Posted: Wed 28th Nov 2012
I've been working in negotiation for many years and have come to understand that it's really a way of communicating where there are some set rules, writes Chloe Askwith, author of How to Negotiate. Instead of being something reserved for specialists, it's a skill that can be learned and is relevant and useful to all of us. There is huge value in learning how to negotiate properly.
What is negotiation?
Negotiating between two people is finding an agreement that both are happy with. This is not just about setting a price. It's more than that - it's putting in time and effort to make sure that you and the person you're dealing with would be more than happy to come back and do it all again. The benefits of successful negotiation are obvious. You will:
But how do you do it? Follow these ten steps to sharpen up your negotiations with suppliers:
1. Do your research.
Research both previous deals you've done and your market as a whole. Knowing what's out there can help you set your negotiating terms and increase your confidence when talking to suppliers.
2. Decide what your variables are.
The core of negotiation is discussing all the moving parts or 'variables' of each deal.Â Alongside the price, this is everything else that's included in the discussion, which would normally include, for example:
after sales care of any sort
any extra bits you can add on.
Ask yourself what's fixed in your deal and what can change. Also, think about any factors that may be beneficial to the other company.
3. Work out what deal you would like (i.e. your best and minimum deal 'range').
Do your numbers and make sure you have to hand:
your cashflow projections (this can be as simple as how much money you have in the bank)
your profit margins on each product (and overall)
how much you spend per year on all your supplies
how it would benefit you to spread payments
what volume of the product you can store.
4. Make a proposal.
In presenting your first offer, you'll be trying to get to your best result. Don't make it too low, but make sure there's a bit of 'wiggle room' included. By this, I mean be brave and definitely offer lower than the lowest price you're hoping to pay so you can go up a bit. Expect them to say 'no' to your first proposal. Follow up afterwards with a formal offer so it is very clear and nothing can be misinterpreted.
5. Get feedback and discuss.
You may be quite far apart in your expectations to start with. The challenge now is to work through the variables and find where you can agree. If the supplier doesn't agree to your offer, make sure you defend it before moving on. Explain why it's a good offer, and why you would be a good customer.
6. Work towards a deal you are both happy with.
Work through your variables to find out where you can keep your offer as it stands and what you need to change. Try to understand their perspective and what the most important variables are to them. Be clear about what you need and ask questions of them to find out what areas of the deal they are happy with. If you increase your price or any other variable, be sure to move in smaller and smaller amounts. So if you start by agreeing to go up by Â£10, only increase by Â£5 the next time. You are letting them know that they are near your price 'ceiling'. Be aware of who holds the more powerful position. Is it the buyer or the seller? If you need to boost your status, being persuasive is important. Give logical arguments for your offers using the information you gathered beforehand.
7. Write it all down.
Write everything down, and summarise regularly to avoid forgetting things and to ensure you both have the same understanding of what's been discussed so far. When you have discussed for a while, recap and confirm where you are, what you have agreed to and what you still need to agree on.
8. Keep going.
Keep moving along until you both get to a point you are happy with. This isn't always a pleasant experience, which is why relationships and an understanding of the other side's position and motivation is so important. You also need to help them understand your perspective and do all they can to help you. To keep your resolve strong, make sure you have another company ready to contact if you don't get the result you want from the first one. If you come to a 'deadlock' where no side is prepared to give anything away, it's time to offer something that you have decided is not essential for you, in return for something from them.
9. Agree a deal.
It feels great to agree a deal if you have been going round the houses to find the right terms. It's definitely worth celebrating with lunch or a drink. But there are a few things to remember at this stage of your negotiations:
Don't try to add or change anything at the last minute. There is nothing worse than shaking hands with someone as they are adding something in to the deal.
Get everything written down and signed.
Capture all the points of the deal, even the smallest details.
10. Keep in touch.
After you've been through a negotiation, keep in touch and continue building your relationship with the supplier - if you get some good research under your belt, you will not want to go back and do a similar exercise every time you need to make a new order of something. If you've found a good supplier, you want them to keep doing business with you. Chloe Askwith is an experienced negotiator who has worked as a buyer and seller for film and television for more than 15 years. She's worked with large corporations and start-up companies and negotiated deals ranging from a few hundred pounds to many millions.
Get more negotiation tips from Chloe
Chloe Askwith's How to Negotiate: The beginner's guide to saving money, gaining confidence and getting great deals is a complete guide to business negotiation from an expert in the field. It's available for Â£5 as a downloadable ebook from the Enterprise Nation shop.
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Photo credit: Nomadic Lass