Successful Negotiation Begins with Surveying the Situation

Think back on a few of the times you’ve done a little negotiating in your personal life. Before you made an offer on a used car, you probably looked up the value on Kelley Blue Book. Before you asked for a break on rent, you probably built a little rapport with your landlord.

When you buy a used couch online, you’re usually just going back and forth on price. But most business deals are way more complex than that. You both want multiple things and would probably be happy with a ton of different outcomes.That’s great news because it means there are a ton of paths leading to some version of a win-win. Surveying the situation helps reveal those paths. And the more paths you uncover, the greater the odds of finding one that works for both parties.

The biggest reason you review the situation is that knowledge is power when you’re negotiating. It arms you with everything you need to give a little, but also get a little. Remember, you’re trying to arrive at a mutual agreement. So, gaining an intimate knowledge of the landscape helps you dial in on the overlap that gets this thing done. You see that on display when Marcus visited a company in California that makes outdoor furniture. He loved their gazebos, but was bumped a little bit by all the organizational chaos and their leadership style. That didn’t mean it was time to walk away, though. It meant it was time to review the situation and see if they could work something out. He did a little listening and realized they were interested in financing, but also mentorship. So, Marcus decided to do a little mentoring. He gave them some leadership tips, ideas for improving morale, and a template for improving margins. Then he told them that if they could incorporate some of those tips within the next three weeks, he’d be comfortable enough to follow up with the second thing they wanted: financing. They struck a deal, all because Marcus was able to review the situation and find that win-win.

The most successful negotiations begin with a pretty thorough preparation phase. One great thing to identify is the zone of possible agreement, sometimes called your Z.O.P.A. This means you’ve carefully identified your best-case scenario, as well as less ideal, but still acceptable outcomes. Then you take a crack at doing the same for whoever you’re negotiating with so you get an idea of what they’ll ask for and how you’ll respond. You’ll also want to identify your best alternative to a negotiated agreement, often called your B.A.T.N.A. In other words, make sure you know all your options. This means a healthy dose of Marcus’ “Know your numbers.” If you’re hoping to buy 10,000 chairs for your event planning company, what other places can you approach about this? Are there a ton? Or is there only one other place, they’re in Tokyo, and shipping costs are crazy. Identifying your next best option teaches you a lot about how much you’re willing to give on certain things. FOX did a great job of that when they struck a deal with Disney in the example below.

This is when your talks have officially begun. You’ll want to pay special attention to three areas of communication, because they’re all equally important.

• • Actively Listen to Their Position – They seem really excited, but are also weighing another offer. They mention living about an hour away from your office, which they aren’t too worried about, but you can tell it’s a factor. You’re writing things down and really making them feel heard. You don’t want to chase them, but are surveying the situation, reading their body language, and can tell you both want to make this work.

• Clarifying – You paraphrase their position to make sure you understand them correctly, and by doing that, uncover an important misunderstanding. You have two offices and their role would actually be in a suburb where the rent is much cheaper. That means their money would go further and their commute would be drastically less. Is that enough to reach an agreement? Would another $1,000 in salary do the trick? How about a work-from-home day? You don’t need to figure that out until you reach the next phase where you’re actually problem solving. But by communicating, you already see plenty of ways for this to come together.

Do you remember Marcus’ “If you don’t evolve, you die?” Think of the problem-solving phase exactly like that. When you come in with a mindset of flexibility, you give yourself the wiggle room you need to keep the deal alive. We saw this in the AT&T merger with Time Warner. The government initially tried to block the merger because they thought it would mean less choices for consumers and higher prices. But AT&T and Time Warner did a great job surveying the situation. They realized the Justice Department didn’t totally understand the TV industry, so they explained that they weren’t actually direct competitors. The whole point of the merger was to merge Time Warner’s content with AT&T’s distribution so they could contend with streaming services like Hulu and Netflix. This would actually increase competition. So, the $81 billion merger ended up going through because of a stellar job clarifying and problem solving. If you review the situation carefully in your own negotiations, will you spot a way to hurdle over obstacles?

You always hear Marcus say, “When you shake someone’s hand it’s gotta mean something.” So, make sure your agreement holds both parties accountable. Are there certain deadlines you need to put in writing? What does the dismount look like if someone isn’t holding up their end of the bargain? Do they need oversight so you can keep surveying the situation even after you sign the deal?

There’s a great book called “Thinking, Fast and Slow” by psychologist Daniel Kahneman in which he describes a negotiation technique called “anchoring.” The gist is that whoever says the first number subconsciously informs where you’ll land. For example, let’s say someone walks into your apartment. They like your rug and say, “Hey, would you ever consider selling that thing?” If you mention any number in your response, you’re creating an expectation.

You’ve probably seen those late-night commercials that say, “Act now while supplies last!” That’s a familiar refrain because it’s rooted in human psychology. Urgency drives action. People don’t want to miss out. You can bring this concept to your negotiations by putting a time frame on your offer. You don’t want to put anyone on the spot, but it’s okay to throw a reasonable deadline out there. If you don’t, you give them an opportunity to go out, play the field, and shop for a better deal. A deadline also keeps them engaged so you can continue to review the situation. Have you ever texted someone and three days later you still haven’t heard back? You start to wonder if they’ve lost interest. In business, that’s actually a negotiating tactic. People can slow play your offer to feign disinterest and hope you’ll come back with something better. So, make sure you put a time limit on your offer to keep you both moving towards victory.

This allows you to review the situation during the execution phase. It’s an especially great tool if you’re dealing with a huge unknown. Let’s say you own a regional restaurant chain and are hoping to open a new location just in time for summer. You meet with a few contractors you like, but really hit it off with one in particular.

Did you ever ask your mom if you could stay out late? You probably wanted to see if she was in a good mood first. You wanted to make sure all your chores were done. You even looked ahead to the following morning to make sure you took out the trash bins in advance. All of this context was the backdrop for negotiating your curfew. Your ability to speak to all of those factors meant the difference between staying out late and getting stuck at home. That’s what it is to review the situation when you’re negotiating business deals. When you know all the background and see all the angles, your company finds those win-wins – and gets to stay out until midnight.