Everything in this world is negotiable, which is why knowing the rules of negotiation is crucial to your financial success. It doesn’t matter whether it’s a salary negotiation, contract negotiation or used car negotiation, the same rules apply.
Not knowing the rules, however, not only labels you as unsophisticated, but it sets you up to be taken advantage of as well. By adhering to the following five rules, you will be able to consistently and successfully navigate your way through anything.
1. Know Your Bottom-Line
Before beginning the process, it is essential that you determine both your target number and your bottom-line tolerance limit. These two numbers will serve as a “lighthouse of reason” to keep you on course during your negotiations. If you fail to firmly establish these figures, you run the very real risk of having buyer’s remorse at the end of the negotiations.
2. Have Other Party Make the First Offer
The goal is for your opponent to put the first offer on the table when possible. The reason for this is simple. If your opponent comes in with an offer that nets you more money than your initial offer would have, you’ve earned money before the negotiations are even underway. Take advantage of a potential windfall by having your opponent bid first.
3. Respect the Process
People unfamiliar with the process often make the mistake of trying to take shortcuts by putting their target number out on the table. The problem is that no matter what you say, your opponent will think this is your starting point, not your ending number. The expected practice is to open high/low and move off of that initial number and any “talk” to the contrary is considered bluffing. The assumption is that the deal will be struck at the midpoint of the two opening numbers after a series of offers and counter-offers. Attempts to circumvent or streamline this process are one of the most common reasons negotiations fail. Since there’s no getting around the dance, make sure to bring your dancing shoes.
4. Don’t Break the Cardinal Rule
What is the cardinal rule, you ask? Don’t bid against yourself. This means that once you put a number on the table, it is your opponent’s turn to counter that number. The easiest way to determine whether someone is a skilled or rookie negotiator is by testing whether they will move without requiring the other side to counter. It sounds like this: “That’s a ridiculously low number. I’m not responding to that. You need to come up with something better.” Rookies fall for it every time – and skilled negotiators secretly delight when they increase their bid. Instead, calmly explain that you aren’t going to bid against yourself and that it is their move. You will instantly gain respect as a worthy negotiator.
5. Know When to Walk Away
Negotiations can be everything from exciting, confrontational and anxiety-producing to lack-luster and unproductive. There is no way to predict its direction and people easily get caught up in the moment. Car dealers know that investing a lot of time negotiating translates to being invested in closing the deal. To avoid this trap, you must be ready to walk away from the table when you reach your predetermined tolerance number. This powerful strategy is unlike all others because it strikes cold fear into your opponent’s heart. Trust that and know that many deals are struck after multiple sessions.
The simple fact is that the better you can negotiate, the more successful you will be in all areas of your life. If you follow the above rules, you can walk away with confidence knowing you possess the control to ensure that any deal you strike is on your terms.
