Topic 6 : Negotiation

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This topic whilst not directly linked to your strategy is an important additional tool which will help you achieve your strategy goals.

Often people think of negotiation as a “ Sales Mans” job , but negotiation falls into every aspect of business, wether that’s selling products, buying raw materials, hiring staff, finding premises, securing marketing, asking for people to work over time, getting team buy in to your strategy, even negotiating with our loved ones who may be expected to support us on our entrepreneurial journey.

From a very young age children practice negotiation, ever noticed how good they are at getting their own way ? That’s because they often have nothing to loose and don’t think about the consequences, but as we grow older many of us get more polite, we may also feel guilty or embarrassed about negotiating and as such stop asking for things we want. On the other hand some people become very aggressive with negotiating thinking that you have to “beat “ the other person into the ground in order to be successful.

We believe that both of these approaches are floored and that in business the best outcome is a win/win , i.e. we should ask for what we want but we should also be prepared to concede on some points that maybe less important, so that both parties come away from a negotiation feeling like they have had a positive result overall and that they are happy to do business in the future.

In order to achieve this we are going to show you a very easy tool that works in all negotiation scenarios, the trick to it as with any business strategy is in the planning.

In the example shown we have assumed that we are about to supply a new customer with a new product.

In this example we have used Price, Advertising spend, Service levels and Range of products as the key points we may need to negotiate on. However you should study your own market and be aware of the important factors that might come into a negotiation , these could include ;

-Credit terms

-Delivery days

-Exclusivity

-Discounts

-Promotional days

-Level of distribution

Hint: It is important to know your customer, there maybe some things that they NEED in the negotiation that might not cost you a lot but are big wins for them, this is why it is important to do good research and understand what they might want , sometimes its as easy as asking them.

 

 

Now you have established the main points for discussion write these down in the left hand column. Ensure that you consider all the points that are important to you. Remember you are going into a negotiation where you are looking to leave with an agreement or deal, as such you cant leave out important factors that would be deal breakers for discussion later otherwise the deal you make may not hold and you will lose credibility and potentially the whole deal.

The next step is to write along the top of the grid for each of the categories you have highlighted,  the following;

Desirable – What you would like to achieve, this ultimately is the best outcome for you.

Probable – What is likely to be the outcome given that you cant have everything?

Essential – When will you walk away from the negotiation?, this is a deal breaker and you must achieve this as a minimum

NOTE: Remember the essential has to be a real essential and once set under no circumstances should you move beyond it i.e. minimum price /  maximum discount / max payment days etc…..

Now that you have complete your grid headings you can now populate ensuring all boxes are filled and you have a Desirable, Probable and Essential for each category of negotiation. It is useful to take these into the meeting with you but of course don’t allow them to be visible to the person you are negotiating with. Don’t try to memorise them as a lot will be happening in the meeting, use them as a tick list, and work through the list as you go along, ticking which ones you achieve as you progress through the meeting, ensuring all categories are covered by the end of the meeting, this will hep maintain structure during the meeting and ensure nothing is forgotten.

 

As you can see from the example in this negotiation the sell has achieved middle range sales price of £8 , however has managed to limit marketing support to £10,000 ( less than they expected) with committing to 2 days shipping days, however they have only secured 5 different products to sell to the customer ( this being the absolute minimum they wanted, as such had the buyer insisted on only 4 product lines then we should have waked away from the deal. Ultimately in this scenario we have achieved some great results with so minimums and some average results but overall it is positive as a deal has been done and not all the factors are down to the minimum essentials.

Note: Most win win negotiations should look similar to this , if all are in the desirable range then either the customer will feel bad in the long run, or you under estimated your negotiation power. If all are essentials then you will feel bad long term and you need to improve your negotiation skills next time .

 

  • Activity : Your Negotiation

Step 1. Create your own Negotiation grid

Step 2. Think of all the potential components that might be part of the negotiation and put these down the left hand side ( there maybe more than 4 , if so add more lines.

Step 3 Populate the table for each component with the Desirable / Probable and Essential you want from the negotiation.

Optional Step 4: Get a friend or college to roll play a negotiation with you, brief them on the scenario and explain they have got to get the most out of you but don’t let them see the grid .