10 steps to better negotiation skills
With the pressure to secure value from deals higher than ever, we asked the experts for tips on perfecting the art of negotiation
Entrepreneurs and experts reveal the secrets behind striking the best deal
“Almost every aspect of the business landscape is negotiable,” says Andrew Simmons, managing partner of negotiation specialists The Gap Partnership. In recessionary times, this can work in your favour, as the pressure to get the most out of relationships and realise value from deals is higher than ever.
So whether you're faced with suppliers looking to hike prices, clients extending their payment terms, fixing a price for new business or dealing with an employee's request for a pay rise, understanding the art of negotiation will considerably increase your chances of a positive outcome.
There is a lot more to negotiation than open-ended questioning and other sales tricks, and a few key principles will stand you in good stead no matter what you're bartering over. We have distilled the advice of a number of experts into 10 top tips for perfecting this crucial, and sometimes undervalued art.
Preparation is everything
“You can't wing negotiations,” says Mark Jacobs, marketing director of sales and business management training company, The Mdina Partnership. “You've got to know your audience, what they want and what questions you need to ask.”
The first step is to understand what's driving the party you're negotiating with, and where their priorities really lie.
Tailor your response
Figure out what type of individuals you are dealing with and talk to them in a language they recognise. In short, find out how to push their buttons. Kevin Dougall, managing director of AP HR Solutions, uses a four-colour system to make an initial assessment of a person: a blue person is formal, precise and analytical, and needs a lot of data before they can make a decision; a red is purposeful, demanding and competitive, and more intuitive; green people are caring, relaxed and patient, and don't like to rush things; yellows are warm, expressive, sociable and often persuasive.
Once you've determined who you're dealing with, adapting your approach will make negotiation easier. Blues, or thinkers, will want lots of information, reds, or knowing people, just want the bare bones, while yellows and greens prefer stories or diagrams. However, it's important to understand what type of person you are, too. “If they've got a strong [red] knowing person, putting your own strong competitor or thinking person in against them is not going to work,” says Dougall. “Instead, look for your own [green or yellow] pleaser, or feeling person, to help make the other party feel like they are winning. You need to adjust who talks to who about what.”
“Nature gave us two ears and one mouth, and in life – generally, you've got to use them in that proportion,” says Dougall, adding that this is the best way to understand who you're up against. He recommends asking the other party what they want to get out of the negotiation, and advises an initial face-to-face meeting to discuss this before getting into the specifics.
Simmons believes knowledge is power. “The more you say, the more you give away,” he says. “Exercise control, be quiet. Ask lots of open questions. Let them talk, listen and take notes.”
Be mentally prepared
We give 55% of what's going on in our head away through our body, and face-to-face is usually the preferred medium for negotiation. So you need to take the right mental approach. If you feel subordinate, it will be hard to cover this up and will set the wrong tone from the outset. Even your most junior staff should be encouraged to think of negotiation as a business-to-business discussion.
“Whatever's going on in your head will come out of your body,” says Jacobs. “If a junior salesperson is trying to sell something to someone senior, their approach might be subservient. That is a terrible negotiating position.”
Instead, those entering into negotiations should think: “We all need each other.” Know the value of what you're offering, and how it helps the other party. Once your head is clear, you will feel in control and can take the lead through questioning.
Discuss, don't sell
Negotiation should be a discussion of how to achieve a mutually agreeable outcome, not a selling exercise. “The classic sales pitch is ‘look what we can do for you',” says Jacobs. “What you should be saying is: ‘This is what we do and what we can offer. How can it help you?' This gives you something to negotiate with, as they're telling you why they want your product or service.”
Also try to identify trade-offs – things you can offer that are of a low cost to you, but high value to them, or “coinage”, according to Jacobs. Let's say you're selling IT systems, and part of the offering is two days' on-site help from your engineer. You could give them three days, because you already pay for that person, so a day here or there doesn't cost you much. But if you usually charge your engineer out at £500 a day, that's valuable to them. In other words, how can you help them to help you?
“If it's your product or service on the table, the key issue is trying not to move on price,” says Jacobs. “So what can you agree to give them that means they still buy at the original price?”
Take some time out
Don't be afraid to ask for a break in negotiations to collect your thoughts. “You need time to go away and reconsider,” says Dougall. “Unless you're up against an absolute fixed deadline, be prepared to ask for time out, and use this to recalibrate your thought processes.”
Understand your position…
Before you enter negotiations, form three positions in your head: what you could get away with – which is usually your opening bid; what you expect to get, based on a knowledge of your market; and your deal breakers. Or, as Jacobs puts it: your “mega win”, your “expected win” and your “walk away”. “In the heat of the battle, it's easy to give more away than you want to. It's quite an emotional thing,” he says. So it's vital to work out these positions in advance.
Simmons recommends being extreme, but realistic with your opening bid. “Move from this position to give them the satisfaction of winning,” he says. “This helps them become more agreeable. You need trust for collaboration to work. Unrealistic positions damage relationships.”
…and get to know theirs
One of the biggest mistakes negotiators make, according to Jacobs, is failing to uncover their opponent's position. When selling, for example, if a potential customer does not want to pay your asking price, ask them what they do want to pay.
“I think a lot of people miss that bit out,” he says. “They'll say OK, we'll give you 10% off, and the client will say: ‘That's not enough,' and then the salesman will offer more. We call that ‘ringing the dishcloth'. When do you stop doing it? When the drops stop coming out.”
Once they have told you what they are willing to pay, you have two positions and there is scope for negotiation.
Everyone's a winner
If you're going to have an ongoing relationship with the other party, negotiation needs to be win-win. “Negotiation should always be about understanding how we are solving people's problems, and what pain we are taking away,” says Jacobs.
Once more, with feeling
Whether it's an employee asking for more holiday or you're agreeing the price for a product, emotions are usually involved in negotiations. According to Dougall, talks often fail due to communication problems, even when an agreement isn't far away. So, you can go a stage further than simply finding out about who you're negotiating with – and a step closer to success – by carefully assessing how sensitive the subject is and the level of emotion involved, and taking this into account.
There is always a reason why someone is saying no. Mark Jacobs, MD of The Mdina Partnership, says that if you find out what this is, everyone can be a winner.
“We were recommended to a company by the wife of another client who had attended a Mdina course.
“I explained about our seven-stage sales approach. They subsequently thanked me for the proposal (15 days' training) and asked me to leave it with them. When I followed up it was clear that they were not keen to book the training. We found out that the real objection was that it was too expensive for their budget.
“What many companies would now do is see if they could meet that pricing. I remained at our normal price by organising part of the training in one financial year and the rest in the next.
“The course ran consecutively as we straddled the two years. The delegates didn't notice because we separate our development days by three to four weeks to allow them to practice the techniques. Everyone won, which is the general aim of