Friday, July 30, 2010

High Dollar Negotiating Tips

This will be the first in a series I'm going to be writing about negotiating.  Negotiating isn't just important in business.  It's also valuable in your personal life.  When you are talking to your kids, you're negotiating (even though they may be winning).  Dealing with your spouse can be a process of negotiation.  When you're purchasing something, it's a negotiation.  Business deals are full of negotiations.  Buying a house, or a car - serious negotiations.  So, this is a topic that really affects everyone, and that's why negotiation is my favorite of all business topics.  In this blog, I am going to give some helpful tips in negotiating.  Later, I'll talk about some specific negotiating tactics, preparing for a negotiation, closing the deal, and more.  So, stay tuned.  For now, here are some helpful tips to think about in any negotiating situation.

1.  Be prepared.  This means that you should know about the person or business you are going to be negotiating with.  What are their "hot buttons"?  What do they want?  What problems are they experiencing?  What problems can you help them solve?  What weaknesses do they have?  What weaknesses do you have?  How do you hide those?  How much do you want to pay and how much are you actually willing to pay?  How much do you want and need to get paid?  You need to spend an adequate amount of time preparing for whatever deal you're working on.  This is the first and most important part of any successful negotiation.

2.  If you're planning on making the first or opening offer, it needs to be very high or very low depending on what's best for you.  For example, if you're trying to purchase a piece of real estate and you know the market value of the property is $100,000, you might want to initially offer $85,000.  It seems like a ridiculous offer considering the market value, but this prevents the seller from coming out of the gate with a ridiculously high offer like $125,000.  You're anchoring the sales price at or below the market price and that starts you out in a strong position.

3.  Never fall in love with a deal.  You must remain objective and keep your options open, including the option to simply walk away.  The purpose of a negotiation is for you to get a good deal.  Don't sabotage yourself by losing objectivity.

4.  Always say "no" to the other side's opening offer.  They are trying to anchor the deal in their direction anyways, so don't say "yes" yet.  Make them work for it.  Even if you like the deal, you don't love it and you are going to say "no".  This will get you a better deal every time.

5.  When the other side makes the opening offer, be shocked at their offer because you can't believe they would offer such a bad or one-sided deal.  Then wait for them to cave in and make a better offer.  Always say, "you have to do better than that".  Even if you like their opening offer, be shocked and tell them to do better.  It will work most of the time.

6.  Only give up something if you get something in return.  These are concessions and you can't concede if the other side is unwilling to do the same.  Because you did your planning in advance, you already know what things you would be willing to concede and what things you want.  If someone says they need you to drop the price by $5,000, (after you look shocked that they would ask such a thing) you tell them (very reluctantly) that "I might be able to do that, but I would need you to pay 40% up front instead of the original 25% that we talked about before".  Always get something of value in return for giving up ANYTHING - regardless of that thing's value to you.

7.  Never offer to split the difference.  That is your opponent's job, not yours.  If the other side wants $100,000 and you want to pay $80,000, don't offer to split.  However, if the other side offers to split the difference, then you're in a very good position.  That means they would now be willing to accept $90,000 and you're only $10,000 apart instead of $20,000.  From this point, you would say, "wow, you'd be willing to take $90,000?  That's great because now, we're only $10,000 apart.  Surely there's a way we can get this deal done since we're so close on price."  If you end up paying $87,000, you're in better shape than if you would've offered to split the difference.  Because then you might have ended up at $93,000.  You just saved yourself $6,000!  Great job!

So, that's quite a bit of information for you to soak up for now.  Try this stuff out.  It's amazing how well it works.  Practice, practice, practice.  Have fun with it.  What's the worst thing someone can say to you?  "No"?  So what.

Stay tuned for more High Dollar Negotiating Tips.

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