Negotiation 101 ( The art of Negotiating)

    Negotiating is a basic skill that every entrepreneur should have and should be able to execute to perfection. The truth is, most businesses would either fly or fall as a result of the deals made overtime. You as an entrepreneur should be careful not to back yourself into a position where your profit will be semi negligible or you'll be making more loss than you can account for. In today's article, you'll be getting insights based on personal experiences of myself and a couple of other entrepreneurs.

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Preparation plays a major part :

    We've all come across this saying 'proper preparation prevents poor performance ' , as a matter of fact, it has become cliche. But the truth is, the usefulness of preparation in negotiating can NEVER be overemphasized.

    If you are a buyer, you should do research ( i'm talking intense research) for the product or service that would be the subject of the negotiation. Psychology plays a major part in negotiation, the other party will be only too willing to fleece you of whatever change you can spare if he senses that you know little or nothing of the product in question. Let me give you an instance here: lets say i live somewhere in the artic (using some other place may sound racist) and i have had no access to news since the  iPhone 4 came out . Someone can come to me in in 2015 with the same iPhone 4 and sell it to me at the price of an iPhone 6 because i do not know an iPhone 6 exists for that price. So, because of my level of preparedness, i'll be overpaying for the iPhone 4 when i could have gotten it for less. You as an entrepreneur can also exploit this weakness if you perceive it at any point in your negotiation .

    You should also take your time to know about the person you are negotiating with to find out about his strengths and weaknesses. Talk to business associates who have dealt with this person before. Many negotiators develop styles and patterns that you may be able to use to your advantage.

    You as a negotiator should also have a realistic price target in mind that should be based on realistic expectations after considering all the constraints that will inevitably surface. You should also be flexible in your negotiation because the goal may change based on unforeseen actions by either party. However, this should not constrain your first offer or counter offer.

The offer

   Before you begin negotiation, you should make sure the decision of the of the other party is not subject to decision from 'higher powers' so you don't end up thinking you've struck a deal only to find out the 'higher powers' are not satisfied with the deal and are not interested in doing business.

    The first offer is the most important and goes a long way in determining how much profit is to be made from the deal. More than anything, your first offer should be bold and aggressive. The initial price is just a number and includes a margin to give away during negotiation. You as a profit oriented individual (except you are a non profit organisation) would want to take all of that  margin (and hopefully more) so, your first offer should be lower than the seller expects. You shouldn't worry about insulting the other individual. As long as your offer is not absolutely ludicrous, the other party will continue negotiation in hopes of settling for a better number. 

    An offer is more than just a dollar amount. It must encompass all of the elements of the bargain and will normally comprise the basis for a contract that formalizes the agreement. If you make an offer without nailing down all of the specifics, you may find out later that there was no meeting of the minds with the other party. The basis of the bargain should include: offer price (in proper denomination), statement of work (scope), identification and quantities of goods or services, delivery schedule, performance incentives (if any), express warranties (if any), terms and conditions, and any documents incorporated by reference.

    Trading one element for another--such as a lower price for a more relaxed schedule--is a common tactic. These bargaining chips should be kept in your hip pocket until you need them to close the deal and get the price you want. While your primary focus is normally on price, you should always keep all the other components of the deal in the forefront of your mind. Don't be pressured into accepting boilerplate contracts represented as the "standard of the industry" or something that "we always use." Everything, including the fine print, is open to change. If the other party refuses to alter onerous terms, consider taking your business elsewhere.

    

    The details of the offer should be put in writing and should include all elements of the bargain. You'll should keep notes containing the reason for each offer in case things go terribly wrong and you need to restart negotiations. These notes , while not visible to the other party will be invaluable if negotiations restarts. The notes also help in putting your experiences where can be read and learned from.

    Have a strategy

    As a buyer, try not to disclose your budget or other limitations in your negotiating position. The goal is to get the best product your money can afford. The details of your budget should be kept secret because salesmen have a habit of reshuffling specifications, parameters etc. to convince you to take an inferior product that will fit your budget. Keep it secret and you'll find that you may eventually spend less than you originally planned

    Always have something to give away without hurting your negotiating position. If you're submitting a price proposal to a buyer, consider inserting decoys and red herrings for the other party to find. For example, if you are bidding a project, consider including some nice-to-have items that aren't critical to the success of the project. You could also include spare parts that may or may not be needed in the end. If the buyer takes those items out to reduce the overall cost, you haven't lost anything but it may help the buyer reach his price target. Such distractions will help to divert the other party from attacking the meat of your proposal. Employing this strategy must be viewed in the context and in consideration of what other bidders may be doing. If you know that the only way to win the bid is to provide a bare bones cost, then this strategy may not be appropriate.

    If the other party in the negotiation seems unwilling to budge or unlikely to change from their initial asking price, immediately indicate your reluctance continue the negotiation under that condition. Make the other party wonder if you'll ever come back. If they are desperate to cut a deal, they'll change their position and
hope to get a deal done. Hard as it is, you should be patient. You don't want the other party thinking you are under pressure to finish quickly

    From a contractual standpoint, a counteroffer automatically rejects all previous offers. Once an offer is made, you should expect an acceptance or rejection of your offer, or a counteroffer that keeps the negotiation open. If your offer is rejected and you are asked to submit a new and better offer, do not fall into that trap. That would be tantamount to negotiating with yourself, and you should never do this. If the last offer on the table is yours, always insist on a counteroffer to force the other party to move his/her position before you make another offer.

    Find the leverage

   In addition to exploiting the other party's weaknesses, concentrate on taking maximum advantage of your strengths. If you're the only source available for a particular product, you have tremendous leverage across the board. If economic conditions have created a market in which the product you're selling is in great demand and low supply, that gives you more bargaining power to name your price. If you are the buyer in a depressed economy, you normally have the advantage of too much supply and lower demand. The current housing situation is a classic example of what happens when supply vastly outweighs the demand and market prices fall dramatically.

    Establish a strong foundation early in the process by demonstrating your knowledge and expertise of the negotiation subject matter. This may intimidate those on the other side and put them on their heels before they've a chance to establish their own credibility. Playing catch-up in a tough negotiation can be challenging, so it's much better to take the initiative and steer the process in the direction you want.

    While you have the power to influence the negotiation process in your favor, your goal should be to secure a good deal without extracting the last pound of flesh from the other party. This is especially true if you will be negotiating with the same party on a recurring basis. The most effective negotiators are professionals who know their business and don't let personalities and irrational behavior interfere with their mission. They are capable of making the other party believe they got the best deal they could under the circumstances.

    Once the negotiation is completed, you want to be able to work effectively with those in the other party during contract performance. If they are threatened and pounded into submission, they probably won't negotiate with you again, possibly cutting off any future business. While heated confrontation is a common occurrence during negotiations, at some point collaboration and compromise are needed to get a deal.