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Not everyone is comfortable with negotiation – it makes most people think about two heads of government sitting in a smoke-filled room hammering over the details of a hostage situation.

That or lawyers hashing it out in a boardroom about a hostile corporate takeover. These are types of negotiation but it also takes place on a much smaller scale – day-to-day things, children asking their parents if they can stay up later than their bedtime, asking for a raise at work, or trying to save money on your bills and expenses at the office. Negotiating happens all the time and knowing some of the key principles will help you in the long run for your business.

 

Listening is key

Listening is something that everyone thinks they do but not everyone does well. The key to having a successful negotiation is truly understanding why the other party wants to negotiate, what they want from the discussion, and why they are motivated to be there. You can only truly understand someone else if you ask the right questions, and then truly listen to what they say in response. If you’re constantly thinking about what you will say next then you might miss what is actually important to them.

 

Coinage, coinage, coinage

Coinage is defined as something that is very important to the other party but might not mean as much to you as them. If you have listened well and identified what is really important then you might find something that you’d be willing to part with that would help the negotiation down the line. Coinage might have happened to you in the past – for example, if someone throws in a free warranty – it likely doesn’t matter much to the salesperson but added value to your life.

 

Preparation

If you’re not ready, you’ll not negotiate well. Or as the famous saying goes – fail to prepare and prepare to fail. If you are negotiating as a team then coordinating is very important – who will say what and when, and who will you close the deal. And when will you try to close the deal. And who has the final say and sign off. All important things to keep in mind. If you are negotiating by yourself then you need to make sure you understand the upper and lower limits of what you can offer and know when to walk away from the negotiation. This is sometimes allied BATNA which stands for “best alternative to negotiated agreement” and is basically what you will do if everything doesn’t go your way.

 

Set the Scene

Depending on what you want to achieve, the surroundings and where you meet will play a big part. It will be one of the first things that both parties understand when they arrive and so especially if you are choosing it then be careful with your choices. If you choose a cold and informal boardroom then this will set the tone for the negotiation. If you choose a more relaxed setting then that can be a guiding factor in how the discussion will go.

setting-the-scene-for-negotiation

 

Bargaining Power

Bargaining power is something that comes in all guises – from finances to control to power so don’t underestimate the bargaining power you might hold. Before you go into the negotiation you should think about what you can bring to the table. Some of it might be less obvious than other things and so as you start prepping for the meeting think about who you are meeting and what is important to them. Power doesn’t just come from market cap or the size of your business, it can also come from the power held in the relationship or time pressures that are put on what needs to get done.

Set the Tone For the Meeting

At the beginning of any negotiation, you should set the tone for how the meeting will go. The tone will already be set by which venue you choose and so after that, you can set the tone based on your words, actions, and how you set the agenda. You can also anchor everyone to a certain set of actions, beliefs or values, for example – everyone will have a respectful and productive negotiation. These are all things that you can refer back to during the negotiation if it goes off track.

 

Not All Deals Will Work Out

Some negotiations just aren’t meant to happen. If you’ve prepared well then you will know what you are willing to give up and what you want to gain from the negotiation. If you hit a brick wall when negotiating one of the best things you can do is take a break, or address the impasse directly so that you can get it out in the open and start to discuss what is really causing the issues. If you cannot get past the impasse then the deal might not be the right one. And this is ok. Not all deals will happen and it is important to keep this in mind especially as new information will come to light. This happens to everyone.

 

Enjoy the Negotiation

At the end of the day it (probably) isn’t a life or death conversation and so try to enjoy it. Otherwise, it can be incredibly stressful and exhausting and so try to find some joy in it.

 

Remember the Win-Win

The last point, but maybe the most important is to try and remember that you want to find a win-win situation. Negotiations aren’t always a zero-sum game and you should come out of it finding a good solution for both sides. Trying to destroy the opponent is not a good tactic and should be avoided at all costs.

Richard Allan

Richard Allan

Richard Allan is the founder of Capital Bean and a passionate writer about personal finance, budgeting and how to save money at home and work.

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