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Want to become a better leader? Want to save your organization a lot of money? As a financial professional one of the most valuable skills you can learn is to be a great negotiator
What is a great negotiator?
A great negotiator is able to get both sides feeling good about the transaction. Yes, bullying may get you a great deal the first transaction. But after that, the vendor providing the goods or service will not be motivated to go the extra mile and on the next deal and they will be less likely to give you a great price. Bullying only works over the short term.
Principles of Negotiation:
1. Make it competitive
When you create a competitive environment, the competition will help you flush out the best deal. Additionally, when you have competition, you provide the person selling you the goods or services a justification that they can take to upper management to give you the best deal. There are times, however, when bringing in competition might not make sense. For instance, if you have IBM Analytics Software deployed and you want to buy additional licenses. But even in those situations, I suggest you reach out to a partner of the software vendor and ask for a quote. Often business partners of software vendors can give you a better deal than the vendors themselves because they give up some of their margin.
2. Build Rapport
Get to know the people on the other side of the negotiation. Find areas you have in common and understand their goals for the transaction. If they like you, they are typically going to give you a better deal and they may guide you so you ask the right questions. I have found the best way to build rapport is to meet in person. Ninety three percent of communication is non-verbal and a lot can be learned from facial expressions. If you can’t meet in person try video conferncing.
3. Create a Plan and Communicate It
When you are purchasing a big ticket item like software, create a purchase plan with the steps that need to be completed and the timeline. Then communicate the plan to all your vendors. Vendors love working with an organized buyer and are more motivated to give you a better deal because you didn’t waste their time. When you have a target date for the purchase and the vendors all know it, they will work hard to meet your timeline. It also gives the salesperson credibility with their management to give you a better discount.
A trick many companies use in buying software is to wait until the end of the vendor’s year. If you use this technique, make sure you communicate the timeline because the sales teams are very busy at year-end. If you are looking for a sample purchase plan here is a sample analytics software selection process checklist I give to clients.
4. Communicate Your Expectations
There are two schools of thought when it comes to negotiating price. You can let the vendor give you a price or you can tell them what you expect to buy it at. My recommendation is that you lead, but do your homework first. Ask the vendor for list price, but also ask your peers if they have purchased the goods or services you are interested in and what discount level they received. FEIconnect is a great place to go to discuss topics with your peers. Next, determine the discount you would like to get. Make the discount as large as you think would be possible and then make it a little bigger. I always want a better deal than my peers, so ask for a little more and offer something in return like to be a reference in the future or a speaking opportunity at a conference. Make sure you communicate to the vendor the discount and all the unique terms you desire and are offering. Understand that the vendor may come back at a lower discount but if you ask for a large discount early enough, the worst thing they will do is counter.
5. Understand the Vendor’s Needs
The person you are negotiating with has their own needs. Yes, they want to do business with you but they have other motives too. By building rapport and asking the correct questions you will better understand both what they want personally, and what their organization needs. For example, when you buy software the sales person may have some motives you don’t know about. They may get paid more on the software sale than the services or maybe they don’t get paid on future years support fees. When you know this type of information you can get the salesperson to help you to get the best deal. Another example is that if the company is a newer organization or you are purchasing a new product, they recently launched, they may be very motivated to get testimonials. Offering to record a testimonial when you are happy during the negotiation, could help you get a lower price.
6. Keep Open Lines of Communication
As you are negotiating and believe you know which vendor you want to go with, don’t cut off communication with the other vendors, but rather tell them you prefer the other vendor and why. When you communicate this the vendors will often share with you questions to ask the vendor you prefer to ensure you are an educated consumer, or they may lower the price. You can then use the information they provide in your negotiations with your preferred vendor.
The next time you negotiate, keep these six principles in mind and you will negotiate a great deal.
If you would like to learn more from Heather Cole on negotiation skills, contracts, and purchases, register for the 2019 Financial Executive International Leadership Summit in Orlando in May 19-21, 2019.
Heather L Cole is the president of Lodestar Solutions and Heatherzied.