Last March, we offered up seven ideas to improve your negotiation skills. Given that this is such an important and ongoing issue that contractors face, we're back with another set of tips to help you carve out win-win type of deals with your customers.
1. Be open and honest: This is pretty much rule No. 1 in any negotiation, whether contractor-specific or not. There's no better way to put a business relationship in jeopardy than by being less than straightforward. It tends to come back and bite you... not to mention help perpetuate the myth that our industry can be shady at times. Don't be that contractor.
2. Eat that frog: Based on the Mark Twain quote, the frog is your most important task, and it's easy to put things off and procrastinate to the detriment of negotiations. For instance, you're going back and forth with a customer on pricing. Finally, an agreement is struck, and you meet up to ink the deal. Suddenly, your customer mentions an addition they want to include. Your first inclination is to tell them you'll go run the numbers and get back to them so you can avoid the discomfort of even more negotiations. But a different approach would be: take a moment to explain (in a professional manner) how challenging this late request is, then run some estimates. Explain the cost impact and that you will make an allowance for it until full pricing is available. If they have any questions and concerns, address them immediately. No matter how uncomfortable it may seem, it's vital to get a decision from them now and sign the deal. It's a win-win, as opposed to deferring the decision, which can lead to second guessing.
3. Accept compromise: Some say a successful negotiation is one in which both parties walk away disappointed. Think of it as giving up something you want in order to get something you want even more. You better get used to this one if you want to excel in negotiations, because a set of negotiations that doesn't involve compromise is like a unicorn.
4. Commit to Finalizing the Deal: It's easy to drag out negotiations by deferring details to later meetings, or going back and forth on certain issues, but really, the longer the process takes, the less likely it is the deal will come to fruition, so who is benefiting from a drawn-out negotiation? Make a commitment to finalize the deal no matter what it takes, and you'll likely find your business growing as a result.
5. Don't Negotiate... Build Trust: Sometimes, your dealings with customers are not about how much you can get from them or how much you have to give up to close the deal. You should know what you need to charge for your services to generate margins to cover your operating costs and achieve your target profit, and as long as you make it clear that you won't charge more or less than that, it takes money out of the equation. Instead, your deal-closing tactics should centre on building trust and demonstrating that you operate with integrity. Show a genuine interest in understanding the underlying issues your customers are trying to solve with this project and offer creative solutions to solve those issues that work within their budget, and you're more likely to get the job. Structure your processes so that at key decision moments the customer does not feel threatened, but rather in control and supported by an organized system. Negotiations can sometimes feel more like a tug-of-war than a sense of working together to achieve a goal.
6. Don't Budge on Labour Rate or Time: Never, ever negotiate your labour rate or the amount of time a project will take to complete. Doing so is an easy way to ensure your quality, reputation and stress levels will suffer. Be honest with your customers about the situation, and remain calm and understand that they are not trying to nickel and dime you, but rather they only have so big a budget and are simply trying to get the most bang for their buck. Here is where you need to educate customers about what is or is not possible for X amount of dollars and how long a project of this size will realistically take. You're the professional that's been down this road countless times, so explain that the customer can only benefit from leveraging that experience instead of second guessing it.