Certain skills can't be taught in schools, and one of these is knowing how to negotiate your way in the conference room. It can be hard to get people to understand your vision and when they don't you will automatically get turned down. Entrepreneurs have to learn very quickly how to persuade and negotiate for optimal terms. Whether you're trying to get funding for your tech-startup or you're negotiating the terms of your office lease, here's a few tricks we gathered to keep in mind!
Always start the negotiations - be the one to initiate the process, because who ever controls the start of the negotiations tends to control where they end. If you let the other party start, you'll be constantly giving up control even without realizing it. For example if you ask for the other party's budget, you let them start the negotiation and you'll end up chasing that number instead of finding the best solution. It might even pay off to interrupt the other party to prevent them from controlling the starting point. Remember to also ALWAYS negotiate in writing. The purpose of negotiations is to arrive at a formal written agreement, from the first moment you make a proposal, refer to a document that is being created in front of the other party. This includes all the points of the agreement and becomes real to the other party. Negotiating first and then having to create a document adds unnecessary time to the transaction. Build it as you go and you'll be ready to ask for a signature the moment the decision to buy is made.
Negotiation is as much about preparation as it is about making a deal - research as much as you can. Knowledge is power in a negotiation, so the more you know, the better off you are. This will make you look more professional, smarter, more trustworthy and you'll feel more comfortable negotiating. You can also practice beforehand and run through the reasons behind your agenda. Remember that a negotiation is not an argument. If you let your emotions get the better of you, you're bound to lose the other party's attention. A negotiation is not about winning, but creating a win-win situation where everyone walks away happy.
It's important to know who you're trying to win over, who is the real decision-maker in the room? Most of the decision-makers speak for a team, but the key is to try to make that person feel like they're winning personally as well. Not all important decision-makers have full authority to green-light your business proposal, there might be influencers to their decision and people within the organization who's opinion and advice matters to the decision-maker. This person is probably not around at the negotiations table, but you still need to make your proposal work for them too. Find out who these people are and try asking for example: Before we go ahead with this proposal, does anyone else need to approve it? Once you know the people you still need to impress, make them feel like they're winning personally too. If you can't get to these people personally, try to help the people on the room to address the agendas of the hidden power-players.
Always add a human touch! Sometimes when we're busy going about our business we forget to humanize the process. No one likes to feel like they are unimportant and aren't being heard. A successful negotiator knows how to create a situation where both parties walk away from the deal happy and feeling like a winner.
Walking into the negotiations, it's essential to know your non-negotiables. You have to have a clear perception about what are your limits and terms you absolutely can and will not negotiate about. People will always try to change how things are done and what your doing and sometimes their advice is valid, but sometimes it's not. Know your deal-breakers and be willing to walk away. Walking away from the table shows that you mean business and you know what you're doing. It also shows that you know what the core of your business is and that you can't be low-balled. It's important to negotiate with people who see the value in what you're doing and considers you as a partner, instead of someone they can take advantage from.
A little preparation goes a long way, but the heart of your negotiation is the tactics you use. Here are four simple negotiation tactics that work.
1. Expand the pie.
Expanding the pie is a negotiation technique that is ideal for creating a win-win situation. In a negotiation, parties are usually discussing about a single pie and trying to get the bigger portion of it. Instead, if both parties work to make the pie bigger, everyone walks away with more and are happier. Expanding the pie doesn't necessarily mean more money, it can be other terms and perks. The idea is when something isn't negotiable, you need to find something that is.
2. 15-20% Rule
Always offer to pay 20% less than you are asked. Most sellers price themselves for about 20-15% more than they'd be willing to take. The same rule can be turned the other way around. Never say your real number first, start with a higher price.
3. Listen for Qlues
If you're not an expert negotiator, one of the smartest things you can do is to let the other person talk. This gives you the chance to listen for clues of where the other party might end. Silence can be one of your best tools. If you make an offer and the other party instantly turns it down, don't respond straight away. Sit tight and let them wait. The other party will most likely start talking in order to fill the uncomfortable silence, and might end up giving up clues on why they turned it down and share useful information about how you can still end up with a deal.
4. The Nibble Technique
The nibble technique is all about pushing for tiny improvements to a deal. Lets say you're offered a deal that you're not 100% happy with. In order for you to accept the proposal the other party has to make improvements in another section of the proposal to compromise. Try using this "one more thing" technique. People use it all the time for example with airlines when negotiating to bump people off an overbooked flight. Columbia business professor was able to get a 1000 dollar voucher for a future flight, a first class ticket, a free hotel and a meal, and a ride from the airport by using the nibble technique when the airline asked him to change his 180 dollar flight to a later one because it was overbooked. If you don't ask for something, you can't get it.
Finally, there are a few things you should avoid when negotiating. Don't assume that you've told the other side everything they need to know. Your product details and features are just facts and facts aren't enough. You need to provide your potential customer with a vision. When you know the other party's dissatisfaction and pain, present a picture of what they're life will be like after using you product and offer a solution to their problem. Remember that your product is not just another product that is there to possibly replace the one they're currently using. If what you're offering is unique, present it to the other side as an opportunity that's tied to the vision you have just painted for the client. These type of unique opportunities often come with higher price tags, so be prepared to defend it. Every moment you spend time with someone you might do business with is a chance for you to create a vision for them. Entrepreneurs often identify a very narrow window for the time that's appropriate for negotiating, keep in mind what you can accomplish when networking and participating in events.
Now, good luck with talking money!