Top Ten Rules of Negotiation

Posted on Posted in Professional Development
    • Introduction
    • 10 rules of negotiation
    • Conclusion

    Introduction

    Negotiation is a skill that most of use on a daily basis, and it is a basic part of business.

    The old anecdote is true: "You get what you negotiate".  You can use negotiation in your personal life or in business.  Good negotiation skills can make or break a small business.  In any B2B transaction there are often incentives, perks or additions that are available beyond the list price.  This could be a better deal, more products, reduced price, future cooperation, a free pen... it doesn't matter. 

    Here are the top ten rules for negotiation.

    10 rules of Negotiating

    1 Don't negotiate

    I know this definitely seems like a cheat, that the first rule of negotiation is "Don't negotiate."  But it is true.

    If you are selling: Identify the the customers problem, solve the problem then ask for the money.  Get the value proposition identified, and sell to the value.    Don't enter with a soft offer that isn't serious.  If there is no need for negotiation then don't negotiate.

    If you are buying: Identify what the value is to you, tell the supplier how much you want to spend.  That's it, let them make their own decision.

    Don't negotiate if you don't have to.

    2. Don't negotiate with yourself

    This rule goes hand in hand with the first rule.  Don't negotiate with yourself.  Lead with what you have calculated and lead with confidence.  If you have done your preparation and your calculations, then your lead price should be reasonable, and competitive for the value.

    Don't round down.  Don't negotiate yourself off of your calculated price.  Enter with your number and see what they say.

    Don't lose confidence before you have begun.

    3. Never EVER accept the first offer

    There is always something that can be done to make the deal sweeter.  If the other party has an interest in getting the deal done, there is something they can do.

    There is always always a better offer.. not necessarily lower money, but better offer can be made.

    4. Never make the first offer if you can avoid it

    The person who puts forth the first price is at a disadvantage. Avoid this whenever you can.

    The person who is hearing the first offer gets to react, and the pull will begin in their favor.

    Whenever possible, do your best to get the other person to put the price first.

    5. Listen more, and talk less

    This is a good rule in life as well as in negotiation.  Ask questions and listen, let the other person talk.

    The more you say the more likely you are to say something stupid.  Don't leak information.  Don't break the rules of negotiation.

    Listen well and let the other person do more of the talking.

    6. Never give anyone a free gift

    In life, as well as in negotiation, nothing is free.  If they want something they must work for it or pay for it.

    This may seem harsh and if you are on friendly terms with the other party you may be tempted to offer free incentives, but there are very practical reasons why you shouldn't.

    If you give someone a free gift that they haven't worked for or paid for, that will be their new expectation.  Any further negotiation will start at this discounted rate.

    Furthermore, they will negotiate for additional gifts and discounts as well.  So the free gift you gave away for a friend has left you in a worse position today, and a terrible position tomorrow.

    Even if its just information or cooperation, don't give free gifts.

    7. Beware of the salami effect

    Be very careful not to give away your whole deal slice by slice.

    Just like a log of salami that loses thin slices one at a time and ends up with nothing, you can do this to your deal if you are not careful.

    Especially if you itemize your costs in too great detail for the other party.  They will start to remove key components of the deal piece by piece, they will tell you this part is too expensive and that part is not necessary and what you are left with is an unattractive deal you may have trouble refusing.

    Try to keep your itemized costs to yourself to avoid this, and don't break rule number 6.

    8.  Avoid rookie's regret

    This is another rule that is good for life in general as well as negotiating.

    Everyone walks away from a deal wondering if they could have or should have done better.  When you second guess yourself and put unnecessary shame, blame and pressure on yourself.  It can poison a deal, it can poison your whole day or week or month.

    To avoid this, you have to be sure that you have done the required preparations and calculations diligently.

    In negotiation you should be aware of 3 key things that will help you avoid rookie's regret:

    a) know all the details.  If I'm about to make a concession, what is it going to cost me?   -  

    b) what is it worth to the other guy?

    c) If i know A &B, what do I want in return, preferably of equal cost to him and equal value to me.

    This will take patience and preparation.  You will have to follow the rules listed here.

    To avoid rookie's regret you have to ensure you are well prepared.  You have to ensure you have followed the proper steps to the best of your ability.  You have to be sure you know what your goals are, what your minimum is, what is beneficial, what is acceptable and what is not.

    In short, you have to trust the process.  If you have done your best, then you should be able to live with the results.  Real regret comes in when you know you could have done better and you missed opportunities.  But if you have done your best, in negotiation or in life, then you can have peace of mind and live with the results.

    9.  Avoid the quick deal

    You should be very suspicious if the other party changes the tempo of negotiation and wants to seal the deal unusually fast.  This may seem like a very good thing, but it may mean they have noticed something you have overlooked.  Take your time and be careful.

    10.  Never tell anyone what your bottom line is

    After the deal, you may have the opportunity to be friendly with the other party... maybe over drinks or meals.  No matter what, never reveal what your bottom line was.  Never tell them how far you could have been pushed.  Never tell them what you held back or what the true business value you have received.

    Revealing this information puts you at a disadvantage for future deals.  Furthermore, it can spoil the entire perception of the deal.  Anything that you held back and successfully negotiated for is a loss for the other person, and it can change their attitude and your relationship.  Keep your lips sealed.

    Conclusion

    Becoming a strong negotiator will have great benefits on your business and your life.  It will require you to develop patience and listening skills.  It will require you toe develop and enhance your communication skills.  It can even force you to be more diligent in preparation and calculation.

    All of these traits are very positive and will help you in your life and in your business.

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