Nearly all negotiators completely underestimate the time required to plan for any business negotiation even though this is a key part of business negotiation best practice.
Using your negotiation skills to understand the context is a great place to start preparing for negotiations.
The key elements to think about are:
- What is the nature of the sale/purchase in terms of risks involved, the level of expenditure and the complexity of the transaction?
- Competitive analysis: What is the current position of the market and what alternatives do our counterparties have available? We will approach a sole supplier in a different way than those in a competitive market.
- Is it a single transaction or should we think about maintaining a long-term positive association that creates alternatives for future business?
- Have we had any dealings with our counterparty in the past and what is their most likely approach to concluding business?
- How accomplished are the negotiators on the other side of the table?
- What cultures will be present and what are the local traditions?
- Who are all the parties & individuals concerned in the transaction and what is the decision making process? A diversified tactic is needed as final decision makers will most likely be interested in Return on Investment and increased revenues & margins. The final user who looks for enhanced output and efficiency regard the financial elements almost totally immaterial.
Almost any negotiation training course will highlight the importance of setting formal deal objectives.
Failing to plan and rank our deal objectives we put ourselves at risk of being taken advantage of and/or ending with a sub-optimal conclusion. Whether you are engaged in negotiation on the sales or purchasing side, consider the following factors when preparing for negotiation:
- Price and payment, Key responsibilities, Delivery, Warranties, Intellectual property and Risks.
Price and Payments: The competition and the complexity of most business transactions require finding methods to create extra value and to move negotiation from haggling to mutually beneficial and creative joint problem solving. Professional buyers are not requested with getting the most affordable solution but rather with providing their organisations with the cheapest total cost of ownership, which is composed of things like:
- Acquisition costs, Service costs, The cost of use, Support costs, Supplier performance metrics, Delivery, Product quality and Client Support. (These concepts are covered in most purchasing training programmes).
If we are able to minimize our counterpart's costs in the whole life cycle of the product, solution or service and simultaneously offer value for money, we are in a better position to find agreement.
Key Obligations: Make sure your product and services are defined and show your priorities. Include all the relevant quantities and specifications.
Delivery: How key are the delivery timelines and what happens if the delivery doesn't take place on time?
Warranties: In order to preserve trust and credibility make sure that you can live with any promises.
Intellectual property: Carefully negotiate IP ownership rights and think about the following factors:
- Which party is footing the bill for the Research and Development?
- Could the product development be utilised by competitors to your disadvantage if you don' t own the IP? How can you stop competitors to use the same IP?
Risks: The best way to manage exposure is to include the elements in a written contract. Cultural consideration is very important. In Asian countries the goal of negotiation is not a signed contract. In China, unexpected circumstances are settled through the relationship.
Analysing the above factors are important in preparing Concession Strategies that will assist you to leverage maximum value from trades and in planning meetings optimally.