A Few Tips on Negotiation

Robert Naini, your Spray Foam Advisor, shares a few tips about negotiating and negotiation tactics that we can all use to help our business and our personal lives.

The first tip I want to share with you is directly from Stephen Covey’s The Seven Habits of Highly Effective People and he talks about the concept of Win-Win.

Every time you enter a negotiation you are trying to get a deal, you are trying to accomplish something, you might trade money for a good, trade a good for a different good, or trade a good for a service, regardless of the deal the goal should be to achieve a Win-Win situation. You should benefit as part of the deal and the other party should also benefit as part of the deal – this is a Win-Win.

If it’s not a Win-Win then it typically means somebody loses and we typically do not want to operate from a Win-Lose position or a Lose-Lose position, those are terrible options so let’s focus on ways to do business where it’s Win-Win.

The next tip is try not to be the first person to give a number in a negotiation, now as the buyer it is often very easy not to be the first person to offer a number, for example, in the spray foam world if I’m a buyer then I’m not going to set the price for the job, I’m going to get a quote and that’s typically the first number in the negotiation.

However, think about it from your perspective. As a contractor you have to go in and quote the needs of the customer, if the customer explains to you their needs and they are asking for a premium package and you quote a premium package, then they come back and say wow this is beyond our budget, we can’t do this thank you but no thank you. How can you avoid this situation?

What if you change the conversation up front to their budget? What if ask about their budget along with their intentions? This can help prevent you from bidding a premium package that they can’t afford. By including a budget or budget range question in your qualification phase or your high trust interview phase, you can better structure your offer for them, and they are the first to give out a number.

This budgetary guidance allows you to start with a package that’s inside their budget making it much more likely that you get their business.

Another idea I learned from the real estate industry, from several mentors, is one key question as a buyer, the question is, “Can you do any better?”

As a buyer if I call up a manufacturer to purchase a new rig and I’m talking to the sales rep and I find out that the list price is $80,000, the key phrase “Can you do any better?” allows you to give them an opportunity to negotiate with themselves without you giving a number. It’s not the same as you saying I’ll offer 70,000 on this $80,000 item, it’s different, it puts them in a position to try to beat their own number. If you can fit this question into your negotiation 2 to 4 times, especially on high dollar purchases, you may be very surprised at how far you can drive numbers down.

I’ve had coaches in the real estate industry talk about deals that they’ve done where over a weeklong negotiation they were able to take a seller from a $500,000 purchase price down to a $300,000 purchase price without ever offering a number as the buyer and all they did was ask questions and one of their key questions was “Can you do any better?”.

Finally, when you’re involved in a negotiation you have to know your bottom line, when is it time to walk away, when are you no longer interested in the deal, when is it not a win for you, and that means knowing your numbers, knowing your margins and knowing when it’s worth doing business and when it’s not worth doing business.

This leads to an acronym in the negotiating world known as BATNA which is the Best Alternative to a Negotiated Agreement.

If you think about a big negotiation ahead of time, what is the best alternative to a negotiated agreement in your situation, then you’ll be better prepared for potential obstacles that you run into, and you’ll be able to walk away from a deal that doesn’t work for you.