Negotiate like a lion. Or like a fox. Negotiate like your life depends on it.
I must learn a lot. But I do hope that I can explain how I negotiate.
Procurement teams are negotiating with everyone. Not only the supplier but as well the stakeholders. The goals are different, but the process is almost the same. The only difference is that you cannot walk away from your stakeholder.
No matter how well trained and prepared we are, negotiations are an emotional thing. Some people will drive you crazy for no particular reason. You will as well like some. Try not to get into this trap. Keep the emotions outside. This is a business. Not dating, a fight or competition of any kind.
Negotiations happen in three phases: preparation, the meeting, and after the meeting.
Preparation is the most important part and needs at least half of the total time. We need to collect as much data as possible. To know the major characteristics of the product/ service. Also, what will be the least acceptable quality level that our stakeholders will accept? Another important step is to gather market data. Contact a couple of suppliers and get some prices. Because, if you present an unrealistic demand to the supplier, he will know that You have no market data and will bring You exactly where he wants. It is good to know the supplier, his market share and if possible, their current basic financial data. Find out more about the salesperson that will come to the meeting. LinkedIn is usually a great help here. A couple of personal questions at the start of the meeting can bring the relationship to a much more cooperative level. Moreover, if there is a “show stopper”, a point where the negotiation will not continue, we must understand the potential effect of this on the company. This is BATNA – Best alternative to a negotiated agreement. Once we reach BATNA, the negotiations are unsuccessful.
Time to start the meeting. The salesperson has years of training focused only on getting the sale done. Keep Your ego outside, this is not a boxing match. And anyway, using power rarely brings a good contract. Clarify the general clauses of the contract first and then move on to the more difficult parts. It creates a general positive vibration in the room, as everything goes smooth. I got a piece of good advice on negotiations: first, negotiate and get the price fixed. Then other clauses: payment terms, incoterms, etc. Always have in mind that the best contract is a win-win contract. While asking for something, offer something in return. A longer contract, joint R&D, shorter payment. Some things will not create any extra cost for your company but can help the supplier.
In one moment, negotiations will stall. Usually around the price, but it happens around even a non-important sentence. Do not allow yourself to get emotional. Again, this is not a boxing match. You should not attempt to win at all costs. Remember the preparation. Review your notes and see what can you offer in exchange. If it is outside your BATNA, close the meeting. Do not push further only to close the deal. Do not get defensive or rude. The fact that the deal was not agreed on this time does not mean that you will not work with the other party in the future.
Finally, both parties are happy with the agreement. You shake hands, and everyone walks away with a smile. Speed up with the minutes of meeting and contracting. Have everything written and send out notes and minutes before the contract is sent for signature. Sometimes misunderstanding happens, and we want to avoid any changes in the contract draft. Keep Your Promises, and expect the same in return.