Avoid the Great Eight When You Negotiate

Everyone knows this axiom: What are the three most important factors in Real Estate? Location, Location, Location. Well, when it comes to negotiation, the three most important factors are Prepare, Prepare, Prepare. Yet lack of preparation is the most common mistake I’ve seen, even among experienced professionals. Here is a list of eight more mistakes that you should avoid in your negotiations:

1. Not recognizing that this is indeed a negotiation. When you’re in the business of selling and buying on a regular basis, much of your time is actually in some stage of the negotiation process. Everything is a trade-off and everything has some degree of value. If you immediately start the conversation by identifying what is of little value to you, you’ve potentially given something away that you could have used in exchange for something later.

2. Thinking this is a zero-sum game. Someone has to win, therefore someone has to lose. I recall one member of a negotiation team who simply couldn’t shake her concern that the other party might be getting “more” than they needed to have in the negotiation, even though we were getting exactly what we needed. She thought we should continue to push because this somehow wasn’t fair. She didn’t seem to grasp that an ideal negotiation has both parties believing they got what they needed.

3. Not establishing objectives up front. I’ve observed that people get very stressed out about negotiations because they are afraid that the other party is going to somehow get the better end of the deal. This, even before they’ve figured out what is a good deal for themselves! In other words, they don’t know what their objectives are. Establishing your objectives not only minimizes the stress of the negotiation, it also helps you know what specifically to ask for, and how far you can go in the negotiation.

4. Not knowing when you’ll walk away. The industry term for your walk away position is the BATNA (Best Alternative To a Negotiated Agreement). In other words, if you can’t get what you want, identify the alternative, and seek THAT. The biggest frustration I’ve observed during negotiations is the feeling that somehow you’re being taken advantage of. This feeling is greatly minimized when you know the point at which you can walk away.

5. Not exploiting time constraints for yourself and for the other party. Negotiations that have no known time constraints can become unproductive quickly. There is always some constraint from one or the other parties, and figuring out what that is can be crucial for pushing closure of items. For one party, it might be making a particular revenue amount in a quarter. For the other party, it might be resource availability for closing the agreement. Understanding these factors is crucial for determining how far issues can be pushed.

6. Not spending sufficient time on what matters to THEM. A successful negotiation allows time for trade-offs between the parties where both feel they have gotten what they needed from the business arrangement. For you as a successful negotiator, you need to know what the other party’s needs are so that you can present alternatives that will optimize both your and their objectives.

7. Mistaking your wants for needs. When you enter a negotiation, there are specific items that you must have in the final outcome (these are your “needs”). This could include things such as a certain cost point, a particular quality level, or a specific timeframe. You will also have particular “wants” which could include the way the item is packaged or a particular contractual clause; but these wants are not make-or-break objectives for the negotiation. The rub comes when you get one of your wants but sacrifice a need in return (I got this great termination clause (which I’ll likely never use), but I’m paying more for the service than I budgeted for!).

8. Inability to re-frame issue to meet both party’s objectives. I heard a great example of this from a negotiation instructor recently. She described a purchase she was making when shopping on a Caribbean cruise: she asked the salesperson what kind of a reduction she could get if she purchased two necklaces instead of one. The sales person said they had a strict policy against negotiating. Instead of walking away from the purchase, this instructor asked the sales person if they did any type of volume discounting. When she described the reduction as a volume discount, rather than as a negotiation, the sales person was able to utilize a different method for giving the reduction to the instructor. The instructor got her discount, and the store made a sale. Both parties got what they wanted simply by re-framing the situation.

If you buy and sell as a profession, you’re probably an expert at negotiations. Yet even the best can afford to resist falling prey to these great eight mistakes.