– with an aggressive first offer for instance. Other companies that you will deal with have an approach that is very much concerned with respecting the rights of their employees or their suppliers. You simply have to know who you are dealing with!
Your negotiating partner’s behaviour may be very different to your own, so be prepared to allow for this.
The old maxim ‘proper preparation prevents poor performance’ is as crucial in negotiating as it is in presentations, sales visits and other areas of business. This chapter provides you with a preparation framework that allows you to define your objectives, anticipate the other party’s approach, and develop your own strategy and tactics. Thus prepared, you have a much better chance of reaching an agreement satisfactory to both sides.
A clear understanding of your objectives is essential when negotiating. You should be ready to propose a package that is challenging but credible. Your preparation should end with you deciding on your ‘Desirable’ list and using it to form the basis of your first proposal. Use these steps to prepare.
1 List the things on which you can give and take. These are called your negotiating variables. If it is possible to give and take on something, list it as a variable.
2 For each variable, list the ‘Desirable’ (best you can hope for), ‘Probable’ (most likely) and ‘Worst’ (worst that you would want to finish up with) outcome from your point of view.
3 Put a value on the difference between ‘Desirable’ and ‘Worst’. Now you have identified what the most valuable items are from your point of view. Price and volume are obvious values, but sometimes it is more difficult to put a value on a variable.
4 List all those things on which you are not prepared to give and take. You are effectively saying they are non-negotiable.
5 Look at everything done so far from the point of view of the other party. Ask yourself what they will be looking for on each variable – and what variables they will be looking at.
6 Consider where you will have areas of agreement, and where there will be disagreement. If your partner wants to negotiate on the things that you have considered to be non-negotiable, you may struggle to reach agreement.
7 Having weighed up the situation, you should be prepared to propose your first package (see chapter 4) as the ‘Desirable’ set of objectives, although the Discussion (chapter 3) may cause you to modify your first proposal.
Example list of negotiating variables
This table shows how selling a family business looked when listed in the way described. Your preparation will always give you maximum support if you finish up with this sort of five-column table.
| Negotiating variable | Desirable | Probable | Worst | Likely difference in value desirable to worst |
| Basic price (for 100%) | £5.1m | £4.7m | £4.5m | £600,000 |
| Keep a family stake | 30% | 20% | 10% | £1m |
| Retain directors | Father = MDSon = Prod Dir | Father retiresSon = Prod Dir | Both retire | Pride and/orrenumeration |
| Pay directors | 2 years at£30k each | 1 year at £30k | Nil | £120,000 |
| Retain staff | Maintain statusquo for 6 months | 3 months’notice clause | 3 months’notice clause | Loyalty |
| Payment terms | 100% now | 50% now50% two months | 100%two months | Securityand interest |
Prepare a detailed list of variables and assess their importance to both parties.
2.2 Anticipate the other party’s approach
In your preparation, it is important to consider the likely reaction of the other side (your negotiating partner). There is a need to display empathy – to put yourself in the other person’s shoes.
You are not negotiating in a vacuum. You have to work out an agreement with other people, who have their own objectives, problems and emotions! Here are some of the things to consider:
Priorities. What’s important to them is what has the most value to them. So it is important to be aware of their likely gap between ‘Desirable’ and ‘Worst’. You can’t be sure of this until the discussion stage, but you can think about relative importance as they will see it.
case study A buyer is negotiating the purchase of a batch of components for a machine. The buyer’s position is as follows: ‘Best’ price £6.44 each; ‘Worst” price £7.37. The seller’s position is: ‘Best’ price £7.80 each; ‘Worst” price £6.80. Here the negotiating issue is price. Somewhere between ‘Desirable’ and ‘Worst’ limits is a potential negotiated settlement for both parties. The area of overlap is a price between £6.80 and £7.37. If there is no overlap on another issue (say, payment terms) there would be a potential disagreement and failure to agree. This will only be overcome by one or both parties being flexible.
“If you are to put on another man’s shoes you must first take off your own”
Mark Twain, American author
Wants. You need to consider ‘wants’. What they want and what you want. ‘Wants’ are crucial in any negotiation because you trade/exchange what they want with something that you have.
Monkeys. Does the other party have any serious ‘monkeys on their back’ – things that restrict their ability to move and to be flexible? If they have, you need to understand this, bring it into the open, and help them understand why this is a barrier to both. (I often find companies make credit terms non-negotiable. This can be a real obstacle to agreement, and movement on this issue need not be expensive.)
Behaviour. On every aspect of the negotiation keep asking yourself “How should I behave?” and “How will they behave?” Only then, for example, can
