Article by Richard Houwing, Business Advisor , Western Sydney Business Centre
Understanding the art of negotiating should be a primary skill for most businesspeople. Negotiating is a universal human activity. We all engage in bargaining and making deals with the people around us more often then we realise. In business, good negotiating can help you get better prices for items you sell or help improve your profitability by keeping costs down.
People often confuse tactics with strategy in negotiating which is one of the reasons it is considered a confrontational sport. Tactics are often associated with haggling or phrases like, “let’s split the difference”. Strategy has more to do with ways to increase the size of the pie, rather than getting a bigger proportion of a smaller pie. In business we often consider how we could create additional value by making things worth more through our efforts. This may be by creating a wonderful product from raw ingredients or by providing superior service. In negotiating the aim is to increase the value for everyone. If you were buying a complex piece of machinery, an example may be, “I will pay your installation fee, if you include additional staff training”.
The concept of value is crucial for negotiating. Further, people perceive value differently and this is where being prepared for negotiating is important. Take a creative look at the parts that make up the deal. Think with an open mind about your own interest and the benefits you expect from the deal. Which of these interests are fundamental and which are secondary. Consider the interest of the other parties as well. The better you know their interest the more effectively you can negotiate. Then, with this knowledge trade one concession for another. For example, “If you can do this, I will do that for you”. The objective is to trade things that are of low cost to you for things of higher value. This way negotiating becomes a joint decision-making process.
A thoughtful strategy will often result in a mutually beneficial outcome with lower risks where all parties are motivated to fulfil.