Deal or no deal: Your preflight checklist for successful negotiations

This month, my buddy and colleague Chris Yount is taking the column.  

He is an entrepreneur and mentor with me, helping startups, SMEs—that’s business lingo for “small to medium enterprises”—and especially university startups gain some perspective and hopefully some traction. He has expertise in many areas including manufacturing, leadership, turnarounds and strategy. He’s also a columnist for Family Business Magazine. Chris has some great insights from selling a family business years ago. He’s great guy, and also a pretty darn good skier! Check it out. —Matt Westfield 

Whether you are involved in the business world or not, negotiations are all around you. Getting the landlord to fix the sink in your apartment, obtaining a raise at work, deciding what movie to stream with your significant other—these are all negotiations, even if you don’t think of them as such. 

Chance favors the prepared. Negotiations are no different. A little work ahead of time will do wonders for your eventual outcome. I will walk you through a preflight checklist of things you should consider before you enter any negotiation. 

Before we begin, a disclaimer/word of caution: Negotiating tactics are ripe with moral or ethical quandaries. From not disclosing a material fact, to exaggerations, to white lies, to out-and-out fraud, there are many approaches that will push your principles. It is helpful to firmly consider where your line is—and never cross it. Where you position your line is a personal matter, and I am not advocating what is right for you, but don’t let the heat of the battle allow you to wander over your own line. 

Know what you want 

Science-fiction writer Arthur D. Hlavaty once said, “The first secret of getting what you want, is knowing what you want.” While it may sound basic, you would be surprised to find out how many people enter a negotiation without really examining what they want out of it.  

Trying to get the cheapest price is not really a defensible position. What price is fair in your mind? What things can you do without? Are there terms of the negotiation you care the most about? What do you care the least about getting? By evaluating your needs versus your wants objectively beforehand, you are better able to steer the discussion toward your ultimate goal. 

Know what they want 

This is the flip side of the same coin. Just arguing vehemently for your position is fine, but you will be much more effective if you have really listened to understand the goals of your negotiating partner. It is surprising how often a true win-win solution can be achieved just by clearly understanding what is meaningful to the other party.  

The threat and value of asymmetric information 

“Asymmetric information” is when one party in a transaction has more information than the other. Both parties will typically have some pieces of information the other is lacking. You know the minimum salary you are willing to accept at a new job, but the hiring manager knows how much they pay others in this same position. Both sides are trying to uncover what they don’t know to improve their bargaining position. 

To the best of your ability, understand what facts you know that the other side does not know. Will it help you or hurt you to make sure they are aware of this information? This is where some of the moral considerations mentioned earlier will come into play.  

Try to get a feel for what information they have that you don’t have. Is there a way to get that information or validate it with a third party? To loosely quote Donald Rumsfeld, “There are known unknowns and unknown unknowns.” Try to decrease the unknowns so you can avoid unwanted surprises.  

Care the least; get the most 

Quite often, the party that is the least interested in the negotiation is in a superior bargaining position. The ability to walk away is one of the most powerful tools you can bring to bear in a negotiation. Of course, you don’t want to have your bluff called and ruin your chances at a great deal. 

The best way to balance this threat is to first consider your BATNA (“best alternative to negotiated agreement”). If these talks break down, what alternatives would you pursue? By knowing your next-best alternative, you now know when this current deal is no longer the best fit for your needs.  

Finite vs. infinite game 

Lastly, you should consider the nature of this relationship. Is this a finite game, where you will never see this person again? Or is this an ongoing relationship where you will want other negotiations to go well in the future? 

You often see travelers screaming loudly at airline personnel, with little concern about hurting their feelings. This is a finite game. This traveler likely will never see this airline employee again, so they use tactics that can be very aggressive to get what they want in that moment.  

If you are asking your boss for a raise, you are in an infinite game that will be played again and again. If you push too hard, your boss might not be open to giving you the time off you request later, or might withhold better assignments in the future. With infinite games, you need to consider what you want now, but also give thought to what you may want later in this relationship, too.  

Putting it all together 

Let’s go through the checklist for a fictional negotiation. In this scenario, let’s say you are shopping for a used car. 

• Know what you want: Make a list of must-have features like all-wheel drive; nice-to-have features like a sunroof, maximum number of miles, how many seats, etc.; what you want to spend; and the maximum amount of money you can spend. 

• Know what they want: The car dealership certainly wants to make a sale for the highest price possible, but there are other things they may want, too. Are they interested in trade-ins, financing, servicing contracts, whether you are a repeat customer, etc.? 

• Asymmetric information: Do as much research as possible about the models of car you are considering. Bring in Kelly Blue Book pricing and car-loan offers from a local credit union. Read about similar cars available from competing car dealers. Also think through what information you have that is worth disclosing, and what information you will keep to yourself. Disclosing whether you are a schoolteacher or CEO will likely be information that affects the negotiation process. 

• Care the least: This is where your BATNA really comes in. Know what alternative cars you can buy, and really know where your line is. 

• Finite or infinite game: This is likely a finite game, but you may ask about maintenance programs or other ways of extending the relationship for better terms. 

Negotiations can have a bad reputation, but by approaching them methodically, you will be better prepared to get what you want—and help the other side achieve an excellent outcome as well. Win-wins are possible with a little preparation.