To get the best outcome, you need to answer these four important questions before you get to the bargaining table.
With simple products, negotiation is all about price. With complex deals, though, there are often competing priorities–things like delivery schedules, support capabilities, financial targets, and so forth.
If you're going to negotiate the proverbial win/win deal, you'll need to understand where you are now, where you need to be, and how you plan to get there. This is only possible if you make the following four decisions before you actually sit down at the negotiating table.
1. What are the parameters that need to be negotiated?
To answer this, collect and evaluate information on leverage, values, sale prices, competition, and any other factors that will affect the negotiation.
Example: You know that the CFO greatly desires a three-month ROI, rather than the six-month ROI you've proposed. You are therefore aware that you may either need to adjust the price in order to produce that ROI, or come up with some form of alternative financing (like rent to own) that will achieve the same effect.
2. What are my realistic expectations?
Naturally, you'd love to negotiate a "sweetheart deal" that would give you and your firm everything you could possibly want. Realistically, though, you've got to temper your aspirations with feasibility, based on what your counterpart has in mind. And you'll need to reassess those expectations as the negotiating progresses.
Example: You know that your counterpart expects to pay only marginally more than she paid 10 years ago for the same service. You're not going to get double the old price, no matter what–but a 33 percent increase is more realistic.
3. What are my financial parameters?
When it comes to price and cost, know the deal you want to forge, and be able to justify your position as being realistic and logical.
Example: Suppose you're fairly certain the customer will ask for a big discount. Before the customer asks, find out what's the largest discount you can possibly offer and still remain profitable. If that figure is 15 percent, you know than any discount larger than that is simply not acceptable. More important: You can explain why it's unacceptable in terms anyone can understand.
4. Where do I have room to maneuver?
Because negotiating is a process of give and take, you've got to know where you can be flexible. However, while you need to leave yourself some bargaining room, you should have a plausible rationale for the positions that you take, rather than just trying taking a position for bargaining's sake.
Example: You know that your installation team is idle right now, so you can realistically offer the customer an immediate installation if they're willing to pay full price.
Once you've made these decisions, it's safe to discuss competing priorities, adjust the various parameters ... and cut a deal that makes sense for both parties.
GEOFFREY JAMES writes "Sales Source on Inc.com," the world's most-read sales-oriented blog. His new book, Business Without the Bullsh*t, will be published in early 2014. To get weekly blog updates, sign up for his free "Insider" newsletter. @Sales_Source