Negotiating As A Science Behind The Art
Updated: Aug 25, 2020
Negotiating and coming out feeling good oftentimes feels like a blue moon event. Now that you know what negotiation entails, you need to know the science behind the art. How do you choose which aspects are up for discussion and which aren’t? What factors should you take into account before putting a certain variable up for discussion?
Known as Tradeable Concessions or Negotiating Variables, these aspects depend heavily on the domain in which you are doing business. That said, we can list out six variables that come up most often in a negotiation.
The most important bit to remember here is that you cannot treat these variables as independent entities and set conditions for negotiation based on a minimum and maximum thresholds. All of these variables are linked to each other, and thus need to come together very precisely in order to make a deal work for you.
Money: Prices, fees, commissions, margins…the monetary aspect is where most discussions eventually head. What is the least amount of money you need to make from this negotiation in order for the deal to work for you? Don’t settle for anything at least 20% higher than that.
Volume: In simple terms, this is ‘how much’ of a service you are expected to deliver or receive. Volume and timelines work very closely together. Some products and services may be cheaper with increasing volumes.
Delivery: Timelines are important in business- what is required today can be irrelevant tomorrow. The when and how of delivery determines how many people you need for handover, follow-up or implementation.
Legalities: Large contracts come with large bundles of legal documents. A contract needs to cover every single aspect of the business. Oftentimes, discussing them, agreeing upon and signing them takes quite some time, based on which delivery needs to be planned.
Terms of payment: Most contracts involve payments made in parts. Each deliverable has a fee associated with it, which may escalate based on the time taken for each aspect. Case in point- inflation makes the cost of infrastructure projects shoot up over time.
Specifications: Known variedly as SLAs, delivery outcomes, etc. specifications make up the bulk of the service and its legalities too. What, where and why make up the specifications quite often. Software services often see quite a bit of negotiation around the specifications of a project.
As you may have noticed, there is no scope for considering any of these aspects independently. When you negotiate each variable separately without linking to other variables, the end result may cause you to lose more than you could cede.
A good way to have a fruitful negotiation is to mathematically model these variables as dependent on each other, and observe how other variables are affected when you change one or two. This way, you know exactly how much wriggle space is available to you, and to the other party so that you both come out of the negotiation feeling like you accomplished something.