Getting what you want in deals with clients and vendors"
While your business environment might not be the markets of Morocco, where haggling over a head of lettuce or a cab ride is expected, negotiation is simply a part of doing business anywhere in the world. Not only is it critical in establishing the best terms for your services, but you want a good deal in your contracts with vendors, too.
“In this challenging business environment, nothing affects the bottom line of your company more than the ability of your people to negotiate well, both on the buying side and the selling side,” says Roger Dawson, author of The Secrets of Power Negotiating. “Remember that a negotiated dollar is a bottom-line profit
dollar. You will never make money faster than you will when you’re negotiating.”
Do Your Homework
Before you start haggling over the details of a deal, know what you’re talking about and who you’re dealing with. When selling products,understand the customer’s needs. Get a grasp on the marketplace and what others are offering. Is your target client driven by price, quality, service or a combination of all three? How much does this client need you? How much do you need him?
On the flip side, when negotiating with vendors, understand all of their product lines and identify more than one way you can work together. Maybe you can snag a better deal if you agree to buy additional products. Or come to them with the competitors’ deals and say, “This is what X Company can do for us. What can you do?”
Then, when you fi nally take a step into actually negotiating the deal, you have the advantage of knowing what you want and what is available, says Frances Cole Jones, author of The Wow Factor: The 33 Things You Must (and Must Not) Do to Guarantee Your Edge in Today’s Business World. “Doing your research really does pay off,” Jones says. “Plus, if you make a genuine inquiry, they will calm down a little because it is clear you are prepared to spend money. It is just a matter of whether you plan to spend it with them.”
Be Flexible and Creative
If you find the conversation at a standstill, that doesn’t mean negotiations have come to an end. Probe around with the client to find other possible perks to add to the deal. Does she have more than one line item in her budget that you can tap into? How can you make yourself an attractive vendor of services outside of her immediate need? Maybe service terms or financing can be softened, unusual requests honored or a tight deadline met.
“Don’t just give a yes/no answer to an offer,” says negotiations coach Michael Schatzki. “Probe around a little and see what else there is. Don’t dig yourself into a corner.”
Offer Multiple Choice
You know the best deals are those in which both parties leave feeling like they’ve won. This is the best recipe for a relationship that can continue for years and foster a spirit of partnership that fuels growth. To get there, Jones suggests offering the other party three options. “Any time you do that, it allows the other person to have control of the situation,” Jones says. “That is critical. No one likes being sold to.”
Giving options allows the other party to dismiss one (or all) as ridiculous, but it also sets a tone of congeniality and win-win.
Think outside of the money box and identify ways you can add value to the deal, says Schatzki, who advocates an “asymmetrical trade,” which he defi nes as “things that are low-cost to one party and high-value to the other.”
Make Concessions Strategically
Obviously, you’re going to have to give. But don’t just negotiate down, down, down until you’re forced to scream “Uncle!” The key is to identify your bottom line and your ideal price, then settle on a number somewhere in the middle. But be careful how you arrive at that middle, Schatzki warns. “People watch the pattern of your concessions,” he says. “Think about the message you’re sending, and don’t make concessions willy-nilly.”
If your initial price for a service is, say, $500 and the lowest you are willing to go is $400, don’t make your fi rst comeback $410. “The other party will then think your bottom line is $350, and they might not make a deal with you at $400,” Schatzki says. Instead, in this example come down in $10 or $15 increments to relay the message that you are trying to get as close to your original $500 offer as possible.
Be Straightforward and Expect the Same
Avoid at all costs deals with others who are not 100 percent transparent in their dealings. The same rules of honesty apply to you, says J. Hester Jenkins, a principal with Sabre Capital private equity investment group. “Communicate openly,” he says. “The best deal benefits everyone. Be upfront with any deal-breakers or must-haves. There is no sense wasting weeks or months negotiating if your critical deal points are unattainable.”
Jenkins recently saw a $1 million real estate deal disintegrate one week before signing. After many successful meetings resulting in good will between the buyer and seller of an apartment complex, the buyer decided a week before closing that he would pursue the deal without any out-of-pocket funds—after the seller agreed to finance a portion of the deal under other terms. The deal fell apart. “The seller was genuinely angry by the perceived dishonesty in the negotiations,” Jenkins says. “The end result is that the purchaser wasted money on a bank commitment fee and attorney fees and did not even purchase the apartments. If he’d been upfront with his desire to fi nance 100 percent of the purchase, I’m certain the seller would have been agreeable to a deal.”
Embrace Your Size
It may be tempting to bolster your image to appear bigger, but playing true to yourself is better for negotiating. Jeff Huckaby, founder and CEO of rackAID, an IT managed services company, says that his smallness has sometimes worked to his advantage, but that pretending you’re bigger than you are rarely helps.
“When you create a big corporate image, vendors assume your pockets are deeper than they are,” Huckaby says. “They may assume you need their flagship product when you need the starter version. Being honest about your company’s size, growth and position in the marketplace is key. Good vendors will try to align your business needs with the appropriate products.”
Huckaby recently struck a deal with a small software firm after testing several competing products; rackAID liked that the vendor was small, applied rackAID’s suggestions for improving the product and was able to offer a significant discount from what much larger companies paid. “I simply asked for better pricing and more flexible licensing, and we got a great deal,” Huckaby says.
Just Ask! (But Be Nice)
It’s a cliché but true: You will never get it if you don’t ask for it. But being nice is far more effective than being a jerk, Schatzki says. “You create a contentious relationship by being contentious—not by negotiating,” he says. “The tougher you are, the nicer you have to be. It’s business, not personal, and people will respect that as long as you’re not contentious.”
Schatzki adds that the nice-guy tactic works 98 percent of the time, while 2 percent of the population “won’t pay attention to you unless you blow your stack in their face.”
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