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The preparation for conducting negotiations

Conducting negotiations successfully:

How to prepare yourself ideally in 7 steps

As an entrepreneur, managing director or decision maker, you not only have the ambition to acquire the right customers and identify the relevant opportunities, but also to secure the best possible deals.

The Sales Pipeline, which you can read about in other blog posts, is very relevant to what is discussed here. You can learn about definition and relevance, success probabilities, the right target, relevant key figures and tactics for development and filling, by clicking on the respective links.

Your Sales Pipeline must not only find and prioritize the relevant deals, but also lead to you closing deal on good and strong terms. Conducting negotiations is an essential part of targeted offer processing, both in the acquisition of new customers and in the optimization and expansion of existing mandates. In order to conduct successful negotiations, you must master the processes and tactics.

The basis is the understanding of the definition: "A negotiation is a type of conversation between two or more parties with the objective of reaching a decision. Negotiations occur when both parties want something from the other and neither party can or wants to apply alternative forms of reaching a decision .

According to this, it is central in negotiations that both parties are interested in the decision-making process. In addition, both parties want something from each other. Internalize this in order to position yourself at eye level with your counterpart and to avoid a power differential.

The negotiation process consists of four phases: Prepare, lead, bargain and fix. In addition, external circumstances and the type of deal influence the process over the entire period.

This blog post is about the first phase, preparation for negotiation. This is further divided into 7 steps as shown below:

  • Negotiation preparation

  • #1

    Set Goals

    When setting your negotiation objectives, focus on your most important interests. Be courageous and formulate your goals in a measurable and specific way. It is important to define your walk-away point. So be clear about where your demands are undercut and an agreement from your side is no longer possible. Only revise this point if there is compensation.

  • #2

    Choose an Approach

    You have several options to choose your approach:

    Large and strategic

    In this case, you base your negotiations on facts, focusing initially on the technical characteristics of your services. For this purpose, put together a cross-functional team, i.e. a mixture of specialists and generalists. Conduct several rounds of talks, with price negotiations at the end.

    Medium

    A cross-functional team may also be used for a medium-sized process. Here too, the basis of the negotiations are facts, whereby the focus is on the price at the beginning. The goal is to have only a few rounds of talks.

    Small

    The small process is reduced to a single round of talks. The focus is directly on the price, so no cross-functional team is necessary.

  • #3

    Identify BATNA: Best Alternative To a Negotiated Agreement

    According to Fisher & Ury (1981), BATNA is an acronym that stands for the Best Alternative To a Negotiated Agreement in case no agreement is reached in a negotiation. It is used to define your plan of action if negotiations fail. This plan must be real and feasible and serves as a benchmark for the decision whether to accept or reject the final offer. This increases your negotiating power and strength.

  • #4

    Determine Tradable Goods

    Thoroughly determine which positions, points and issues need to be decided and negotiated together. Typically, these can be certain functions, warranty, project duration, service, payment terms and of course the price.

  • #5

    Set Priorities

    Assess the priorities for you and your counterpart.

    High priority

    These points must be achieved, otherwise it would be contrary to your main interest. If you cannot agree on these points, the result from your perspective is worse than the BATNA and therefore not interesting. The fewer topics you classify with this high priority, the better the negotiations will go.

    Medium priority

    You have the claim to reach also the points of medium priority. However, they do not constitute a reason to break off or reject the negotiations. This is where the other and more important points of discussion come into play.

    Low priority

    These topics make it easier for you to reach an agreement and are a plus in the options they include. These can be located near or even behind the Walk Away Point. However, they are not give-away, so for these points you are not willing to give up other concessions or topics.

    For each discussion point, set a Starting and a Walk Away Point. The more tradable goods you have, define and evaluate, the lower the probability of a dead end or no agreement can be reached. You then have more room for negotiation.

  • #6

    Understanding Negotiating Partners

    During the preparation, answer the following questions: What is the BATNA of your counterpart and at what point will he end the negotiations? What does your counterparty really want? What priorities will he set? And who is the main decision maker, who do you have to convince?

  • #7

    Understanding Circumstances

    As explained above, circumstances also influence the negotiation process. Is it a one-time negotiation or is it a long-term, repetitive process? Does this negotiation influence other project negotiations? What is the relevance of timing? Is the deal strategic. What is your experience with previous negotiations? Are there other factors such as cultural differences or legal restrictions that you need to consider?

With these steps you will be properly prepared for the next negotiation phases, which the next blog post will be about.