When I was in college, my grandparents and parents came together and decided to purchase a car for my twin sister and I. We were very excited, and because my grandparents lived in another state, my mother handled the purchase.
Car dealerships are known for their…ummm…let’s just call them less than savory negotiation tactics. Some will take your identification under the ruse of “checking with the finance guy” and then hold you hostage at the dealership for hours. Others will haggle with you over price only to bring you a contract that includes the “standard additional fees” that weren’t mentioned before. You’ll even find some who will play the good cop, bad cop game for hours, shuffling back and forth to check with a “manager” to see if they can sell you a car for a specific price. It’s exhausting and annoying.
Fortunately, the car dealership was no match for my mother. My mom has gumption for days, is very confident, and can tell it like it is. She handled those salesmen like a pro and bought two cars in one day for a price that was well below the sticker offer.
When I went to law school, I had the opportunity to come face to face with my first car salesman when a friend needed to purchase a car. Armed with our law school student research skills, we mapped out the local dealerships, determined the average sales price for the vehicle my friend wanted in our area, decided on her optimal and walk away points (the price she really wanted to pay and the price where we leave the dealership empty handed), and found out which dealerships were more prosperous. We were banking on the idea that the less successful dealerships were more likely to give us a better price. Although the approach differed, we were successful in our negotiation too. In fact, my friend purchased the car she wanted at the price she wanted to pay.
Negotiation is part of our everyday experience. You do it at the local flea market, the car dealership, and at the bizarre during your overseas trip. As a business owner, you also negotiate regularly with your vendors, contractors, employees, and partners, but sometimes the process can feel overwhelming. How do you start the discussion without feeling like a smarmy car dealer? How do you avoid agreeing with something that doesn’t really work for you? How do you partner with a friend without ruining the friendship?
The key is negotiating with heart and hustle. Negotiating with heart and hustle means that you use strategy and planning along with your intuition, discernment, and those so-called soft skills to ensure that the negotiation is the right one for you in the first place. It’s a mix of skill and art, practically and emotion, research and gumption. So here are the key factors to using heart and hustle in your negotiations.
Everything Isn’t For Everybody or Every Business
If you are negotiating with a potential business partner or long term vendor, you want to check your value alignment first. This doesn’t mean that you have to share the exact same principles as your potential partner, but it does mean that you must be realistic and honest. For example, if you are a wholistic, Martha Beck lovin’, environmentalist, life coach in the midst of considering a partnership with your best friend from high school who has a “Drill, Baby, Drill” bumper sticker on her car, that partnership probably isn’t a great idea. Despite your friendship, you have different values that will probably lead to conflict down the road in business. Even if a partnership is lucrative, remember that everything isn’t for everybody or every business. Your fundamental business values should align if you want to move ahead successfully.
Seek Out Intel Like The NSA
Just like with most things in life, preparation is the name of the game in successful negotiations. Before sitting at the table, you want to do your research. Delve into the values of the person or company on the other side, research the industry trends, learn about the new initiatives or projects of your negotiation partner, and uncover the average price of your product or service in the marketplace. Research will help you broaden the scope of the negotiation (See Make It Bigger Than Price below) and help you determine if the potential deal is worthwhile.
Make The Deal Bigger Than Price
The key to a successful negotiation is creating value for both sides. However, if you limit the discussion to price, creating value can become very difficult, very quickly. When negotiating any deal there is always more to consider than fees, and if you are serious about creating value, you must broaden the scope. Here are some questions to get you started – Is the other party willing to pay more for expedited delivery of your services? What about intellectual property rights or exclusive rights? Can you add in additional consultation hours after the project is complete in exchange for referrals to other potential customers? The possibilities are endless and can be quite lucrative. So keep an eye toward adding value and your negotiation will go farther.
Know Your Optimal Result and Be Prepared to Walk Away
Using your research, determine your optimal result and walk away points. Your optimal result is the deal of your dreams. It includes your highest price point and most desired terms within reason of course (no one is sponsoring your weekly massages). Your least optimal result or walk away point is just that. It’s the point where you will walk away from the table leaving empty handed. Deciding on these points will help you to establish the bounds of the negotiation and keep you on target. Sometimes we fall in love with the idea of a business partnership or venture, but if the numbers do not make sense, you have to say no. So it’s important to know the boundaries of any negotiation before you get to the table.
Set The Tone
There are pros and cons to making the first offer, but I’m all for it. Let me explain. The party that makes the first offer tends to anchor the back and forth negotiation process at that offer price. Now if you make the offer higher than your most optimal result, then psychologically you feel comfortable with the give and take when it comes to price. However, there is a risk in doing this. If your optimal result is a lot less than what the other party was expecting to pay, you may feel like you left money on the table. If that is the case, then there may be two issues at play: 1) you failed to do your research, or 2) you are severely undervaluing yourself and your services. Either issue can affect your bottom line and must be handled asap. However, anchoring the negotiation above your optimal result will get you closer to your desired result.
Don’t Be A Jerk
In the movies, masterful negotiators are rude and tough. The negotiator bullies the other side into getting her way “or else,” and there usually is the threat of physical harm to encourage cooperation. However, those negotiations usually involve some terrorist plot to destroy the world. In real life, negotiations are not like that. People do not respond well to bullying and rude behavior. Instead, they become defensive and are more prone to taking unreasonable positions. Bottom line, being a jerk does not pay. Effect negotiators remember to be respectful and courteous at all times.
Do you have a great negotiation tip to share or a question about a deal that you are considering? Let discuss it. Leave me a comment in the section below.