to achieve. Go into the negotiations asking for 5 or even 10 goals. In the bargaining process, you can “give up” some of your demands to show the other side you are willing to compromise.

As long as you gain some or all of the three key goals you wanted, you are ahead of the game by negotiating.11

Always keep issues of legality in the back of your mind when negotiating without a lawyer pres- ent. Let’s say you negotiate a trade of services with another business—you print its ad brochure, it waterproofs your parking lot. Legal? Yes, but in barter arrangements, you are trading something of value. That means you need to count it when tax time rolls around. If you fail to account for it, you have done something illegal. Twists like that are a good reason to get lawyerly advice until you know enough to go solo.

1. What are the four steps to structure a negotiation to achieve a winning solution?

2. What are the techniques for finding mutually winning propositions?