6 critical things to consider in a negotiation

1. What are your legal rights? first and foremost, you need to know what your legal position is. It is impossible to negotiate from a position of strength if you are not confident where you stand legally.
2. Who are the stakeholders in the transaction, what is your relationship to them and with them? How much do you need them and where do you see your relationship with them going in the future? If the company is a crucial supplier or a key trading partner, you need to take a different approach to negotiating than if it is a party you will have no further dealing with into the future. That said, it is always good to deal fairly and with integrity with everyone as this builds your personal and your corporate reputation, even if you do not plan to deal with the business again. A business is run by people and you never know where those people will turn up working in the future – there must be a reasonable chance that it will be somewhere else within your industry. It is never a good idea to burn bridges unnecessarily.
3. Can you trust the other stakeholders? If you have doubts about their trustworthiness or reliability, think again about the whole transaction and whether it is really worth it. It is almost impossible to draft a legal document that will provide sufficient protection against unscrupulous operators.  You need to consider what extra safeguards you can put in place if you still need to deal with them and be willing to walk away if you don’t get them. The best deal in the world is no good if you don’t get paid.
4. What is the benefit to the other party(s) involved in the transaction? What are the elements of the deal that most matter to them? Are those elements the same for you or are you looking to benefit from different aspects of the deal? If so, can you use these differences so that you both get the maximum benefit from the deal/transaction?
5. What are the risks involved? – what are the risks to you and what are the risks to the other party(s)? Are the risks the same for all of you or are you vulnerable in different ways and if so, can the transaction be tailored to help all of the parties avoid their particular risks?
6. Do you really want to squeeze every cent out of the deal/transaction? or can you live with a comfortable level of profit and give some money away in the deal to sweeten/strengthen your business relationship. This is particularly a consideration if you have the upper hand in the negotiations. Can you use your upper hand to strengthen your relationships with the other party(s) rather than to drive a harder bargain? Maybe you can do both – depending on your answers to the first 5 questions, because it may be you are both looking to get different things out of the deal. Do you want to negotiate hard at the expense of the goodwill between you or is it of more benefit to your long term goals to act generously, still commercially of course, but looking to maximise the potential of the ongoing business relationship by being fair and even handed, and seeking to benefit the other party in the transaction as well as your own business as far as you can? The whole Fair Trade Movement, comes to mind when I think about this question – businesses who have been able to run profitably, some extremely profitably without needing to drive a bargain so hard that it comes at the expense of the party on the other side of the table.

Business is hard. The market is competitive, and we are all under pressure to maximise profit. There is no room for naivety.  I wonder however if often a longer term view of the huge benefit it is for a business to have a reputation for integrity, honesty, fair and plain dealing throughout its industry and across the community, is lost on the altar of driving a hard bargain. I wonder if the long term financial benefits for a business of building good, strong, stable business relationships with suppliers, customers, employees, contractors and all those other parties it deals with aren’t underestimated when compared with the immediate benefits to the bottom line of those last few hard won dollars which left a bad taste in the mouth of the other party and started them thinking about looking elsewhere.