Nearly all negotiators greatly underestimate the amount of time required to prepare for any business negotiation even though this is the most important part of business negotiation best practice.
Using your negotiation skills to understand the negotiation environment is a great place to start preparing for negotiations.
The key elements to think about are:
- What is the nature of the transaction in terms of risks involved, the level of expenditure and the complexity of the deal?
- Competitive analysis: What is the current position of the market and what choices do the other side have at their disposal? We will deal with a sole supplier differently than those in a competitive market.
- Is it a single deal or should we consider maintaining a long-term positive relationship that creates opportunities for future trade?
- Have we had any dealings with our counterparty in the past and what is their most likely style to doing business?
- How experienced are the negotiators on the other side?
- What cultures will be represented and what are the local customs?
- Who are all the parties & persons concerned in the transaction and what is the decision process? A diversified style is required as final decision makers will most likely be interested in Return on Investment and increased revenues & margins. The final user who looks for improved output and efficiency regard the financial elements almost totally immaterial.
Almost any negotiation training course will highlight the importance of setting formal deal objectives.
If we fail to prepare and prioritise our deal objectives we put ourselves at risk of being taken advantage of and/or ending with a less agreeable agreement. Whether you are involved in negotiation on the sales or purchasing side, think about the following factors when planning for a negotiation:
- Price and payment, Key obligations, Delivery, Warranties, Intellectual property and Risks.
Price and Payments: The competition and the complexity of most business deals require finding ways to develop extra value and to move negotiation from haggling to mutually beneficial and creative joint problem solving. Professional buyers are not charged with buying the cheapest solution but rather with providing their organisations with the cheapest total cost of ownership, which is composed of things like:
- Purchase price, Service costs, The cost of use, Training costs, Supplier performance criteria, Delivery, Quality and Customer Support. (These concepts are covered in most purchasing training programmes).
If we are able to minimize the other side's costs in the whole life cycle of the product, solution or service and at the same time provide value for money, we are in a better position to find agreement.
Key Obligations: Ensure your product and services are defined and show your priorities. Include all the relevant quantities and specifications.
Delivery: How important are the delivery timelines and what happens if the delivery doesn't take place on time?
Warranties: In order to maintain trust and credibility make sure that you deliver any promises.
Intellectual property: Carefully negotiate IP ownership rights and think about the following elements:
- Who is footing the bill for the Research and Development?
- Could the product development be used by competitors to your loss if you don' t own the IP? How can you prevent competitors to use the same IP?
Risks: The best way to manage risks is to include the elements in a written contract. Cultural consideration is very important. In Asian countries the goal of negotiation is not a signed contract. In China, unforeseen events are settled through the relationship.
Analysing the above elements are crucial in planning Concession Strategies that will assist you to leverage maximum value from trades and in planning meetings optimally.
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