Negotiating Your Next Sale: Finding the Best Compromise

This article is a reprint of Wise Bread's contribution to OPEN Forum from American Express -- where small business owners can get advice from experts and share tips with each other.

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Negotiation has been described as the art of compromise: if two people, or businesses, are negotiating, it's very rare that they can both walk away with everything they want. Instead, it's a matter of coming to a compromise that hopefully gives both parties at least something of what they wanted. When you're negotiating a sale, the situation can require even more compromise. Your business likely relies on sales, putting you in the mindset that you'll do anything to win over your customers, but you have to make sure that each sale still offers you enough margin to turn a profit.

To come to a compromise, you have to know your priorities going in. When dealing with clients or customers, it's easy to assume that your first priority is making the sale. Depending on the situation, however, your priorities may be more specific than that.

Setting Your Priorities in Negotiating

David Zahn has taught negotiation skills to both consumer packaged goods manufacturers and retailers for more than twenty years. When he trains a new negotiator, Zahn focuses on prioritizing important issues.

I emphasize what the goal or objective of the negotiation is — what one must have versus what would be nice to have. Rather than focus on the mechanics of how to negotiate when face to face and what you expect to receive (price discount, more service, faster delivery, etc.), the negotiation is based on aligning one’s needs with what the other party has available to offer.

If you absolutely must sell your product for no less than a certain amount in order to turn a profit, that point must be balanced with the needs of your customer, who may only be able to afford to work with you at a certain price point. Zahn says:

Compromises are determined by what one wants, but does not necessarily need to have for the successful outcome. Prioritization is based on recognizing the value of the points to be negotiated (what is it worth to one party may be inversely proportional to what it is worth to someone else).

In addition to recognizing the difference between what you need to walk away from the negotiation with and what you want to have in the end, there are other factors that you need to recognize, in order to help you keep your priorities straight, according to the training Zahn offers.

I help [new negotiators] distinguish between what is urgent (time sensitive) and what is critical (must have). Often, negotiators will confuse what has a tight deadline with what is essential. The time pressure to get things done now can often distract negotiators into working on things that must be decided now versus what is vital to success. Urgent is not always critical.

Creating a Win-Win Situation

A compromise doesn't have to be a situation where one side loses. If you can bring your needs into alignment with what your fellow negotiator can offer, as Zahn suggests, it is possible to create a win-win compromise. That approach can require thinking out the techniques you use to come to an agreement on price, as well as the other factors in your negotiations with clients.

1. Explain your position. If you've laid out options that you feel will benefit both your business and the business you're negotiating with, you may need to explain the benefits you see. The folks on the other side of the table may not immediately see the benefits you recognize.

2. Offer a variety of options. "Take it or leave it" deals can end with someone walking away from the negotiation fairly quickly. If you can offer a few different options, as well as encourage your fellow negotiator to suggest some solutions, you can keep the negotiation going — and you may find a better deal than the one you started with.

3. Find comparable situations. It's crucial to have some background on what's considered equitable in your industry. You may be negotiating with a customer or vendor who is unfamiliar with the realities of your industry and why you do things the way you do. Offer them more information to help them understand your negotiations.

Additionally, it's important to go in with a mindset that you're looking for a balanced solution, rather than to find a way to "beat" your customer. If you can find a way to benefit both sides with your compromise, you'll more than satisfy your clients — you likely will convince them to keep bringing their business to your company.

It's worth taking a look at what your client needs and wants, besides a lower price. You may be able to negotiate other points of your sale in order to make it a win for both sides. Price isn't always the chief consideration after all: your client may simply need delivery by a specific date or longer payment terms in order to make a lower price a want, rather than a need. If you take a more confrontational approach to working with clients and customers, you may have difficulty learning about their needs and wants, and what you can do to satisfy them.

Recognizing a Good Compromise

When you finalize a negotiation, you'll want to evaluate it and determine if you've really worked out the best compromise you could have gotten. But second-guessing isn't necessary. As Zahn says, you can recognize a good compromise by whether you're pleased with the results.

There is no outside arbiter of what is a good outcome or compromise. No one keeps score. If the negotiator feels they achieved what they set out to do, it is a good compromise.

There is one indicator, beyond your own satisfaction, that is worth watching for when you're negotiating with clients and customers. If you're receiving repeat business from a company or an individual, they likely feel good about the compromise, as well. That shows that not only have you negotiated a good deal for your own business, but you've come to the best compromise for both you and your customers.