First and foremost; negotiating is a necessity in life (not just business life; all life). Learn how to negotiate or think about becoming a hermit.
1. Set an anchor. Adam D. Galinsky, in a Harvard Business Review article, talks about being first to set an anchor in a negotiation. Almost always both parties have an understanding of the worth of what is being negotiated. His study found that the final outcome of a negotiation is affected by whether the buyer or the seller makes the first offer. Specifically, when a seller makes the first offer, the final settlement price tends to be higher than when the buyer makes the first offer.
Do not set a price range. If you are the seller and give a range, the buyer will only hear the low end of your range. Yikes, you just set an anchor!
Simply put, if you are the buyer set a low anchor and if you are selling; set a high anchor. The important point is to be first.
2. Give AND take. If your seller requests you raise your offer; get something in return. “If I raise my offer, what will you give in return?”
Bonus: you can ask for things you don’t need or want. Have a couple of things you can give away later that you didn’t need anyway.
3. Never negotiate with yourself. Verify everything and assume nothing. Too often we see people with preconceived ideas leaving money on the table. Remember, ask open-ended questions. Your goal should be to learn as much as you can before final agreement.
4. Silence can be golden. No doubt you have heard of the “poignant pause” sometimes nicknamed the “pregnant pause”. People tend to talk a lot when they are nervous. Whether it be selling or negotiating, listen twice as much as you talk.
Let’s say you are the buyer and you make the make first offer (as you should). Your seller responds negatively to your offer with something like “…way too low…” Here’s your chance to demonstrate some restraint and say nothing in response. She may get nervous and begin talking to fill the void. She may tell you something significant and useful. You may not have learned it had you been talking rather than listening.
5. Control the pace of the negotiation. Sometimes, it is helpful to take a “time out” from the negotiation. Step away, take a breath and clear your head. Particularly if you feel the conversation is not going where you want to go.
Ask for a drink of water, a bathroom break, say you need to call your boss/board member/spouse…any excuse allowing you to make some notes and gather your wits will do. Does that sound wimpy? It’s better to sound wimpy than come out on the short end of a negotiation.
6. Be prepared to walk away. If you have run into the ultimate negotiator or someone totally unwilling to compromise; politely excuse yourself. This will occasionally happen and you MUST be prepared to walk away. More times than not, calling the other’s bluff brings them closer to the middle.
7. It’s not over, until it’s over. Let’s say the negotiation has been going on for a while. There has been significant give and take on both sides. Your buyer asks for something you just can’t give up. It is absolutely acceptable to go back and ask for a previously agreed to concession to be returned.