Saturday, April 23, 2011

Negotiation Preparation

When it comes to negotiation, knowledge is power. That goes for all types of negotiation, win/win included. When both parties have information about each other, the entire negotiation process runs much more smoothly. The research you need to conduct for negotiation is much like the research you need to develop a proposal for a prospect—and it is just as important.

Remember that they will want to know the same kinds of things about you and your position, so be prepared to offer some of that information under the right circumstances. Conventional wisdom says that you should play your cards close to the vest but conventional wisdom is often wrong. Sometimes the exchange of information can be a transaction within a transaction that takes the edge off the larger negotiation.

Here’s a partial list of common types of information you should have before you enter your negotiations:
-What are the prospect’s apparent needs?
-Do any underlying needs exist?
-What are the alternatives to your proposal?
-What are the advantages/disadvantages of the alternatives?
-How do your competitors fit into the alternatives?
-What is the prospect’s financial position?
-How big a factor is the price?
-How strongly are they committed to the proposed idea?
-Are there other decision-influencers?
-What deadlines are they facing?
-Are they negotiating to win/win or win/lose?

You have many sources of information at your disposal. The prospect himself is the best one, of course, and if you’ve been listening to him as well as talking to him, you’ll have picked up the answers to many of these questions already. Don’t overlook your company’s files, either. A given prospect may be new to you but not to your company, since the salesperson who preceded you in the territory may well have had some contact with the prospect.

I’ve also always found it useful to get to know as many of my customers’ employees as I could. You certainly want to know Mr. Big’s secretary or assistant as well as the receptionist and telephone operator (if there is one). But don’t overlook his salespeople, clerks, shipping manager, buyers, purchasing manager, bookkeeper, etc. You never know when they’re going to reveal an interesting tidbit of information that you’ll find useful during negotiation.

Mr. Big’s competitors and other vendors are also important sources of information. A caution in this area, though: Always consider the source when judging the truthfulness of any bit of information. A little knowledge can be a dangerous thing, especially when it’s exaggerated by a partially-informed employee or a competitor with their own agenda. Just as information can be helpful in negotiation, disinformation can be disastrous. Anyone who has tried to make money in the stock market by trading based on “tips” can attest to that danger. Another word of caution: You don’t want to become known as a carrier of tales or rumors. Such a reputation can have very unpleasant far-reaching consequences. Your strict policy should be to have open ears and a closed mouth at all times.

Honesty in negotiation is important in another sense. Be honest with yourself about your own position. You tend to underestimate your own strengths and weaknesses because you are more aware of them than you are of the buyer’s. Remember, the buyer probably doesn’t know that you’re just one sale away from winning that trip to the Bahamas. If you reveal that little fact, you’ll probably pay for it by suffering through a more demanding negotiation.

Dave Donelson distills the experiences of hundreds of entrepreneurs into practical advice for small business owners and managers in the Dynamic Manager's Guides, a series of how-to books about marketing and advertising, sales techniques, hiring, firing, and motivating personnel, financial management, and business strategy.

No comments: