Nobody’s born an expert negotiator. But negotiation is coming for you if you’re in the world of small businesses, startups or daydreaming about that fantastic entrepreneurial idea over your morning coffee.
What is negotiation
Negotiation is a two-sided (sometimes multi-sided) conversation where each person aims to walk away feeling they got a fair deal. It's not just about getting the best deal for yourself; it's about finding that sweet spot where you and the other person think, 'Yep, that's a win!'
Negotiation can pop up between:
- Business owners and suppliers: “Can we get a discount if we order in bulk?”
- Startups and investors: “What percentage of equity are you looking for?”
- Employers and potential employees: “Can I get an extra day off instead of that overtime?”
- Entrepreneurs and service providers: “Can I get a discount for my new self-funded startup?”
You might need to negotiate even before your business sees the light of day. Think about hashing out a business plan with potential partners. And once your business is up and running? Negotiations are everywhere, from vendor contracts to deciding on the perfect logo.
In my 27 years as an attorney and 15 years as an entrepreneur, I’ve honed my negotiation skills through thousands of negotiations, from everyday disputes to multimillion-dollar deals. I always begin with a clear strategy but remain adaptable, even post-agreement. The right approach keeps you composed, lets you tackle challenges directly, and ensures you make beneficial decisions. It’s all about striking a balance, listening, and sometimes, making a few concessions to reach a solution that makes both sides smile. This guide shares the wisdom and techniques I’ve learned about negotiating the best deal.
We won't ask for secrets or specifics.
Negotiation: Bargain Like a Boss
- Expand your view of leverage. Leverage isn’t just about having a solid fallback option (BATNA). It also involves recognizing unique benefits and values you can bring into a negotiation. Before any negotiation, list your BATNAs and any special attributes, resources, or connections you possess that can enhance your negotiating position.
- Link your negotiations strategically. Sometimes, negotiations are interconnected. A decision or agreement in one negotiation can influence outcomes in another. Map out all related negotiations and consider how concessions in one area might lead to advantages in another.
- Master timing and sequencing. The order in which you present information and the timing of your negotiation moves can significantly influence the outcome. Plan the flow of your negotiation. Decide which points to bring up first and which issues might be better left for later.
- Embrace innovative negotiation processes. Traditional negotiation tactics might not always be practical. New and innovative approaches can offer unexpected solutions. Regularly update yourself with the latest negotiation techniques and strategies. Don’t be afraid to try something new if traditional methods aren’t working.
- Practice active listening. This means fully concentrating, understanding, and responding to the other party’s words rather than passively hearing them. In your next negotiation, take notes while the other party speaks and repeat key points to them to ensure you’ve understood correctly.
- Be flexible. Being adaptable with your solutions and not rigid with your demands can lead to more fruitful outcomes. Always enter negotiations with multiple solutions or outcomes in mind. This way, you can pivot when necessary.
- Concessions are tactical, not weaknesses. Making concessions, especially in areas that aren’t critical for you but are for the other party, can be a strategic move. Identify areas where you can afford to concede in advance and use them as bargaining chips when the time is right.
- Maintain clarity. Ensuring that both parties are clear about each point prevents misunderstandings and potential disputes. Summarize key points of agreement and disagreement after every negotiation session. This ensures everyone is aligned.
- Keep emotions in check. Emotions can cloud judgment and make negotiations personal rather than objective. If you feel yourself getting emotionally charged, take a short break. Always aim to respond rather than react.
- Always aim for a win-win. The best negotiations result in all parties feeling satisfied with the outcome. Instead of trying to ‘win’ the negotiation, aim to find solutions that bring value to all involved parties.
If your time is limited or you prefer to watch a short video, here are ten proven negotiation insights:
Examples of business negotiations
Negotiation drives deals and fosters collaborations. Negotiation skills are invaluable whether you’re haggling over prices, carving out terms of a partnership, or simply striking a deal with a new supplier.
Here are 15 common negotiation scenarios you might encounter, with tailored insights for brick-and-mortar and digital businesses:
- Supplier pricing negotiations. Small businesses negotiate with suppliers for better pricing, favorable payment terms, or bulk discounts. For example, a local cafe owner might negotiate with a coffee bean supplier for a discount on buying beans in bulk. An e-commerce site selling artisanal coffee might negotiate with its shipping provider for reduced rates on bulk shipments.
- Commercial lease terms. Entrepreneurs often negotiate the terms of their commercial leases, including rent, length of lease, or maintenance responsibilities. A boutique store owner might negotiate with a mall for a prime location at a reduced rent. An e-commerce startup might negotiate with a data center for server space lease terms.
- Marketing partnership agreements. Companies collaborate on marketing efforts, co-branding, or sponsorship opportunities. A local gym can partner with a nearby health food store for mutually beneficial promotions. A health and wellness blog can collaborate with a fitness app for cross-promotion.
- Employee compensation and benefits. Employers negotiate salary, benefits, and other compensation details with potential employees. A salon owner can discuss salary and commission structures with a new stylist. A digital marketing agency can negotiate a remote work policy and health benefits with a new hire.
- Client contracts. Service providers negotiate deliverables, timelines, and costs with clients. A freelance event planner can negotiate the scope and pricing of a corporate event. A web design agency can discuss project deliverables and milestones with a client.
- Distribution agreements. Businesses negotiate terms with distributors to widen product reach. A craft beer brewer can negotiate shelf space and prominence with a local liquor store chain. An e-book author can negotiate royalties and visibility with an online publishing platform.
- Franchise agreements. Businesses expanding via franchising negotiate terms with potential franchisees. A successful pizzeria brand can discuss franchise terms with an aspiring business owner in another city. An online education platform can franchise its model to international educators.
- Joint ventures and collaborations. Businesses partner for mutual growth and shared resources. Two local restaurateurs can come together to create a pop-up dining experience. Two e-commerce brands can develop a business proposal on a limited-time product bundle.
- Intellectual property rights. Companies negotiate licensing, patents, or other IP rights. A company can license its patented machinery design to a manufacturer. An indie game developer can negotiate with a platform for exclusive distribution rights.
- Customer retention deals. Companies offer deals to retain valuable customers. A gym can provide a loyal member with additional perks or discounted renewal rates. A SaaS platform can offer extended trial periods or features to subscribers considering cancellation.
- Merger and acquisition (M&A) terms. Companies negotiate terms when considering mergers or acquisitions. A chain of bookstores can negotiate the purchase of a smaller, niche bookstore chain. An e-commerce giant can discuss the acquisition of a rising online brand.
- Endorsements and sponsorships. Brands negotiate terms for endorsements or sponsorships with influencers or celebrities. A sportswear store can ink a deal with a local sports star for in-store promotions. A beauty brand can negotiate terms with a YouTube influencer for product placement.
- Debt financing and equity investment. Startups or small businesses negotiate terms with banks or investors for funding. A budding restaurateur can negotiate loan terms with a local bank for a new venture. A tech startup can discuss equity shares and valuation with venture capitalists.
- Reseller and affiliate agreements. Businesses negotiate terms with affiliates or resellers to promote or sell their products/services. A brand can negotiate consignment rates with boutique stores. A software provider can negotiate commission structures with affiliate marketers.
- Product return and warranty policies. Retailers or manufacturers negotiate product return or warranty terms with vendors or customers. An electronics store can negotiate warranty terms with a gadget manufacturer. An online fashion retailer can discuss return policies and split responsibility with a logistics partner.
Examples of negotiations for individuals
While business entities negotiate contracts and deals, individuals grapple with terms that define their professional lives.
- Salary negotiations during a job interview. For example, you can fear appearing greedy or losing the job offer. You can overcome this obstacle by understanding the industry standard for the role in the specific region and company size and emphasizing your unique skills and experiences that would benefit the company.
- Promotion and raise discussions. For example, you might need to demonstrate your worth and contributions to the company. Do this by regularly recording your accomplishments and their impact on the business. And periodically get feedback from colleagues and superiors to build your case.
- Relocation or remote work requests. For example, you might need to convince the company of your productivity and commitment from a different location. Do this by outlining how you’ll maintain or even improve productivity. Propose a temporary arrangement to prove it can work.
- Navigating non-compete clauses. For example, you might need to overcome limitations on future employment opportunities. To do this, understand the validity and enforceability of the clause and strive to limit the duration or geographic range of the clause.
- Severance package negotiations. It’s challenging to navigate this sensitive topic after job termination. Start by understanding your contractual and legal entitlements. If applicable, remind the company of your years of service and achievements.
- Flexible work hours requests. The challenge is to show that you’ll meet responsibilities despite unconventional hours. Offer a clear timetable showing when you’ll be available and discuss how flexible hours can enhance your output.
- Contract negotiations as a freelancer. Your challenge is to receive fair payment and a clear list of deliverables. Define every aspect of the project, including revisions and additional costs, ensure timely payments, and protect against scope creep.
- Project or team lead opportunities. You need to demonstrate leadership skills or past success. Do this by highlighting previous leadership roles or project successes. Have colleagues or superiors vouch for your capabilities.
- Navigating workload and burnout conversations. Your challenge is addressing overwork without appearing uncommitted. Show the increase in tasks or hours over time. Offer solutions, including delegation, hiring assistance, or process improvement.
- Discussing future career path and growth. Your challenge is to steer the conversation towards long-term opportunities and not just immediate roles. Discuss how your development aligns with the company’s future. Engage with senior employees to guide your growth within the organization.
The five stages of the negotiation process
Whether you’re negotiating a contract, a salary, or a significant business deal, every negotiation journey broadly encompasses five pivotal stages. Each stage plays a crucial role in determining the outcome and the efficiency of the negotiation process.
Stage 1. Preparation: the foundation of successful negotiation
In preparation, you gather all the necessary information and resources before entering the negotiation. This stage sets the tone for the entire negotiation process. Being adequately prepared can distinguish between a successful deal and a missed opportunity.
- Objective clarity. Understand what you want out of the negotiation.
- Know your counterpart. Research who you’re negotiating with and their probable objectives.
- Set your boundaries. Determine your “walk away” point.
- Anticipate challenges. Predict potential obstacles and plan for them.
- Prepare fallbacks. Identify alternatives or compromises you’re willing to consider.
Questions to ask yourself:
- What is my primary objective in this negotiation?
- What concessions am I willing to make?
- At what point will I walk away from the talks?
- How well do I understand the needs and wants of the other party?
- What is my best alternative to a negotiated agreement (BATNA)?
- What do I anticipate will be the main sticking points?
- How much do I know about the market or industry standards related to this negotiation?
- Can external factors (time, events, market shifts) influence this negotiation?
- How have past negotiations with this party (or similar parties) unfolded?
- Do I have a clear agenda for how I’d like the negotiation to progress?
Tips to succeed in the preparation stage:
- Research extensively. The more you know, the better equipped you’ll be.
- Role-play. Practice the negotiation with a colleague or friend.
- List your priorities. Rank them from most to least important.
- Stay open-minded. Be ready to adjust your strategy based on new information.
- Seek advice. Talk to others who have been in similar negotiation situations.
- Prepare emotionally. Recognize your emotional triggers and plan how you’ll handle them.
- Gather resources. This could include market data, expert opinions, or statistical evidence to support your points.
- Understand cultural nuances. If dealing with international parties, understand their culture’s negotiation styles.
- Have a backup plan. Always be ready with a Plan B, C, or even D.
- Self-awareness. Recognize your strengths and weaknesses in the negotiation process and plan accordingly.
Stage 2. Relationship building: the cornerstone of trust and collaboration
Building a relationship or establishing rapport is more than just a preliminary courtesy. It’s about forging connections, understanding perspectives, and establishing trust.
A strong relationship often leads to a more transparent, open, and collaborative negotiation environment, making later stages smoother and more constructive.
- Find common ground. Discover shared interests or experiences to build upon.
- Open communication. Foster an environment where both parties feel they can speak freely.
- Show genuine interest. Actively listen and engage with the other party.
- Body language. Ensure your non-verbal cues are open and welcoming.
- Respect cultural differences. Recognize and adapt to cultural nuances in communication.
Questions to ask yourself:
- How much do I know about the other party beyond the negotiation topic?
- What shared experiences or interests can I use as a starting point?
- How can I ensure the other party feels respected and heard?
- What can I do to make the environment more conducive to open dialogue?
- Are there any cultural norms or etiquettes I should be aware of?
- How will I handle disagreements or tense moments without damaging the relationship?
- What feedback have I received in past negotiations regarding my communication style?
- How can I better adapt my communication to fit the other party’s preferences?
- Are there any biases or preconceptions I must be aware of and counteract?
- What steps can I take to nurture this relationship continuously after the negotiation?
Tips to succeed in the relationship-building stage:
- Practice active listening. Give the other party your full attention and seek to truly understand their perspective.
- Be authentic. Genuine interactions are more likely to foster trust.
- Avoid jumping to conclusions. Hold off on making judgments until you’ve heard the whole story.
- Seek feedback. Ask the other party about their comfort level and any suggestions they might have.
- Stay patient. Building a relationship takes time; don’t rush it.
- Use open-ended questions. Encourage the other party to share more about their perspective.
- Acknowledge emotions. Recognize and validate feelings, even if you disagree with them.
- Share personal anecdotes. Relatable stories can humanize the interaction.
- Stay adaptable. Be ready to adjust your approach based on the other party’s feedback or behavior.
- Continuous effort. Relationship building isn’t confined to the negotiation table; try to maintain the relationship beyond the immediate context.
Stage 3. Exchanging information: the art of active listening and clear communication
This stage is pivotal in the negotiation process. It’s the time when both parties share their viewpoints, desires, and concerns.
The primary objective is to gather as much information as possible, not to persuade or argue. Effective communication ensures that both sides understand each other’s positions, leading to more productive bargaining later.
- Active listening. Understand more than just the words – grasp the emotions and concerns behind them.
- Transparency. Clearly convey your objectives without revealing your entire strategy.
- Ask open-ended questions. These can unveil deeper insights.
- Be mindful of non-verbal cues. Body language can sometimes say more than words.
- Avoid premature judgment. Keep assumptions at bay until you have all the information.
Questions to ask yourself:
- What did I learn about the other party’s priorities and concerns?
- Did I clarify any misconceptions or ambiguities about my position?
- How open was the other party in sharing their information?
- Were there any non-verbal cues that gave away more than their words?
- How did the tone and pace of the conversation influence the exchange?
- Were there any unexpected revelations during this stage?
- Did I ensure that all relevant information on my side was presented?
- What information might the other party still be withholding?
- Did I validate my understanding by summarizing key points?
- Were any emotional or sensitive topics broached, and how were they handled?
Tips to succeed in the exchanging information stage:
- Practice patience. Allow the other party ample time to share their perspective.
- Take notes. Documenting key points can aid in future stages of the negotiation.
- Reiterate and confirm. Regularly summarize and validate your understanding.
- Avoid confrontation. This stage isn’t for debating but for understanding.
- Adopt a curious mindset. The more questions you ask, the more you learn.
- Maintain a neutral demeanor. Avoid showing strong emotions, whether positive or negative.
- Manage your reactions. Even if you hear something surprising, stay composed.
- Seek clarity. If something is ambiguous, don’t hesitate to ask for more details.
- Acknowledge their points. This builds trust and rapport.
- Stay engaged. Show genuine interest in what the other party has to say.
Stage 4. Bargaining: the dance of give-and-take
Bargaining is the heart and soul of the negotiation process. Both parties engage in a back-and-forth dialogue at this stage, making offers, counteroffers, and sometimes concessions. It’s where the magic of compromise happens, leading both parties towards a mutually beneficial agreement.
- Stay flexible. Be prepared to adjust your demands and offers based on the negotiation flow.
- Know your limits. Be clear on your walk-away point and stick to it.
- Understand their needs. Recognize what’s essential for the other party and see where you can accommodate.
- Look for win-win solutions. A successful negotiation isn’t about defeating the other party but finding a solution that benefits both.
- Use concessions wisely. Give them strategically and ensure you get something in return.
Questions to ask yourself:
- What concessions am I willing to make, and what do I expect in return?
- Are there creative solutions or alternative offers I haven’t considered?
- How close am I to my bottom line, and am I prepared to walk away if necessary?
- Have I truly understood the other party’s priorities during the bargaining process?
- Is the pace of the bargaining appropriate, or is there a need to slow down or expedite?
- Are there signs of agreement or deadlock, and how can I navigate them?
- What emotions are influencing the negotiation at this stage?
- Have I confirmed mutual understanding after each offer and counteroffer?
- Are the concessions I’m making aligned with my long-term goals and objectives?
- How can I maintain or re-establish rapport if things become contentious?
Tips to succeed in the bargaining stage:
- Stay calm and composed. Emotions can cloud judgment. It’s essential to stay level-headed.
- Seek mutual value. Always aim for a solution that respects both parties’ needs and priorities.
- Take breaks if needed. A short break can reset the atmosphere if things get heated or stagnant.
- Be genuine. Authenticity can build trust and rapport.
- Reiterate mutual benefits. Remind both parties why a successful negotiation is in everyone’s best interest.
- Avoid ultimatums. They can corner the other party and break down dialogue.
- Practice active listening. Continuously validate your understanding.
- Show appreciation. Acknowledge the other party’s perspective and the value they bring to the table.
- Remain optimistic. A positive attitude can influence the mood of the negotiation.
- Stay resilient. Persistence and adaptability can turn the tide Even if things don’t seem to go your way.
Stage 5. Closing the deal: sealing the agreement
Closing the deal involves finalizing the terms and ensuring that both parties agree on what has been decided. This stage is not merely a formality; it’s essential to ensure all discussed points are captured accurately, and both parties leave the negotiation table satisfied.
- Clarity. Ensure every agreement aspect is clear and there’s no ambiguity.
- Commitment. Both parties must genuinely commit to upholding their end of the bargain.
- Document everything. Always have a written record of what has been agreed upon.
- Review. Go over all the terms one final time to prevent any misunderstandings.
- Build for the future. The end of one negotiation can be the starting point for future collaborations.
Questions to ask yourself:
- Have all the main issues been addressed and resolved?
- Are there any last-minute concessions or points that need clarification?
- What’s the process for finalizing the agreement (written contract, handshake, etc.)?
- Are both parties leaving the negotiation table with a sense of accomplishment?
- What steps should be taken immediately after the close to ensure the agreement’s success?
- Are there any contingencies or follow-ups that need to be planned?
- How will disagreements or breaches of the agreement be handled post-closing?
- Is there a system for regular reviews or check-ins on the agreement?
- Have I established a foundation for a long-term relationship?
- Have this negotiation’s key takeaways and lessons been identified for future reference?
Tips to succeed in the closing the deal stage:
- Summarize agreed points. A concise recap can avoid later disputes.
- Celebrate the agreement. A positive closure can pave the way for future partnerships.
- Be gracious. Thank your counterpart for their time and cooperation, regardless of the outcome.
- Follow through. Ensure you uphold your end of the agreement diligently.
- Get it in writing. Formalize the agreement through contracts or written documentation.
- Stay open for feedback. A post-negotiation review can offer insights for improvement.
- Acknowledge differences. Understand that disagreements might arise in the future and be prepared to address them.
- Stay connected. Build and maintain a relationship beyond the negotiation.
- Reflect on the process. Consider what went well and what could be improved for next time.
- Seek external validation. If necessary, consider third-party mediation or validation to ensure fairness.
Mastering negotiation: 15 essential skills for success
Mastering negotiation requires a blend of inherent talent and cultivated skills. Here are 15 indispensable negotiation skills that every good negotiator should have:
This is the ability to convey thoughts, ideas, and intentions clearly to the other party.
Effective communication ensures that both sides of a negotiation understand each other’s perspectives and reduces the risk of misunderstandings, which could derail a deal.
During a meeting with a potential client, a sales representative might adjust her tone and simplify her explanations based on the client’s body language to ensure understanding and alignment.
Active listening is more than just hearing; it’s about attentively processing what the other person is saying, asking clarifying questions, and reiterating points to ensure comprehension. It fosters trust and helps in understanding underlying concerns.
During a feedback session, an HR manager might repeat an employee’s concerns to confirm understanding, ensuring the employee feels genuinely heard.
Emotional intelligence (EQ)
This skill pertains to recognizing, understanding, and managing our own emotions while also being sensitive to the emotions of others. In negotiations, emotional intelligence prevents personal feelings from clouding judgment and helps in reading the emotional state of the opposite party.
A team leader, recognizing heightened emotions during a team discussion, might suggest a short break to allow everyone to regroup and approach the situation calmly.
It means being truthful, trustworthy, and sticking to one’s moral principles. For small business owners and entrepreneurs, maintaining integrity fosters long-term relationships, builds brand reputation, and ensures repeat business.
When setting deliverables timelines, a project manager might commit to a realistic deadline he’s confident in meeting instead of overpromising and risking trust.
Planning and preparation
Before entering a negotiation, being well-prepared means clearly understanding your goals and the other party’s potential objectives and having fallback plans. This ensures you can navigate the conversation strategically and reach a beneficial agreement.
Before discussing contract terms, a procurement officer might outline optimal outcomes, fallback positions, and a BATNA, ensuring readiness for various negotiation scenarios.
The art of persuasion involves presenting your arguments in a manner that influences the other party to see things from your perspective. For marketers, for example, it’s essential to convince audiences of the value proposition.
A marketing executive pitching a new campaign idea might present data on predicted ROI to influence stakeholders to see the advantages of her approach.
This skill is about creatively addressing obstacles and developing effective solutions during negotiations. It involves understanding the core issues and brainstorming ways to meet mutual needs.
A marketing manager might notice a budget constraint and suggest a phased approach to a project, addressing the financial concern while still moving forward.
Effective negotiators need to make decisions promptly and confidently. This ensures progress in discussions and conveys a sense of clarity to the other party.
A finance director, faced with investment choices, might quickly analyze the pros and cons and make a firm decision, providing clear direction to the team.
Negotiations can be unpredictable. The ability to adjust to new information, changing circumstances, or shifting demands is crucial. For entrepreneurs, this means pivoting strategies based on market feedback or investor inputs.
Upon learning of a change in a potential partner’s terms, a business development manager might quickly adjust his proposal to cater to the new terms without compromising on core objectives.
Establishing a sense of trust and mutual respect is foundational in any negotiation. Building rapport eases tensions and makes collaborative solutions more attainable.
Before addressing a customer’s complaint, a customer relations officer might spend a few minutes empathizing and understanding the customer’s perspective, setting a collaborative tone for the conversation.
It’s about setting, communicating, and resetting the anticipated outcomes of a negotiation if necessary. For marketers, this might mean aligning client expectations with achievable results.
While pitching to investors, a startup founder might present optimistic and conservative projections, helping manage investor expectations.
Research and information gathering
Before entering a negotiation, it’s vital to have all relevant data at hand. This includes understanding market rates, competitor actions, and the history of the party you’re negotiating with. Knowledge empowers and provides leverage.
Before entering price negotiations, a real estate agent might study local property rates and the seller’s history, ensuring she’s well-informed.
Inevitably, disagreements arise during negotiations. Conflict resolution is about addressing these disagreements constructively, ensuring the conversation remains productive.
An operations manager, faced with disagreements between two teams on resource allocation, might facilitate a discussion to find a solution beneficial to both.
Collaboration and teamwork
Negotiations aren’t always about competing; often, they’re about collaborating to find a win-win solution. This skill is about working together to find shared value.
A product manager working on a new feature might bring in representatives from sales, design, and tech teams to ensure a holistic and effective approach to development.
Rushing a negotiation can lead to unfavorable terms. Patience ensures that all facets of a deal are considered and both parties feel satisfied with the agreement.
An attorney navigating a complex legal negotiation might resist the urge to rush and instead give ample time for both sides to consider proposals, ensuring a thorough and thoughtful outcome.
How to become a better negotiator
Whether negotiating for a prime spot at a local trade show, seeking better payment terms with a vendor, or simply trying to get your team on board with a new marketing strategy, sharpening your negotiation skills can make all the difference. Here are actionable strategies and insights to help you elevate your negotiation game.
- Redefine the parties to the negotiation. Often, we’re quick to pursue the obvious deal parties—sellers find buyers, borrowers seek lenders. However, this conventional approach can be limiting. To encompass all relevant stakeholders, negotiators should ask questions like: What are the objectives of this negotiation? Who has an interest in these outcomes? Who can influence these outcomes? How can we connect with those who share our interests?
- Understand all stakeholders. Viewing the opposing side in negotiations as a cohesive entity is tempting. However, larger organizations have various stakeholders with different priorities. This can offer unexpected negotiation leverage.
- Don’t treat the deal’s scope as fixed. Many negotiators mistakenly view the deal’s scope as set. Instead of comparing their BATNA with a preferred outcome, they should consider broadening or narrowing the deal’s scope to discover more advantageous terms. For example, when we negotiated the first hosting agreement for crowdspring 15 years ago (several weeks of intense negotiation), we were prepared to walk away and work with another major vendor if a few key terms – including our bottom line on price, ability to terminate the contract early without penalty, and a few others – were rejected. After a complex negotiation with a major vendor’s business team, we successfully obtained concessions on our crucial deal points. Still, their legal team rejected several terms and refused to budge. Within five minutes, I was on the phone with our second vendor, and within several days, we offered a longer-term deal and signed a long-term agreement (the second vendor made the concessions we needed).
- BATNA is not your sole leverage. Negotiators often wrongly equate negotiation power solely with a robust BATNA (Best Alternative To a Negotiated Agreement). This narrow viewpoint tends to favor pressure tactics and limits creative solutions. Instead, it’s essential to consider both coercive and positive leverage. Positive leverage offers unique benefits that make the counterparty desire a deal. Going beyond binary thinking opens up more avenues for agreement.
- Don’t be intimidated. Small business owners and entrepreneurs often get discouraged when negotiating with larger companies. Larger companies know this – they tell you they have “form” agreements, and their legal team won’t let them negotiate. Most of the time, that’s untrue. Once you allow yourself to be intimidated, you’ll have difficulty getting your needed concessions during the negotiation. Good preparation and a solid Plan B will help you start the negotiation on level ground – and your ability to negotiate as equals will help you obtain the necessary concessions to make a deal happen.
- Think long-term. Dealmakers aiming solely to maximize the current deal’s value might overlook long-term relationships and repeated transactions. Identifying links across various negotiations can reveal hidden leverage points. Making specific, credible promises or threats about future business prospects based on past negotiations can shift the power dynamics in your favor.
- Be prepared to walk away. Although your goal in the negotiation is usually to obtain agreement on your key terms, there are times when you should walk away instead of negotiating further – if the other party isn’t yielding. I always do this when buying expensive goods like cars and real estate. And more often than not, the other party will contact you again – and make enough concessions to bring you back to the negotiating table. Sometimes, I walk because that’s part of my strategy going in. If I’ve carefully researched the other side and know they’re bluffing about specific key terms they can’t accept, I’ll plan to walk – in advance. Sometimes, the decision to walk is prompted by what happens during the negotiation. But I always know my next best alternative. For example, when we negotiated our first real estate lease, we had a bottom-line price that we were willing to pay. After we successfully negotiated that price, our future landlord surprised us with “other” costs and fees that added substantially to the per-square-foot price we would be paying. They wouldn’t budge, and we walked out. The landlord called us the next day and offered to stay within our budget. We declined. By then, we decided we didn’t want to deal with a landlord who wasn’t sincere during our negotiations. We ended up leasing space from someone else who’s been open and reasonable throughout our negotiations with him.
- Manage timing. Merely using timing to pressure the opposite party can backfire. Instead, understanding the other party’s reactions to changes in negotiation speed is crucial. Effective management of timing and sequence often depends on considering external marketplace changes, evaluating the strengthening of each party’s BATNA, and assessing how past deals might influence the current negotiation. For example, we make significant purchases at the end of a quarter, knowing that companies discount more heavily towards the end. Sales teams are pressured to finalize deals, and this timing always helps us.
- Be innovative in how you negotiate. Negotiators often struggle with presenting their terms aggressively or opting for a more balanced approach. However, binary thinking limits the ways to shape the negotiation process. Rather than sticking to traditional negotiation tactics, there’s value in exploring creative strategies that can offer win-win results for all parties involved. For example, many years ago, at a negotiation competition, I competed in the Finals against a very accomplished team. Both teams were judged on whether they got the best deal for their client. After the other team presented their offer, we declined, and instead of countering, we walked out. The other team panicked because no deal meant everyone lost. They compromised on all their key points in their desire to come to a deal, and we walked away with a great deal for our client. This was risky, but this team was outstanding in prior rounds, and we felt we had to take an unusual approach.
- Negotiate the process. Every negotiation doesn’t just deal with the core issue but also how the negotiation process itself is managed. This step ensures both parties understand the framework and approach to the negotiation. For example, before launching a joint marketing campaign, two companies might establish a series of meetings to clarify the roles each will play, the specific topics of each meeting, and who will be involved in every discussion.
- Search for smart tradeoffs. Instead of focusing on one issue, exploring multiple issues can provide opportunities to find mutual gains. By identifying issues that matter less to you but more to your counterpart, you can find areas of concession that won’t compromise your primary goals. For example, a marketer might be more concerned about the budget for an advertising campaign, while the advertising agency might prioritize creative freedom. The marketer might secure better pricing by offering the agency more creative leeway.
- Be aware of the anchoring bias. The first proposal or number in a negotiation often sets a reference point for all subsequent discussions. Recognizing this bias can help you strategically place or respond to the first offer. For instance, if a small business owner is selling a product and wants to set the starting price, they might pitch a slightly higher number, knowing that customers may negotiate downwards.
- Present multiple equivalent offers simultaneously (MESOs). Giving various options simultaneously increases the chances of finding a suitable agreement and gaining insights into the other party’s preferences and priorities. For example, a marketer presenting a campaign proposal to a client might offer three different strategies with varying budgets, target audiences, and projected outcomes to understand which direction the client is most comfortable with.
- Try a contingent contract. This approach addresses uncertainties in a negotiation by making the terms dependent on future events. It’s a way to move forward even if parties disagree on the potential outcomes of a decision. For instance, if an entrepreneur is negotiating with a supplier who promises timely delivery but has had delays in the past, they might agree on a contract with discounts applied for late deliveries.
- Plan for the implementation stage. A successful negotiation doesn’t end with an agreement; it should also cover how the agreement will be executed and monitored and what mechanisms are in place if adjustments are required. For example, after finalizing a collaboration between two small businesses, they might schedule quarterly reviews to assess progress, address challenges, and potentially recalibrate their strategy based on performance.
Mastering the art of negotiation is a pivotal asset for every small business owner, entrepreneur, and marketer. It’s more than just reaching an agreement; it’s about forging partnerships, maximizing value, and driving your vision forward.
Frequently Asked Questions (FAQs) on negotiation
What Is BATNA?
BATNA stands for “best alternative to a negotiated agreement.” Think of it as your plan B. For instance, if you’re negotiating a job offer and can’t secure the terms you want, your BATNA might be another job offer you’ve received, or you might decide to continue with your current position. Knowing your BATNA is crucial as it sets the threshold of what you’re willing to accept.
Why Is listening important in negotiation?
Active listening is paramount. It helps you grasp the other party’s needs and concerns. For instance, if a supplier mentions timely payments as crucial, offering prompt payments can become a strong point of negotiation for better terms.
What makes a good negotiator?
A skilled negotiator possesses qualities like empathy, adaptability, and resilience. They actively listen, articulate their stance effectively, and are willing to find common ground. For example, a negotiator understanding a client’s budget constraints might offer flexible payment terms, ensuring a win-win scenario.
What’s the role of preparation in negotiation?
Preparation sets the stage for a successful negotiation. It involves understanding your and the other party’s needs, researching market standards, and setting clear objectives. For example, one should explore prevailing market rates and amenities offered in similar properties before negotiating a rental agreement.
What Is ZOPA?
ZOPA, or the “zone of possible agreement,” is the range where both parties’ expectations meet. If a seller’s minimum price is $80 and a buyer’s maximum budget is $100, the ZOPA lies between $80 and $100.
How do emotions impact negotiation?
Emotions can both aid and hinder a negotiation. While passion can drive a compelling argument, unchecked emotions can derail discussions. For instance, if a client’s feedback upsets you, reacting defensively might harm the relationship. Instead, understanding the feedback’s root and addressing it calmly can lead to a more positive outcome.
When should one walk away from a negotiation?
If the discussed terms compromise your core values, exceed your predetermined limits, or the negotiation process becomes unproductive and toxic, it’s often wise to walk away. For example, it might be best to decline if a job offer requires excessive travel conflicts with your family commitments.
How important is cultural awareness in negotiation?
Especially in global business settings, understanding cultural nuances can make or break deals. For instance, while directness might be appreciated in Western negotiations, it could be rude in many Asian contexts.
Can silence be a strategy in negotiations?
Absolutely! Pausing after making a point or proposal can prompt the other side to fill the silence, sometimes revealing valuable information or making concessions. For example, after quoting a price, instead of justifying it immediately, waiting might lead the client to state their reservations, giving you a clearer idea of their perspective.
How can one improve their negotiation skills?
Continuous learning, practicing in real-life situations, seeking feedback, and attending workshops or courses can help refine negotiation skills. For instance, role-playing a salary negotiation with a mentor can offer insights and build confidence before the actual conversation.
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