The Elements of Negotiation

ELEMENT 26Planned Target

Before entering any negotiation, it's crucial to establish three key parameters: your starting point position, your threshold of pain, and your target. Entering a negotiation without clarity on these aspects is akin to embarking on a journey without knowing your starting point, destination, or estimated arrival time.

As a supplier preparing for negotiation, it's essential to define these three benchmarks. For instance, if your initial proposal to a buyer is $40,000, this becomes your starting point. Your goal might be to close the deal at $38,000, while your threshold of pain, or the lowest price you're willing to accept, could be around $36,000.

Conversely, if you're the buyer in the same negotiation, your perspectives on these parameters will differ. Your starting point would be the supplier's quoted price of $40,000. Your tolerance limit could be influenced by a competing supplier's offer, say $38,000, with your target set at a more favorable $37,000.

Understanding your starting point is vital throughout the negotiation process. This is one of the reasons that team-based negotiation is advantageous. In a team setup, you can designate a member as the “calculator,” responsible for tracking and updating the financial aspects in real-time. This role is especially critical for the negotiation team leader, who must manage multiple facets like strategy, questioning, listening, and more, making it challenging to stay updated on every financial detail.