Extraordinary results in negotiations are typically preceded by extraordinary preparation. As such, before you negotiate any business deal—you must have a clear understanding of the counterparty, why you are negotiating, what you want, and how to realize your objectives.
Answering these 10 questions will boost your leverage / outcomes:
1. Should I pursue the negotiation at all?
The sooner a potential deal can be disqualified on valid grounds the better. Why waste time, money, energy, and other resources in pursuing a deal that is not worthy of closing. In answering this question, you should consider the financial condition of the counterparty, the risks of the deal, the probability of the risks arising (as well as the effect thereof), and the rewards of the deal.
2. Your Bottom Lines?
If you’ve answered question one above, you have an idea of the risks/rewards of the deal. Now is the time to create your ceilings and floors. What are your maximum risk levels and minimum reward levels for the deal? This information is critical to answering questions 3 and 4 below.
3. Second Best Positions?
Now that you have your bottom-line positions, let’s suppose that a counterparty is going to negotiate with you rather aggressively. As such, you cannot present your bottom lines (as, if you do so, you’ll end up having to close the deal beneath your bottom lines or walking away altogether). So, move your ceilings lower and your floors higher. So, if your bottom line (floor) on price was 1 M USD- increase this to 1.2 MUSD. Further, if your maximum liability (ceiling) level you will accept on the agreement is 100K USD, start at say 50 K USD. This gives the counterparty room to win and for you to make a concession (preferably for some tradeoff(s)) but to still end up respecting your bottom line positions.
4. Best Position?
Now, assume your answers to question 3 above are really your bottom lines and then process your ceilings and floors to one more round of adjustments as explained in point 3. This will be your best position.
5. What are the Counterparty’s anticipated Demands?
The better you can predict the core issues for each counterparty, the better you can adjust your initial offer to promote value creation and risk mitigation for your company.
6. What make my company, my offering, and myself unique?
One of the greatest determinants of success at negotiations is the ability to establish that the counterparty simply can’t get what you offer (qualitatively) anywhere else. Take the time to define as many arguments as possible in support of this proposition as the information will definitely come in handy.
7. What are the foreseeable Tactics?
Take the time to imagine what tactics the counterparty will try to utilize against you. How can you neutralize these tactics? What tactics can you use against the counterparty and how will the counterparty likely react? How can you counter such reaction? The more you can prepare for these movements, the better you can execute your strategy.
8. Do I Understand all Key Contract Terms?
Never enter into any negotiation without a comprehensive understanding of the legal implications. If you fail to do so, you will not be able to properly assess whether your risk and reward limits are being exceeded.
9. Is there Enhanced Value?
Whenever you can distill additional value (i.e. order size, order range, contract length, customer testimonial, etc.) to integrate into the deal, you will have a better likelihood of closing the deal. Such enhanced value can be shared between the parties and thereby promotes a win-win atmosphere and outcome.
10. What can I Give Away?
Upon the conclusion of the deal, I always encourage clients to give something away that won’t cost you much but will (i) be appreciated by the counterparty and will (ii) promote ongoing business between you and the counterparty in the future. For example, if you are licensing certain software which the counterparty will be, for instance, using or reselling, why not offer, unexpectedly, a few hours of free training which will promote the licensee’s familiarity with your software and thereby greater usage and/or sales?
Other issues will naturally have an impact upon your negotiations. With this said, the foregoing will, if applied, absolutely enhance your structure and results.
We have extensive experience with negotiations and can help you negotiate a specific deal and/or create a negotiation structure to empower you in future negotiations.
Contact Us to learn more about how we can help you.
Best of luck in your negotiations!!!
*This article is not legal advice and is provided for general information purposes only.