This is a repost of an anonymous article I found on the net.
Gather Your Chips
It is critical that you be prepared before the negotiation starts by gathering all of the bargaining chips. A bargaining chip could be anything, such as money, an objection to be overcome, or any discrete unit of exchange.
Find out what each side wants. Evaluate both sides’ positions in order to determine what both sides’ chips are. Make a “pro vs. con” list for each side’s positions for the issues negotiated. Turn these into chips.
Prioritise the chips. Determine what you need versus what you merely want. Put some chips on a wish list. Use alternative chips if you have them; for example, if you don’t have red in stock, offer them blue.
Give away freebies as chips. A freebie is something that costs you nothing but appears valuable to the other side such as a guarantee or timely delivery.
Negotiation is a give and take process. Usually, each give, and each take, occurs in a step by step process. Thus, each “step” in the negotiating process takes a chip. During negotiation, use the chips to raise or lower the stakes during the give and take process.
Never, Ever, Make the First Offer
This is the first test of the negotiation. Sometimes, it can get to the point of ridiculousness when neither side wants to go first. So what, be nice, smile and shrug.
Here’s an example of why you should never give the first number. You want to hire someone to paint your house. You are willing to pay £100. A painter comes to give a bid. You don’t know it, but he is willing to do it for £50. The painter asks you for your price. You say £80. The painter agrees since the painter was willing to do the work for £50. You have just lost £30.
Beware of the non-negotiator. This person says, “Give me your best number; I am not going to negotiate”. If you give your best number first, you leave no room to negotiate in case you want to change something later and begin negotiating.
If you are somehow forced to give the first number, make it ridiculous, but not comical. For instance, double your number, but do not ask for gazillion dollars or some completely off the wall number that will show you are not serious. Welcome an outrageous reaction to your ridiculous number, then smile and shrug. The first offer may be zero, the advertised price, or an “Anchor” number.
An anchor number acts as an anchor for a party to attach to their number. I attended a seminar where the speaker divided the class into two groups. He passed out a piece of paper to everyone and then told one group to close their eyes. The speaker held up a picture of a house that had £100,000 printed below it. He asked the group with their eyes open to write down how much they think the house was worth and to pass their numbers to him. He then had the other group open their eyes and held up another picture of the same house, but it had £1,000,000 written underneath it. He asked the second group how much they thought the house was worth and had them pass their numbers forward. He reads the numbers from the first group, and they were numbers like £95,000, £110,000, £82,000, etc. He then reads the numbers from the second group and they were numbers like £950,000, £1,100,000, £870,000, etc., for the identical house. The dollar amounts underneath each picture were the anchor numbers.
Aim for the Centre
Once each side has given their first numbers, aim for the centre which is the natural median. I offer 10, they offer 20, and we aim for 15. During this, avoid the following pitfalls.
Never offer to split the difference. Once you do, that becomes your new number. For example, I offer £80, they offer £100, and then I offer to split the difference, £90. My number is now £90, and theirs is still £100. The new middle number is £95. They will now offer the new middle number assuming you will accept the new middle number. You have just given away a large chunk of negotiating room by going from £80 to £95, while they have gone from £100 to £95.
Never give a range of numbers. For example, telling the painter in the above example that you will pay from £80 to £100 to paint your house, is giving a range of numbers. Which number do you think the painter will choose? £100. By giving a range of numbers, you are actually giving the highest or lowest number in that range as your number.
You can always go up, but never down (or vice versa). You can’t take back a number or go in the opposite direction once you start. If the painter won’t take £100, he certainly won’t take £80. Offering something you know the other side won’t take is seen as bad faith. So it is best to negotiate in small amounts and make a large number of changes so you never have to change directions.
If You Give Something Away, Always Take Something In Return
Negotiation is quid pro quo. If you give something away in the bargaining process, make sure you get something in return. Even if it’s not something you want, you are gaining a chip you can bargain away in the future. At some point, you may want something back, so now you have something to trade away, a freebie.
If you won’t ask, you won’t get. Don’t be intimidated or embarrassed to ask for something. Don’t be afraid of someone’s reaction. Ask for what you want. All they can do is just say no.
Just Say “No”
Don’t be afraid to say “no”. You will not insult the other side by saying no. Don’t be afraid to walk away from the deal, or any part of the deal you don’t like. Never be emotionally attached to the subject of the negotiation.
Get to “Yes”
Getting the other side to agree to your demands is an integral part of negotiation.
Make sure you’re negotiating with the decision maker. A party can only say yes if they have the authority to say yes. Only negotiate in person with the actual decision maker, or all the decision makers, or you will never reach a decision. Be firm about this. If they’re not serious enough to meet you in person for the negotiation, they are not serious.
Use leverage if you have it. A due date or deadline is good leverage. If the other side wants more time to think about something, just say no. If you can put pressure on the other party they will quickly agree to your demands to relieve the pressure.
Offer a demand you know they will accept. Get the other side into the habit of saying yes. An effective method is to use “tie-downs” (“won’t you”, “don’t you”, “isn’t it”). This method is especially useful on stubborn parties. For example,
- “You want your house painted, don’t you?”
- “It would be nice to have it painted for a reasonable price, wouldn’t it?”
- “If I can paint your house for a reasonable price, you would hire me, wouldn’t you?”
Find issues the parties agree on and take them off the table. Narrow the scope of the negotiation if there are complex issues or the parties get hung up arguing over their differences. Getting the other side to start saying yes to many issues puts them in a yes mode. Start with the smaller disagreements, save the biggest disagreements for last.
Shut up! Don’t think you must constantly talk in order to convince the other side. Let the other person talk; they will usually give you good information. Let them think; they may convince themselves. When you make a final demand, shut up! The next person that speaks loses. I have sat a full 30 seconds staring at opposing counsel after giving them a number and waiting for them to respond. Yes, the silence can be uncomfortable or embarrassing, but this method works because when you give your final number, the other side is running through all the calculations in his head. Wait for them to finish. The outcome may be in your favour. If not, they will usually give you an objection that you must then attempt to overcome. When you have overcome all the objections, you will get to yes.
You can recognize the parties are arguing when there is an intractable disagreement over an issue. If you get stuck on a certain issue, the whole process gets bogged down. You can avoid these arguments.
Make a list of disagreements. If the parties can’t agree on an issue or fact, agree to disagree, and then put the issue on a list for future discussion. Factual disagreements can usually be decided later with more information.
Make a list of agreements. If the parties agree on a point, put that on a list. Also, make a list of mutually agreed assumptions.
Be nice. Do not raise your voice, become emotional, or get angry.
Immediately Reduce Any Agreement to a Writing Signed by the Parties
Memories fade. Minds change. Many people get buyer’s/seller’s remorse. Therefore, it is important to make a written memorandum signed by the parties at the time the agreement is made. It can be as complicated as you want or as simple as notes on a napkin. To make it more likely it will be signed, draft the memo in language agreed to by the parties as you are writing it.
A memorandum should contain the quantity, the time for performance, the identity of the parties, the price, and the subject of the negotiation (mnemonic: QTIPS), as well as, other details likely to be disputed later.