One of my primary duties as CEO of a company is to handle negotiations on behalf of my company. I have negotiated almost anything you can imagine at this point:
- Office and apartment leases
- Contractor repairs
- Partnerships with other companies
- Employee salaries
- Lawsuit settlements
- Client deals… I perfected this to a formula so my salespeople can do it themselves without me now.
Below are the core principles of a successful negotiation, ordered by priority:
- Understand the situation before you start. You need a clear understanding of your position, the other parties position, the environment you are operating in, and potential additional items you can add in to take the negotiation from zero sum to benefiting everyone. If you don’t know, ask questions and do research. Who is the decision maker? That is the only person you want to negotiate with, not underlings in most cases.
- Know your points of leverage and the other parties points of leverage. If you absolutely must have a deal and the other party doesn’t need it, you better hope you can win them over with friendliness. The counterpoint to this is when you don’t need a deal but the other party must have it, patience will usually reward you.
- Make the first offer. This allows you to establish the baseline that you work from. Once you establish a point where you want it, it’s unlikely the other party will come back with something crazy different than what you proposed. Don’t be afraid to lowball, even if the other party knows that is what you are doing. If you are friendly, most people will just make a counteroffer and continue the discussions.
- Be fair. You have to live with the other party after the negotiation in most cases. If you really don’t treat them well, they will figure it out and make your life painful for it.
- Be honest. This relates to the Be fair point… if you lie about your position and the other party finds out about it, you will often find yourself in a lawsuit or fighting to get a very hostile counterparty to work with you.
- Listen. The first thing you do in any negotiation is listen. You should spend most of your time listening to the other party if you are a savvy negotiator. When you are talking, you are not learning.
- Never get mean. Try to stay cool and depersonalize disagreements. Don’t negotiate angry as that often pushes parties apart. When I have gotten angry, the situation almost always ends poorly for me.
- Know your walkaway point. You don’t always need a deal in most situations and be willing to walk away from a deal that is bad for you.