Magazine article Journal of Property Management

The New (and Improved) Art of Negotiation

Magazine article Journal of Property Management

The New (and Improved) Art of Negotiation

Article excerpt

Negotiating is unpleasant for some, a necessary duty for others, and fun for a chosen few. To excel at negotiating, learn to enjoy the give and take of the experience and the thrill of exceeding your opponent's expectations.

By exceeding expectations, you are more likely to reach agreement, and money is made by executing agreements -- not by performing negotiations.

Negotiation is definitely an art, but is also a science. For this reason, even if you aren't one of the "chosen few" who naturally excel at negotiating, there is a lot you can do to improve your technique.

* First, you should maximize resources. Itemize the resources you have on hand, (i.e. time, cash flow, real property inventory, human resources), and then plan how these can be put to the best possible use.

* Second, minimize opportunity costs. Opportunity cost is the price you pay for not attaining your best option. To minimize this cost, you must consider all your options. Obviously, you would like to get your best option. Don't forget your second choice, however.

Another way to minimize opportunity cost is to develop more and better options. Don't stop at two plans. The difference between the "best" plan and the "other" plan may be more than the difference between plan one and plan two if you have five plans.

Focusing on these two principles should help you make the most of your assets, while at the same time protecting yourself against agreements you should reject.

Consider the Consequences

Before every negotiation, ask yourself, "What happens if I fail to reach an agreement?" and "What is my next best option?" Consider both the benefits of agreement as well as the risks of failing to reach that agreement. In most cases, the worst possible result would be to become deadlocked or to fully capitulate and meet all of your opponent's demands.

Ask yourself how badly you want the agreement and what alternatives might influence the other side. In addition, consider your financial strengths and your willingness to take risks in deciding your course of action.

If you can't take losing the deal, consider a concession. If you can't fully meet the other party's demands and remain solvent, then you need an agreement -- but perhaps not the agreement offered.

Verbalizing Your Analysis

When put forth in a fair manner, a verbal analysis can often motivate parties to reach an agreement. For example, suppose you are negotiating with a tenant for a lease renewal. Start by sitting down with the tenant and going through step-by-step what will happen to both the tenant and to you should you fail to reach an agreement:

"First, I will be out of a tenant and probably at least a few months' rent until I can re-rent. I will also have to pay the price to re-rent as well as possible redecorating expenses.

"On the other hand, if you leave, you will have to spend time and money to find another location that may not be as desirable and may or may not be as economical. You will also have to pay moving expenses, including the cost of a new phone system, signs, and stationery, as well as the cost to modify your new space. Finally you will have to spend money to notify people of the new location."

After you have run through this list, turn to them again and ask, "Now, what can we do to reach an agreement?"

Planning for Negotiation

To achieve your goals, you will need to plan for the negotiation. A good plan can assist you in creating next best options; keep you from making bad, uninformed decisions; and educate you on your opposition's options as well.

* Determine the players. Will you send a single negotiator or a team? A single negotiator can prevent dissention, can assume total responsibility, and can make on-the-spot decisions. A team can be helpful by bringing in different technical backgrounds, pooling judgment, and presenting a large opposition. …

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