If you’re a business owner, chances are that you’ve negotiated at least a hundred times today.
And I’m not just referring to the decisions that affect your company. If you opted for oatmeal rather than a donut this morning, let another driver merge into traffic, or deleted old photos to free up space on your phone, you’ve negotiated—with yourself, others, or external circumstances. It’s something we understand on an instinctual level.
Nonetheless, it’s easy, particularly in high-stakes discussions, to get swept up in the exciting, intense, emotional aspect and lose sight of the simple formula at the core of all negotiations: you want something, they want something else, but both parties share at least one goal. In other words, conflict is a prerequisite, but not a necessary outcome; it’s a treaty, not a battle.
Whether you’re brokering a deal with a major supplier, establishing a relationship with a potential buyer for your business, or deciding what to eat for breakfast, let’s dig into what makes the negotiation process work.
1. Know Thyself
Before entering into any business dialogue, come to terms with yourself and your objectives. You’ll need to not only define what success looks like, but also acknowledge and hone your unique communication style and play to your strengths.
2. Know Thy Opponent
Find out everything you can about the company and, if possible, the specific individual(s) with whom you intend to negotiate. What are their resources? How much experience do they have? What are they hoping to accomplish, and why?
3. Know the Market
Understand the context surrounding your negotiations. Which forces hold the power in your industry: consumers, manufacturers, vendors, service providers? A volatile market can give you leverage, or it could compel you to negotiate under duress.
4. Have the Right Players on Your Team
It helps to have the right people on your side. Attorneys, consultants, accountants, and other specialized professionals can call on skill sets you may not possess, and can provide invaluable perspectives before, during, and after any negotiation.
5. Decide Whether You Want to Initiate, but Don’t Hesitate
Common negotiation wisdom says you should never move first. That’s not always true.
A decisive statement in your preliminary discussions, such as your minimum asking price, could put the other party at ease and move things forward.
On the other hand, there’s a chance you may benefit from the tension created by waiting. No matter what, don’t change your mind and reverse your strategy early on—it only causes confusion and weakens your position.
6. Emphasize Value
Think about what the other party wants out of the arrangement, and do everything you can to show them you’re on their side and working toward a common goal. This isn’t the same as showing your hand. Rather, it’s about demonstrating that you’re attentive to their needs and open to compromise.
I once read that sitting on the same side of the table during a meeting instills trust between the two parties. You may not need to literally pull up a chair and sit beside your negotiating partner, but I believe focusing your perspective on the other party’s needs—and concentrating on value—can help achieve the same sentiment during a negotiation.
7. Reduce Risk
Negotiation happens much faster if you can remove any and all doubt. Tell the other side what you’re willing to do if you’re unable to fulfill the terms of the transaction, and ask them to do the same. Solicit their questions and keep your responses prompt and transparent.
8. Set Boundaries
Decide how you’ll be engaging in negotiation (for example, in person, over email, through video chat, on the phone) as well as what’s off the table. By clearly communicating the subject matter of your negotiation, along with any ground rules, you instill confidence in yourself and your negotiating partner alike.
9. Determine Your Timeline
Are you playing the long game, or do you need to reach an agreement as soon as possible? Be cautious and stay flexible if you can. A sense of urgency can motivate your negotiating partner, or it could scare them away. As the entrepreneur and motivational speaker Jim Rohn once said, “Without a sense of urgency, desire loses its value.” Make sure, however, that that desire is there to begin with. Read the other party carefully and get buy-in before starting the clock.
10. Determine Your Scope
Negotiations involving a lot of money don’t need to remain all-encompassing. If there are numerous moving pieces involved, consider your scope. The other party may be open to breaking the deal into multiple, smaller transactions.
11. Show Up Prepared
Come equipped with sales data, customer lists, valuation numbers, financial projections—anything that indicates your business is worth the time and effort. It doesn’t hurt to have a negotiation proposal in your (figurative) back pocket. Documentation shows the other side you’re serious and ready to deal!
12. Avoid the Oversell
While it pays to be prepared, don’t give the other side more than what they need. That doesn’t mean hiding information, but rather knowing when to stop talking and allow room for reflection. Embrace uncertainty, strategically. There’s no surefire way to convince someone to accept your terms, but pressing too hard almost always works against you.
13. Let Go of Fear
“Let us never negotiate out of fear. But let us never fear to negotiate.” John F. Kennedy’s words of wisdom speak to an enduring truth: fear poisons dealmaking. It causes us to distrust our negotiating partners’ intentions as well as our own abilities.
14. Don’t Compete
One lesson our founders would be quick to tell you they learned in couples counseling: in a successful negotiation, no one wins or loses, nor does anyone believe they landed the better part of the bargain. Instead, all sides should walk away with a thorough understanding of their role and the conviction that each negotiating partner endeavored to meet the coalition’s best interests.
Negotiate in good faith and strive to work together. Collaboration builds positive sentiment, and an approach based on teamwork prioritizes common beliefs as well as objective truths. When you and the other side can agree on the facts and purposes of the negotiation, there’s little room for scheming and selfishness.
16. Take Your Time
If you reach a roadblock, don’t push yourself or your negotiating partner too hard. Sometimes, a dispute or moment of equivocation can be a sign that it’s time to back off and reevaluate your priorities. Don’t hesitate to reconvene at a later date if you feel the momentum start to lag. Given the benefit of time, you and the other party are more likely to return refreshed, with new solutions.
17. Practice Active Listening
Let your partner know that you’re not only paying attention but pondering their ideas and interpreting their feedback. Paraphrase their words, take note of their reactions, and ask for clarity when you need it. Being a thoughtful conversationalist may be the most persuasive skill you can master.
18. Trust Your Instincts
Remember that you always have the authority to say, “yes,” “no,” or “I’m not sure.” If a deal doesn’t feel right, end it. And if it does feel right—and if you’ve spent enough time researching, deliberating, and negotiating—close it.
I’ll be upfront: I’m not only offering these tips as a measure of goodwill but to give you some insight into what I do on a daily basis. As a financial consultant, I talk to business owners every day to gauge whether inDinero is the right fit for their businesses’ accounting and tax needs. When inDinero isn’t the right fit, I use my knowledge of the industry landscape, as well as everything I’ve learned about the business’s goals and responsibilities to point the business owner toward the best solution for their unique situation.
This routine involves its fair share of negotiations, and the lessons I’ve listed above have helped me—and my teammates—maintain a consultative, clear-headed approach. In each conversation we have, we make sure the benefits remain mutual and ensure we continually deliver value to small businesses at every point during our interactions.
Have a business negotiation tactic you’d like to add? Share it with us here, or on Twitter, Facebook, or LinkedIn.