Every business requires that there are two counterparties negotiating an exchange. Just think about it; this exchange will only happen if they both believe they have had the value they wanted. But even more, they want to believe that the other party has not taken advantage of them.
How is it possible?
How is it possible that everyone earns even when each party is convinced that it is earning at the expense of the other. This brings us to the science of trading; a skill that every person who wants to realize their wealth must have.
Negotiating does not mean succeeding in imposing. Indeed, faulting your interlocutor or succeeding in convincing him to accept something that he more or less openly refuses is not a good idea. Your victory will, of course, be short-term, but it may cost you dearly down the road.
Sticking to your positions by saying from the start that you cannot do better, without even listening to the opposing party’s arguments and / or needs, would lead to an imbalance in the conclusion of the negotiation.
Learning to negotiate is a necessary step in creating your financial freedom. In this article, we take a detailed look at the 6 components of effective negotiation.
Let’s see now how to trade in 6 simple steps:
1. Consider the other party’s problems
Consider the counterpart’s problems as a necessary path to solving your problems. You have to put yourself in the other person’s shoes and see things from their own point of view. It is not easy to put yourself in the other person’s shoes and it is actually not a natural thing for people to do. But overcoming your self-centeredness is a necessary step to negotiate well.
2. Maintain a balance between economic interest and other interests
If you only pay attention to the economic aspect, you will turn a deal into a competition. By using aggressive trading techniques to bargain the price, you run the risk of missing out on more profitable deals that would have been found with more effective trading. Therefore, always consider all types of interests at stake: emotional, psychological, and social status of both individuals and any groups involved in the negotiation.
3. Focus on interests and not positions
There are 3 elements at play in a negotiation:
- Problems to which a solution must be found in agreement
- Positions that represent the views of the parties
- Interests which are the basic needs of the parties
People naturally focus on positions; their positions mainly. We think that our interests are incompatible with those of the other and therefore we come to conflict to defend them. When we focus on our own positions, we are prevented from seeing how there was compatibility on mutual problems.
It is therefore necessary to focus on interests because these allow us to find solutions that satisfy all parties.
4. Don’t necessarily seek common ground
Most people think that finding a common ground and overcoming the differences that divide us, is an easy means to find an agreement. But things are different because generally the source of the value that can be found in a good agreement lies in the differences between the two parties.
In other words, by respecting the different needs and objectives, a more complex solution can be created that satisfies them all, instead of trying to find a solution that is good for everyone which, usually, does not exist.
5. Take into account the BATNAs
The BATNAs ( Best Alternative To a Negotiated Agreement) describe what happens if the agreement does not come true. It is very important for those who negotiate to keep in mind a good alternative to the agreement (eg: closing the negotiation with a stalemate) because this allows you to better manage conflicts. If you want to sell at your price, it is better to have another buyer already than to point a gun to the head of your interlocutor.
6. Consider subjective perceptions and errors
A good negotiator knows that there are prejudices and subjective perceptions that distort reality, as scientifically demonstrated by many experiments in the psychology of negotiation. Understanding that these distortions exist is essential to manage the negotiation without being deceived by subjectivities and to guide objectively in the direction we want.
As you have seen, the art of negotiation is a science, but it can always be useful, not just in business. Therefore, knowing effective and (I would say) “professional” negotiation methods can give you a huge advantage even in everyday life.
The art of negotiation isn’t just for salespeople. From employment contracts, to remuneration, hours of presence, objectives, deadlines, subcontracting etc., we often have to negotiate both in our personal and professional lives. If you want to create your own financial freedom, learn to negotiate.