No matter what your professional role is, strong business negotiation skills will always benefit you. If you’re a manager, entrepreneur, business owner, or regular employee — opportunities to negotiate are around every corner, whether you realize it or not.
Don’t believe me?
Think back to the last time you accepted a position at an organization. Did you accept the first offer without thinking about it? If so, you unwillingly passed up an opportunity to negotiate for a better contract (think more money, better benefits, etc.).
However, you shouldn’t feel bad, as a survey by CNBC uncovered that 58% of Americans accepted the initial offer for their current position without negotiation. Beyond that, nearly 80% of companies lack a formal negotiation process.
That’s a shame, as successful negotiation strategies will help you earn more money, reach agreements with business partners, and keep your stakeholders happy.
Whether you negotiate mergers and acquisitions or want a better employment contract — effective negotiation strategies are a must.
To ensure you don’t get left with the short end of the stick during your next business deal, we’ve compiled this guide containing the most effective negotiation tactics.
Read on to discover how you can master the art of negotiation for a better bottom line.
The 4 steps of the business negotiation process
According to Harvard Business School, you can break down the basics of business negotiation into 4 steps.
The 4th step is one of the most important, as it’s crucial to learn something from every negotiation you take part in, even if it’s what not to do.
Let’s take a closer look at each step.
Step #1: Preparation
It’s essential to prepare for any type of negotiation, including ones you think will be easy. The last thing you want to do is write off or underestimate your negotiation partner, as you can never know whether they’ll accept your terms with 100% certainty.
Besides that, the preparation stage is when you define your zone of possible agreement (ZOPA).
Your ZOPA represents the range of results you’re willing to accept to reach an agreement.
For example, if you’re negotiating the price of real estate, deciding that you’ll accept anywhere from $30,000 – $50,000 would be your ZOPA. If the other party doesn’t accept a figure within your ZOPA, then the negotiating must continue (unless you’re willing to make concessions to reach an agreement).
You should also consider your counterpart’s motivations during the preparation phase.
Do you suspect they’ll agree to certain trade-offs? How confident are you that they’ll agree to your terms?
These are vital questions to ask yourself when preparing for a business negotiation. Sometimes it’s not possible for two parties to come to an agreement, which is why you should develop the best alternative to a negotiated agreement (BATNA).
If an agreement isn’t possible, what would be the best-case scenario for you? Should you end your correspondence and find a new negotiation partner? It’s crucial to know before you show up at the bargaining table.
Step #2: Bargaining
Now the real negotiation starts. During the bargaining phase, you and your counterpart will begin laying out your ZOPAs to reach an agreement.
This stage is about holding your ground and staying true to your ZOPA and BATNA, all while showing empathy toward your negotiation partner.
It’s important to be assertive without resorting to getting aggressive, as that won’t reflect well on your organization.
Ideally, achieving a win-win outcome that satisfies both parties is best, but that’s not always possible.
After a few rounds of presenting offers and counteroffers, you’ll need to move on to the closing phase – as you won’t be able to deliberate forever (even if you want to).
Step #3: Closing
The closing phase doesn’t always mean reaching an agreement, just that the negotiation comes to an end. If you don’t like the terms your partner brought to the negotiation table, it’s best to end the discussion without reaching an agreement.
However, if you can reach common ground, this is the phase where you must reach an agreement in writing. That means agreeing to a figure that falls within the range of both your ZOPAs — which is the best way to make both parties happy.
Step #4: Learning/reflecting
The true final business negotiation phase is when you get a chance to reflect and learn from the process.
Questions to ask yourself include:
Are you happy with the negotiation style you used?
Were you able to secure the best possible outcome for your organization, or were you forced to compromise?
Did anything unexpected happen that threw off your rhythm or game plan?
Do you feel like your negotiation partner out-maneuvered you?
Answering these questions will help you become a more skilled negotiator in the future, which is why this step is so important.
Practice makes perfect, and the more negotiations you take part in, the better you’ll get at it – so don’t be too hard on yourself if your first few business deals don’t go the way you wanted.
Business negotiation strategies that get results
Now that you’re familiar with the 4 stages of business negotiation, it’s time to learn some effective negotiation strategies to achieve the best possible outcome.
The most skilled negotiators out there have plenty of tricks up their sleeves that cleverly steer the negotiations in their favor — whether the other party is aware of them or not.
Let’s take a peek underneath their hats to see what they’re hiding.
Start by asking questions
A mistake new negotiators make is to begin by talking up their strengths, especially when discussing a merger or partnership. They think that this shows their confidence, but that’s not actually the case.
You won’t need to brag or boast about your organization’s capabilities if you’re genuinely confident. Instead, strong negotiators begin by asking the other party questions to see if they live up to their standards, not the other way around.
Doing so communicates an unspoken confidence that you already know you’re a perfect fit, and asking questions places the onus of displaying competence on the other party. Are they good enough to partner with you? Do they have what it takes to add value to your business?
Even if you’re not negotiating a partnership, asking questions at the start is always a strong move.
For example, if you’re engaging in contract negotiations with your employer, asking them questions about what you want initially shows an innate confidence in your abilities.
Work towards a win-win
It’s also crucial to consider the needs of the other party, as it’ll be easier to come to an agreement if both parties benefit. While you want to achieve the best possible outcome for your side, negotiating isn’t about ‘winning’ or ‘being right.’
As such, you shouldn’t only think of what you want to gain out of the negotiations. Try to develop a ZOPA that you feel will make you both happy, as that’ll make it easier to reach an agreement.
The last thing you want to do is be too rigid and uncompromising about what you want, especially if it’s unfair to the other party.
If your counterpart feels they’re getting the short end of the stick, they’ll tighten up – and you likely won’t reach an agreement at all. Since you don’t want to scare them off, your best bet is to do what you can to ensure their needs are also met.
Speaking of meeting the other party’s needs, displaying empathy will help business negotiations run smoother. Not only that but if you’re truly empathetic toward your counterpart, it can lead to reaching a better outcome than you would have otherwise.
The other party will appreciate that you’re clearly considering their needs, which will make them more likely to make some concessions on their side.
What proof is there that empathy works in negotiations?
Just ask FBI hostage negotiator Chris Voss, as he lists empathy as his #1 most powerful persuasion skill. Hostage situations are incredibly volatile, as one wrong move could mean disaster.
That’s why hostage negotiators do their best to empathize with terrorists by addressing their fears, motivations, and desires. By putting themselves in their shoes, the hostage negotiators can create some common ground to achieve the most peaceful outcome.
Start with an offer that’s too low or too high
A classic negotiation tactic is to kick things off with a lowball or highball offer. For instance, if you’re negotiating a price, start by offering half of what you’re willing to pay.
Even if you know the seller won’t take that price, you’ve just made the real price you’re willing to pay more appealing. By starting low, once you reach your ZOPA — your negotiation partner will think they’ve struck gold and will be more likely to settle for the amount you want to pay.
Conversely, if you start by offering a number close to your ZOPA, the number will look far less impressive.
You should follow the same logic if you’re on the other end of the equation. In other words, if you’re the one selling a product — start by offering a price that’s too high and work your way down to your ZOPA.
Give your offer an expiration date
There’s a reason why scarcity marketing works so well; it’s because people don’t want to miss out on a great deal. Online stores and retailers are always running ‘limited-time’ sales that feature countdown timers that prey on consumers’ sense of FOMO (fear of missing out).
The good news?
You can employ the same tactic in your strategic negotiations. Giving your offer an expiration date will trigger a sense of FOMO in your negotiation partner.
They don’t want to miss out on a great deal, and if it’s about to expire in a few days, it’ll be easier to reach an agreement.
Business negotiation do’s and don’ts
You can learn just as much from a business success story as you can from a glaring failure, so here are some do’s and don’ts for business negotiations.
DO clarify assumptions. Misunderstandings derail progress, so ensure that you clarify any assumptions you have about your negotiation partner before the bargaining phase begins.
DO listen with an open mind. Instead of judging everything that comes out of the other party’s mouth, practice active listening and ensure you comprehend everything they say.
DO admit when you don’t understand something. It’s far better to clarify a misunderstanding than it is to pretend that you understand for fear of seeming weak.
DON’T label people. While it can be easy to write off your negotiation partner or view them as your enemy, that won’t yield the best results. Do your best to refrain from any judgments.
DON’T complain. If you start whining about the way the negotiations are going, you’ll wind up shooting yourself in the foot. You could even trigger a more heated, personal argument.
DON’T interrupt. Business negotiations aren’t screaming matches, so give your negotiation partner plenty of time to share their thoughts without interrupting.
Wrapping up: Business negotiation tactics
Negotiations are a reality for virtually every organization and employee, so learning how to negotiate is an extremely valuable skill.
From negotiating for more money from your employer to agreeing on a price for home renovations – there are plenty of opportunities to use your negotiation skills in the real world.