Tips for Negotiating the Best Deal
Negotiating in business is a fact of life, whether it be to close a contract or resolve a dispute. As a result, good negotiating skills can be a valuable asset. In this article John Warlow provides a number of important tips for negotiating a favourable agreement.
John is a nationally accredited mediator, and with almost 30 years experience as a solicitor, has been involved in countless negotiations.
1 Do your homework – preparation and knowledge can be critical
What are the other side’s drivers and weaknesses?
Before negotiations start, gather as much information as you can about the other side. What pressures are they likely to feel, and where they are weak? What are their needs and motivations? Where does your bargaining power lie?
Turn your mind to these matters before negotiations start and keep them front of mind as the negotiations unfold. Focus on the other side’s pressure points. Trying to accommodate the other side’s needs, and remembering their weaknesses, can be critical when framing offers and making strategic decisions about how to handle the negotiations.
Know your position before negotiations start
Before negotiations start it is important to have a reasonably clear idea what you are willing to offer. Sometimes this will change as negotiations unfold – but not having reasonably clear idea what you are prepared to offer before negotiations start can lead to poor decisions being made under pressure which you later regret.
If you are negotiating the settlement of a legal dispute, it is important to know the strength of your case before you start negotiating as well as what will likely happen if you don’t reach a settlement. Without a clear picture of these matters, it is difficult to make an informed assessment of what constitutes a good settlement.
A good solicitor will provide advice on these matters before negotiations start, as sometimes what might initially look like a rather ordinary settlement, can take on a different complexion when weighed against the risks, costs and stresses of continuing with the legal fight.
2 Maintain your credibility
Avoid exaggerations and untruths
Being believed and maintaining your credibility is important in negotiations. If statements you make are exposed as exaggerations or untruths, your credibility in the eyes of the other party will be undermined. For example, if facts and figures you provide are perceived as being unreliable, it can be much more difficult to negotiate a deal.
Conversely, if statements you make and information you provide is viewed as being reliable, that can be very helpful in closing a favourable deal. Being caught out fibbing or overstating matters can also annoy the other party, and in turn make them more determined and less willing to make concessions.
Follow through on what you say
In a similar vein, if you say you are going to do something during negotiations, follow through on doing so, otherwise you can lose bargaining power if the other side sees your statements as hollow bluffs.
This principle applies throughout most legal fights. For example, if you threaten to take a particular step or commence court action if the other side doesn’t comply with a request, and don’t follow through on doing so, your threats will lose force. Conversely, if you follow through on doing what you say, the other side will take future threats seriously, which can be invaluable in gaining the ascendency.
In my experience, bluffing often backfires. For example, I frequently see people use the words “best offer”, but afterwards go on to continue making further offers. Then when they do come to their final offer and describe it as their “best offer”, they are not believed.
In my opinion, the best approach is to only use the words “best offer” when that is truly the case. Then, if the offer is rejected, re-make the same offer with words to the effect “I said this was my best offer and I meant it”.
3 Language, tone and demeanour are important
All too often negotiations fail when people become intractable as a result of high levels of emotion. Successful negotiators try to avoid the parties becoming caught up in emotions or hostility, and focus on finding a set of terms which everyone can accept.
Be conscious of your words and tone
Words and tone are important during a negotiation. Some people feel they have to act in a particularly tough, forceful manner during negotiations. Sometimes that might be needed, for example in an especially hard-fought legal dispute. But more often than not it will just alienate the other side and can cause them to ‘dig their heels in’.
It is much harder to reach an agreement with a person who is angry, offended or doesn’t like you. Conversely, it is easier to gain concessions and reach an agreement if the other side think you are a decent, fair minded person.
Avoid using words or tone that are hostile or confrontational. A firm but polite demeanour will often get you a lot further than forceful chest-beating. Where possible, I try to avoid the word “you” as it can appear confrontational and be interpreted as an accusation.
Tailor your approach to the other side
Some people think that a hard-nosed approach to negotiation is the best way. But be careful not to simply default to that approach. Consider whether there might be a smarter way.
Assess the other party, and tailor your approach to what you think will resonate best with them. A hammer isn’t automatically the best way to crack a tough nut.
Aim for Assertive Confidence
In my experience, it is usually best to aim for a firm but polite demeanour mixed with assertive confidence. That is, use language and a tone which simultaneously displays a firm but civil demeanour that won’t inflame matters, and at the same time says you are confident that your position is both correct and reasonable.
Control your emotions
It can be tough not to respond to rude behaviour or aggressive comments. But always keep your eye firmly fixed on the goal – which is to close a deal. It seldom helps achieve that goal by responding to hostile or aggressive statements in an equally emotive manner. It is much hard to reach an agreement if everyone has their ‘back up’.
Negotiations can quickly breakdown if people give in to their emotions and vent their anger at the other side. That might temporarily make you feel good, but it invariably inflames the situation and can result in the negotiations ending, or at least becoming much more difficult. I have seen many people kick themselves for letting their emotions override their better judgment and losing an opportunity to reach an agreement.
If you have to respond to hostile or aggressive comments to avoid looking weak (which is sometimes the case), do so in a firm, determined and confident manner. Remaining calm, but determined and confident in the face of hostility or aggression can be very powerful, as it sends a message to the other side that you won’t be bullied or intimidated by their histrionics.
A good approach is often to remain silent with strong eye contact and a neutral expression while the other side vents. When the tirade is over, summarise your position in a measured but assertive tone, and direct the conversation back to negotiations regarding an acceptable set of terms.
Such an approach will usually say to the other side that their punches are of no effect. Even the toughest opponent will usually stop throwing punches if they never connect.
Body language and facial expressions play a big part in communicating. From the moment you sit down to negotiate, your body language, eye contact, and choice of words can have an affect on how you are perceived and how the conversation flows.
Consequently, it is important to be aware of your body language and display body language that says you are confident and determined, but prepared to talk. This can come down to things such as maintaining eye contact, keeping a straight physical posture, nodding your head, and being mindful of avoiding facial expressions which show hostility. By doing so you are telling the other party that you are confident your position is fair, and that you will not readily back down.
Be careful not to display body language that appears arrogant, dismissive, or rude as it is liable alienate the other side, hamper productive conversation, and make closing a deal more difficult.
Likewise, be sure to constantly read the other side’s body language, as it can give you an insight into their thinking. If their body language suggests that they are not confident of their position or don’t truly believe what they are saying, it might be time to stand firm on your last offer.
4 Read the other party and understand what is important to them
As the negotiations unfold, be sure to constantly read the other party.
Assess your opponent
From the early stages of the negotiation, assess the other party, and then review that assessment as you gather further information during the negotiations progress. It is critical to understand what is driving the other side, what they want, and what is important to them. If you are unsure, ask them. Sometimes an impasse on the price can be overcome if you can accommodate other things they want.
Understanding the other party’s personality and what will resonate with them is also important. It may be that showing a friendly or empathetic tone will achieve more than a tough approach. Similarly, it may be that threats of legal action or terminating an agreement will just make your opponent more hostile or determined.
Listen more than you speak
Many of us are so focussed on making sure people hear what we have to say, that we forget to listen. When we talk a lot, we miss a lot. Good negotiators constantly watch, listen and collect as much information as possible.
Let the other person do most of the talking – indeed sometimes it is helpful to encourage them to do so, in order to allow them to vent or feel they have had their say. By carefully watching and listening you will often gain an insight into their thinking, personality and motivations.
Only talk as much as you need to
It is essential to explain your position and viewpoint to the other side. But some of us can talk too much. Be conscious of only talking as much as you need to.
By talking too much you risk giving the other side a greater insight into your thinking, or making them feel they have not had an equal voice. You also risk sending a message that you are overly keen to reach an agreement.
Conversely, by limiting the amount you say, you can subtly send a message that it won’t be the end of the world for you if an agreement isn’t reached – which can in turn prompt the other side to try harder to make concessions.
In addition, most people are keen to impress others, and like to keep other people happy. If you limit the amount you say, it can result in others feeling the need to talk more in order to try to keep you happy – which can in turn result in concessions.
Silence can be powerful
Most people don’t like silence when in the company of others. As result, silence at key points can be powerful as it can disconcert people and affect their decision making. If you maintain eye contact but don’t speak, your counterpart will often start talking to fill the void – which can in turn result in concessions. Often the other party will fill the silence with useful information- information you may not have learned if you were speaking.
Ask open-ended questions
I find that asking open ended question – and then listening carefully – can be very helpful. For example, “Is this your final offer?”, “Is that the best you can do?“, What is the best you can do?” can sometimes elicit quite revealing answers.
5 The strategy of making offers
There are differing schools of thought on the best strategy for making offers. Here is what I have found are the most important points to keep in mind.
Your first offer is important
The first offer can be important as it often sets a benchmark for later offers. Start high (or low as the case may be) and concede slowly. Don’t be afraid to ask for what you want. Try to draw the other side out as to what they want – you might be pleasantly surprised.
But don’t start so ridiculously high (or low) that you offend the other side or result in them thinking there is no prospect of a deal. In my opinion, the best first offer is usually one that is at the very outer edge of what is reasonable.
Think laterally when framing offers – look for a win-win
As I said above, be sure to identify what is motivating the other side and what is important to them. Money is usually the main factor, but often there are other matters that are important.
When framing an offer, think laterally and look for an offer than will give both sides a win. Try to understand where the other person is coming from; try asking them about their needs and key concerns, and if you can, frame an offer which gives both sides something they want. Doing so can often help overcome an impasse on money.
Always challenge the other side’s offers
Always challenge the other side’s offer, even when it is better than you were expecting. Otherwise, they may feel that they’ve been too generous, or that you could well accept the offer – which can in turn make them less inclined to make future concessions.
Use facts when challenging offers
Challenging an offer with facts or a plausible explanation, carries much more force than simply saying you don’t like the offer, or that it is too low.
Consequently, when challenging offers, use facts where possible to show how the offer isn’t reasonable, or is based on flawed information. Alternatively, provide justifiable explanations as to why you can’t accept an offer. This might involve explaining how the terms of an offer are unworkable. Wherever possible, provide evidence to back up your facts or explanation.
Link concessions to things you want
Wherever possible, link a concession to receiving something in return. Every price reduction or increase should involve a trade-off of some kind.
Don’t make too many offers
In my experience, it can be unhelpful making too many offers. By making numerous offers you risk appearing overly keen (or perhaps even desperate) to reach a deal.
Every situation is different, but as a general rule I find it is usually best not to make more than three, possibly four, offers. Any more than that and you risk appearing overly keen to reach an agreement.
Work backwards from where you would like to end up
After making your first offer at the outer edge of what is reasonable, it can be helpful to then base your further offers on where you would like to ultimately end up. In other words, if you would like to end up at a certain price, base your offers on figures that will let you make concessions down (or up) to that figure.
Don’t automatically start with the hardest issues
If you expect a particularly difficult negotiation, try starting with some easier issues, and saving the hardest for later in the negotiations.
If the parties have already reached agreement on a number of issues, that can create momentum and goodwill. It can also result in the parties making a greater effort (and more concessions) to close a deal, rather than lose what has already been agreed.
6 Patience – don’t rush the process
Patience can be important in negotiations. Depending on who you are negotiating with, the process may take time. Rushing the process can result in the other side feeling unduly pressured and digging their heels in.
Sometimes the other side may need time to accept what could be an unpleasant outcome or a difficult decision. It can also take time to move people off a firmly held position. If people hold a firmly held view, it is often necessary to chip away at changing their viewpoint. Rushing the process can be counterproductive.
As a result, I find it is best to avoid placing the other side on unduly short deadlines unless there is a good reason to do so. Perhaps in the latter stages of negotiations it might be strategically wise to impose a short deadline in order to apply pressure to close a deal. But this should be done with care as many people resent being pressured, which can in turn result in them getting upset and abandoning further negotiations.
The longer negotiations run, the more time people have invested in the process -and most people don’t want to lose on an investment. As a result, I have often found that the more time people put into a negotiation, the more they will want to close the deal, and the more likely they will be to make the concessions late in the day if necessary to close the deal.
In many respects negotiation skills are a blend of strategy and communication skills. If you have a legal dispute or would like an experienced solicitor and negotiator on your side, then feel free to contact John on (07) 3002 7419 or JohnW@mdl.com.au John has almost 30 years of experience in all manner of business, company and construction disputes.
Director | Litigation