1. Do your homework beforehand.
Collect and
evaluate information on leverage, values, sale prices, competition and
other factors that will have an effect upon the negotiation. Work out a
defensive plan to protect sensitive information that the other side
might inquire about but isn’t entitled to know. Keep your eyes and ears
open for additional helpful information that can assist you in the
bidding process.
2. Set realistic expectations.
Determine your
“aspiration” by combining an “objective” valuation of what you’re
acquiring (use an expert if necessary) and the “subjective” worth to
you. Temper that aspiration with “feasibility,” a combination of what
your counterpart has in mind and the leverage of both parties. Reassess
your expectations as the negotiating progresses and new information
turns up.
3. Decide whether to “go first.”
When it comes to
price, you should know before bidding what deal you want and be able
justify it as being realistic. Then, put your own number on the table
to take control of the bidding and put your counterpart in your
ballpark.
4. Give yourself maneuvering room.
An offer between 15
and 25 percent below what you’re prepared to pay is a common tactic,
but with a hot property, you might get closer to 10 percent. On
nonprice issues, try to leave yourself some bargaining room, but make
sure that you have a plausible rationale for the positions that you
take.
5. Manage the price concession process.
Don’t be afraid to
make the first price concession, but don’t make it at the same time as
your initial bid, or you’ll sacrifice credibility. When making price
concessions, do so in a few meaningful strokes (rather than multiple
small ones) and make sure that the absolute size of each subsequent
concession decreases.
6. Manage the nonprice concession process, too.
Rank the nonprice
issues in terms of significance and their likely importance to your
counterpart. Determine plausible intermediate steps from the opening
proposal to your expectation of where each issue will end up. Try to
make your concessions do double duty – both resolving the matter in
question and furnishing a trading point for some other issue.
7. Create and sustain credibility throughout the negotiation.
Support any
positions you take with appropriate rationales. Be specific about facts
and stay detached from the emotion of negotiations. Assess the
reliability of what your counterpart says: The more significant the
information, the more skeptical you should be.
8. Keep time on your side.
Be alert for clues
that the other side is feeling heat to get a deal done. Conceal
deadline pressure on your side by moving things along briskly at the
onset. If your counterpart attempts to impose a deadline, test that
it’s real and reasonable.
9. Negotiate until the contract is signed.
Try to be the party
that drafts the contract, and make sure that your interests are
represented. In responding to controversial provisions in the other
side’s draft or introducing your own, consider doing so at a meeting
where you can most effective express your views and rationale.
10. Quit while you’re ahead.
If the negotiation
is going well and you’ve got most of what you want, don’t keep
negotiating endlessly. Close the deal before something negative
unexpectedly crops up – like a surprising new quarterly report.
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