Cinventure - For the Cincinnati Entrepreneur

I have a friend that use to sell cars for a living and he said something that has stuck with me to this day.  “A good deal is a state of mind.”  Meaning of course, that as long as the customer thought she or he was getting a good deal, then it was a good deal.  I think this concept can be applied in our business negotiations as well.  Let’s look at some negotiation strategies and see if a good deal is attainable for both parties involved.

Prior to going into a negotiation meeting each side knows that they have a starting point and a walk away price.  We don’t usually say, “ok, I’m going in to this car dealership and I am going to buy that new SUV for $19,000.”  Neither side knows the final sale price or terms going into the negotiation.  We have that $19,000 as our starting price in our mind, but we know that to actually purchase the new SUV we will probably have to come up a little higher.  We start out low because we know the other party will never come back with less than where we start. 

Likewise if you’re selling the SUV you might think to yourself, “I would really like to get $28,000 for this vehicle, but if I had to I could let it go for $24,000.” 

Having a starting point and a walk away price helps us keep the negotiation in a framework that we can use to create a deal that is satisfactory to us.  This leads us into some principles of negotiation.

Let’s talk more about what to do prior to going to the actual negotiation.

Do your homework.  Identify the strengths in your position.  In our above example we said we had a beginning price in mind.  You should know why your starting price is what it is.  Have some reasons why you think the other side should concede on price or other terms.  Are there acceptable substitutes for their product in the market?  Is there a way to reach your ultimate goal without the other party’s product or service?  If you are the seller think just the opposite: what is it that brought them to purchase your product or service versus your competitor?

Rank your needs from those that you absolutely cannot concede all the way down to those that you are the most willing and able to concede.  This isn’t to say the least important things are those that you should start off with, nor should you just give them away.  But if you have to start bending a little from your position to get the other side to concede, it’s best if you have an idea of what you can do without and what kills the deal for you.

Take your position out for a practice run before the actual negotiation.  You could have a business partner, spouse, or friend play devil’s advocate with you.  Have your friend perform the role of the other party and see how he or she responds to your offer.  You will be more likely to see any flaws in your argument before the person helping you role-play will.  Use their reactions to gauge where you need to make changes in your argument. 

Think of other things you can bring to the table that the other party might not anticipate.  In our car example, as the buyer you could offer to take business cards, key chains, magnets, etc. to your friends and family.  Businesses that work on referrals are more accepting of incorporating future business into their current negotiations.  If you are involved in a group or organization and provide the other party with the ability to reach a larger audience by virtue of your sale, don’t hesitate to mention that when you present your offer.  Use your social influence on groups that you belong to as a way to negotiate a better deal for yourself.

I would love to hear from fellow entrepreneurs and especially people with sales experience about how they prepared for negotiations beforehand.  You can leave comments on this post or simply use the Contact form on this website to do so. 

My next post will be regarding the actual negotiation meeting, so if you have comments or experiences you wish to share about the actual negotiation taking place, please save those and post them in the next blog entry!

 Thomas Goodwin is an Ohio licensed real estate agent (Realtor) and insurance agent.  He is the Founder and CEO of Northern Pine Properties, Inc., a real estate investment, development, and management company in Cincinnati, Ohio.

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