Negotiation basics: ask yourself the right questions before and during negotiations and you'll be better prepared for any outcome.

Whether we recognize it or not, we continually engage in different forms of negotiation. Some are obvious circumstances, such as the purchase of a new car. Others are less obviously interpreted as negotiations, such as discussing an extension on a project with the boss.

Negotiating is a communication process wherein two or more parties bargain resources and seek to reach an agreement for mutual benefit. It's important to realize that the resources include tangible ones, like money, and intangible ones, such as guarantees.

We need to be aware of the negotiation process because there are techniques that can help improve the outcome and hasten a conclusion. By asking yourself a number of questions you can improve your approach to the negotiation process and get more from it.

Is there a plan?

It's important to have a strategy before commencing any negotiation. There's a logical flow to the process and it needs to be appreciated. A plan should establish the parameters within which you're willing to negotiate. For instance, it might include the name of companies with which you will do business, and terms under which the contract will operate. Importantly, identify the 'must haves' and the 'need to haves' in your plan. The 'must haves' form a basis of the plan while the 'need to haves' can be bargained advantageously. It's generally sound policy to defer major sticking points until the end of your discussions. Start with small, non-contentious issues and gain a sense of commitment from the person/organization with which you are negotiating. Both parties will have more time and effort invested by the later stages when the more controversial issues must be resolved.

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Am I focused on the goal?

Sometimes we can get wrapped up in the moment and forget the big picture, or make decisions based on gut feelings. Understand the considerable influence that personality and natural inclinations have in a transaction. Take a moment during negotiations and do a reality check. Ensure that objectives are still in focus and that your own prejudices aren't taking control of the situation.

What is the deal?

To negotiate effectively you have to understand the deal and, again, remain focused on the ultimate goals. So often the originally envisioned agreement has changed to such an extent that it's now unrecognizable. The logic that made the deal attractive has become convoluted or no longer exists. This often happens during lengthy negotiations, when a variety of alternative approaches come into play. Seldom do the alternatives provide the same functionality as the original deal, but it can be difficult to place a dollar value on the disparities. At some point, the disparities outweigh the potential savings and the deal no longer has merit. Stay aligned with your objectives.

Do I have enough information?

The best deals are the ones where all parties benefit. For this to occur, one needs to understand the motivations of the other party. Just as important, recognize that price is neither the sole, nor most important driver in most deals.

I was recently involved in a real estate transaction. Discussions with the vendor brought to light that he was building a new house and was uncertain of the completion date. To complicate matters, his wife was due to give birth in a month. He wanted to sell his current residence and not subject his family to multiple moves, in the event that his house wasn't completed on time. While he wanted a fair price for his house, timing was his driving motivation. I was able to strike a deal based on my flexibility about a possession date. Obtain enough information to know not only what's important to you, but also what's important to the other party.

Do I need professional assistance?

No one is an expert in every discipline. One consistent characteristic among professional negotiators is the quality of assistance they enlist. Accountants, lawyers, and a variety of consultants are used as necessary. Seek the same counseling based on your, and their, abilities, and the complexity of the deal. Negotiating for an appliance from a major retailer requires little assistance, but complex negotiations, like the purchase of a new business, shouldn't be contemplated without professional opinions from other professional disciplines.

Are all parties approaching the deal with a creative mindset?

Let's face it, the price of a good or service is always important. But what happens when the two parties can't come to an agreement using price as the sole lever? Remain open to other options and seek alternate solutions. What else in the deal has a perceived value? Interest rates, timing of payments, options, etc., are all possible levers to provide closure. At some point, there will be enough of an inducement from these factors to complete a transaction.

When do I walk away?

If the points that were identified as 'must haves' aren't there, walk away. The next time there's an opportunity for negotiating, map out a strategy. Start with an understanding of objectives. Take the time to perform an appropriate amount of research. If the transaction is complicated or has legal ramifications, seek professional assistance. Identify the components of the deal that are 'must haves' and separate them from the 'nice to haves.' Approach the negotiation in a creative manner and look for alternative ways to close the deal. Strive to reach an agreement, but recognize when you need to walk away. Remember, there will always be another deal.

By Robert Lepine, CMA

Robert Lepine, MBA, CMA, is a manager in Supply Services at Canadian Pacific Railway.