Negotiation Preparation

May 25, 2017

Best Practices Part I

Two common issues I see, when engaging with clients, is how little time they spend preparing for negotiations and what they spend their time on. It’s a surprising fact that a majority of our clients are spending less time preparing than they are negotiating. In contrast, clients who are getting the best results, spend more than 3X times the amount of time in preparation than they spend in negotiation. We see this as a best practice.

We train our clients to use a process that ensures that they spend enough preparation time on the right things. Without a solid process, negotiators run the risk of operating from a position of weakness, making costly concessions as a survival technique. While no one can prepare for every possible contingency, you should be in a position to handle objections, make creative trades, defend your positions and walk away from a bad deal.

So how should you prepare? In this article, as well a several others following in a series, I will be giving several useful tips which outline what our most successful clients are doing to prepare for their challenging business to business (B2B) negotiations.

The right preparation for negotiations with clients can make all the difference.

First steps in your preparation

To start, ensure that you have a clear understanding of your company strategy. By this, I mean you should understand the following:

Mission: Company’s core purpose
Company’s core beliefs
Vision: Clear image of what success looks like
Competitive advantage:
Your company’s unique position
Long-term objectives and forecast: What you hope to accomplish and how it will impact the company’s financial projection. This will keep you focused on the big picture. 

If you're unsure of your corporate strategy, don't be shy; ask someone on your leadership team to explain. If your firm hasn’t gone through a strategic planning process, ask questions that will help you describe the five points shown above. This should give you the context you need, in order to further prepare for your negotiation in the absence of a formal strategic plan.

Moving forward with your preparation

With a good understanding of your strategy, it’s time to start thinking about goals. What do you want to achieve? What does your counterparty want? You will need to understand the goals of both sides and rank them in order of importance. Having this written down will help you understand what and when to trade.

A considerable amount of your preparation time should be dedicated to understanding your counterparty’s goals. In most cases, your counterparty will share positions rather than interests with you. Your job is to understand their hidden interests, needs, expectations and concerns behind their positions. There are no shortcuts here, spend your time getting to understand what’s hidden and what interests drive their positions.

For example, when a customer demands a cost reduction they are communicating a position. The question you should be asking yourself is: what’s the underlying reason for this position? Get a handle on the hidden interests behind your counterparty’s positions and you will be in the driver’s seat.

While most research suggests that clear, aggressive goals deliver the best results, setting aggressive “stretch goals” can have unintended consequences, such as cutting corners or being flat out dishonest.  Risky behavior encouraged by overly aggressive goal setting can be destructive to an organization.

Be aware that a narrow focus on specific goals can cause negotiators to lose sight of the bigger picture. Set clear, attainable goals so that you have clarity on what you want to achieve, but with enough flexibility to allow you to achieve the best possible outcome. Remember to always leave yourself room to maneuver.

Now that you have an understanding of your strategy and have identified what both parties want from the negotiation, you will need to think about your style or approach. In my next article, I will discuss how different negotiation styles can affect the outcome of your negotiation.

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