Negotiation for Entrepreneurs

Lesson 2 introduces the principles of strategic negotiation:

• Negotiation is any communication for the purpose of achieving cooperation intended to satisfy the interests of the parties.

• The criteria for determining competent negotiators.

• Good negotiation is not a tug of war.

• The 8 Elements of Strategic Negotiation.

The lesson then focuses on 2 of the 8 elements:

• The Factual Context and

• Communication

The lesson concludes with tips on how to achieve high-quality communication.

We also discuss the Importance of Meaning and respecting the Other Person's need to be involved in a grander purpose.

The better we understand the other side's interests, the more likely we will be able to devise options that satisfy their interests as well as ours.

By getting a deep understand of what they want and need, we will be able to help them help us get what we really want.

Developing options is about expanding the pie, that is, finding ways to create more value for both sides at minimal cost to each. The lesson discusses how to generate options for this purpose.

Standards of Legitimacy are the measures of acceptability of the options the parties develop. The help assure that each side will feel fairly treated and not taken advantage of.

The lesson illustrates how the legitimacy element is a powerful tool with which to escape the tug of war that haggling and other forms of positional bargaining involves.

1. Are you selling what I want?
2. Is it any good?
3. Can I afford it?
4. Can I get a better or cheaper version elsewhere?
5. CAN I TRUST YOU?

Trustworthiness has two axes: competence (ability to perform) and character (willingness to do it).

To assure trustworthiness, use the following checklist, which summarizes the 7 Habits of Trustworthy People:

1. Is it our best?
2. Is it the truth?
3. Is it fair?
4. Is it good manners?
5. Is it what we promised?
6. Is it legal?
7. Have we exercised due care?

The three magic words every entrepreneur needs to have readily available at all times:

• Please
• Thank you
• I'm sorry

An agent is anyone with authority to act on behalf of another person or entity (the principal).

When negotiating with agents, we must consider the agent’s personal interests as well as those of the principal because they inevitably become intertwined.

This lesson explains how to analyze both sets of interests and to use them in the negotiation process.

But you don't need to haggle. You need to think strategically.

And you need to use all 8 elements of strategic negotiation wisely when discussing the price of what you buy as well as what you sell.

We explain how to get the best price on a new car by creating an auction in which you switch roles with the dealer and become the seller--of your purchasing decision.

In fact, entrepreneurs have many advantages in price negotiations, especially when working with professional service advisers.

Price should not always be a function of cost of production or the calculation of a supposedly acceptable profit margin.

Instead, when in the role of seller, entrepreneurs can often get better deals if they analyze the value they are creating for the buyer and negotiate prices accordingly.

If you must offer discounts because you have not yet been able to demonstrate the value of your product or services, then take care to avoid setting bad precedents. You can do this by explicitly designating the lower price as an introductory offer or a special price for test purposes. Make clear that the price will be adjusted in later sales based on demonstrated value.