Strategies for business negotiations
Negotiation skills are essential in business, whether you’re a small business owner, an employee or the head of a large corporation. Typically, the parties involved have aligning goals and each wants to walk away with a successful and satisfying outcome. However, the way this happens can be difficult to achieve. That is where business negotiation strategies come into play. If you’re discussing a sale price, salary negotiation, or a real estate deal, it’s likely that the first offer you’ll receive will be unacceptable. If you become familiar with the key factors to build a solid negotiation process, you’ll improve the terms for yourself to increase the chances of an effective closing.
And here are some tactics to use:
# Add long-term considerations and requirements. If short-term concerns such as the current financial downturn, for example, loom large in the future, portray vividly the potential risks of rushing into an ill-considered deal – like broken agreement or bankruptcy. Also, seek impartial advice from financial and legal experts on the deal risks. In addition, try to set deadlines for negotiations that will give all parties sufficient time to weigh the pros and cons of the deal.
# Work for a win-win situation. In a successful negotiation both parties leave the table with a perceived win. In this context, effective closers consider their work a problem solving. Ask yourself: what do I want and what does my negotiating partner want that neither of us currently has? Then propose a deal that meets the needs of both parties and leads to an improved outcome.
# Start the negotiation with a high or low offer. If you’re a buyer and know what the company is willing to pay, you can start by offering half that amount. Even if you know the seller will never accept such an offer, it’s still the way to establish a reference base for further negotiations. This negotiating tactic may result in a lower price than if you make a more reasonable offer first. The same tactic applies if you are the seller – lead with a selling price higher than the company is willing to accept. But do not underestimate the risk of ruining the deal if the offer is too inadequate.
# Do your homework. Examine and understand the other party’s business thoroughly by visiting their website, reading their press releases, articles written about their company, financial reports and so on. Conduct a thorough search on at least Google and LinkedIn. Review the history of the person you’re negotiating with by looking for any bio on the company’s website, the person’s LinkedIn profile, and on the web. Investigate what similar deals have been made by the other party and, if possible, on what terms. Research the offers and prices from the competitors of the party you are negotiating with.
# Use mirroring to show you are paying attention. Professional negotiation training often focuses on the principle of mirroring. Mirroring is the repetition of key words used by the negotiating partner. The technique can be particularly effective when you repeat words just spoken by the other person. That lets the other party know you are paying attention to what they are saying. It shows that you are considering the views and arguments put forward.
# Accept the best alternative to the negotiated agreement. If both sides are firm in their positions, getting to “yes” may be impossible for one or both of them. The best alternative to a negotiated agreement (BATNA) sets parameters for what happens if no agreement is reached. For example, if a worker insists on a raise to stay in his job and his boss refuses, the BATNA may require the worker to remain at work for six more months at the current rate and then quit. BATNA is associated more with compromise than a successful business decision, but ideally should result in concessions on both sides. In the example above, the solution allows the employee to have six months to find a better paying job and the employer to have six months to find a proper replacement.
# Seek the help of the best advisors and lawyers. If it’s a big or complex deal, hire genuine expertise to help negotiate and outline the contract. For example, if you’re selling your company, it’s usually worth consulting an investment banker who knows the industry and has contacts with prospective buyers. If you’re closing a real estate deal, look for an experienced real estate attorney who has closed many deals like the one you’re working on (not a general practitioner). If you’re accomplishing a merger or acquisition deal, find a lawyer who has done 50 or 100 M&As (not a common business lawyer). These advisors don’t come cheap, but they are worth the investment because they often know most of the pitfalls.