We are back to share with you our best suggestions for negotiating. Part 3 of our guide discusses negotiation limits! Check out parts 1 and 2 of our guide before continuing.
Your Limit Before Negotiation
In the third part of this negotiation guide, one of the most important aspects of negotiating is to set your limits before the negotiation. Think of this as your walk-away point. This is the most you will pay if you are buying something. This is the least you will accept if you are selling something. If you are considering taking a job offer, it’s the lowest offer you will take for doing this job. The reason this walk-away number is so important is that it’s the root of all your strength. Having a walk-away point gives you something to push back from your back being against a wall. And if you know you’ll walk away at a certain point, it gives you power, because the only power you have in a negotiation is the power to walk away.
Put another way, if you don’t have the power to walk away, and the other person knows it, you have no power at all. Most people are fine with the idea of setting a limit. What tends to be challenging for people, is then, sticking to it.
There are two ways to look at this: the logical side and the emotional side.
On the logical side, why would you do a job but be paid less than you think you’re worth? On the emotional side, your limit is a promise to yourself.
If you go beyond your limit what you’re saying to yourself is that you don’t mean it. Essentially, you can’t trust your own word to yourself. This is an important thing to consider, and we encourage you to honor your promises to yourself. But it also means that you need to set your limit very carefully. You need to make sure that you will walk away if your limit is not met. The other side of this is when you truly have a limit, the other person can feel it. And having a limit means you are acknowledging to yourself that you aren’t in scarcity. There are other job opportunities.
It’s worth saying however that you never start a negotiation at your limit. More about that next.
Negotiation Preparation
You would never want to “wing it” when it comes to negotiation. Important negotiation tip: preparation and practice are key. Before you negotiate, first do a negotiation analysis. This is when you do all your pre-planning, assessing each side’s interests, determining what your and their walkaway point is, imagining possible agreements, factoring in personality and culture, thinking through moves and possible countermoves, and considering what potential hard questions the other person could pose.
Negotiation Guide: Basic Questions to Form Your Negotiation Analysis:
- To begin with, what outcomes are you seeking through this negotiation? What outcomes might the other person be seeking? On a basic level, what do you want?
- Secondly, what are my strengths—values, skills, and assets—in this negotiation?
- What are my weaknesses and vulnerabilities in this negotiation?
- Why is the other party negotiating with me? What do I have that they need?
- What is my Best Alternative To a Negotiated Agreement, or BATNA? What might their BATNA be?
- What is my aspiration point in the negotiation—the ambitious, but not outrageous, goal that I’d like to reach? What might their aspiration point be? This is what you wish would happen.
- What are the other side’s interests? How important might each issue be to them?
- What is my “walk away” point? What do I think theirs might be?
- What’s my relationship history with the other party? How might our past relationship affect current talks?
- Are there cultural differences that we should prepare for?
- Who are my competitors for this deal? How do our relative advantages and disadvantages compare?
- What objective benchmarks, criteria, information, facts, and/or precedents support my preferred position?
- Finally, what are the hard questions that the other side could pose to you? (After listing these hard questions, go through them and come up with answers.)
Answering these questions will give you a handle on the conversation you’re about to have and help you outline your goals for the negotiation.
Opening Offer
We’ve discussed the first thing you need to know: your limit. But you also need to know your opening offer. Of course, in some job situations, they give this opening offer. There are times, when speaking with a recruiter, that they may ask you your range, and there are times when it is appropriate to tell them. One of those times is when you are both trying to determine if the role is even at the appropriate level for you. That said, in many more situations, when you are interviewing and if they were to ask what you are looking to make, I would consider deferring to them and saying, “I would prefer to hear the range that you are paying for this role.”
The opening offer is the first specific statement of what you’re looking for in a negotiation. After you’ve set your goals for the negotiation, you can consider your opening offer. For example, in a job interview, the opening offer is the salary you’re seeking. Don’t look for any hard-and-fast rules or magic formulas. To determine your opening offer, you should draw heavily on the goals and limits you set and the information you’ve gathered while preparing for the negotiation.
Your opening offer should be higher than the goals you’ve set for yourself. But it shouldn’t be so outrageously high as to be off-putting to the other side or make you look foolish or inexperienced.
Keep in mind that we aren’t suggesting you always make the opening offer but rather that you should know what this number is for you.
Here are some important aspects of the opening offer:
Hardly anyone accepts the first offer. So, if you do put a number out there first, make sure there is room for you to be satisfied even if you choose to maneuver lower.
Ideally, your offer should be at or near what you think is the other party’s BATNA (best alternative to a negotiated offer), close to the most that your buyer will pay, or the least your seller will accept.
Enjoying Part 3 on Negotiation Limits?
Enjoying parts 1, 2, and 3 of our negotiation guide? Then join us next in part 4 the final installment of our series where we will discuss Salary Negotiation specifically.