One of the essential skills for any business owner is negotiation. How well you can negotiate a favorable agreement or deal for your business makes the difference between growing to achieve your goals and not. There are so many different types of relationships—ones with your employees, your vendors, your customers or even your investors—that require you to negotiate. But negotiating well isn’t easy. It can feel intimidating and uncomfortable for many business owners, making it difficult to hone this necessary skill to build your business in positive ways. But you don’t need to approach negotiation as an adversarial tactic. In fact, effective negotiation should lead to something that makes all parties feel seen, heard and satisfied.
What’s your ideal outcome?
One key to successful negotiation is knowing what you want to achieve and what you’re willing to settle for. Another is to know the other party's true needs and objectives as best you can. Negotiation comes from a need for change and the people on either side of the negotiation have their own ideal outcome in mind. When an employee comes to you to negotiate a salary increase, for example, it’s essential to anticipate what they may ask for and be ready with where you’d ideally like to settle. With vendors or suppliers, knowing some points of negotiation aside from cost and your own leveraging strengths with them is critical to negotiating a deal that will make both parties happy.
Eight basic steps
Entire books and business school courses have been written on negotiating and negotiation skills. But you don’t need to take a course to learn to effectively negotiate. These eight basic steps give you the foundation to get started:
Steps for preparing
1. Determine your own motives and objectives.
Why are you negotiating?
What do you hope to gain? Why is it important to you?
What do you think you’ll have to offer in return?
2. Decide on your starting position and your bottom line.
What's the ideal number or solution you want to end with?
How much are you willing to go above or below that ideal outcome?
What offer should you start with to give you space to negotiate?
3. Identify the objectives and emotional motivations of the other person.
What do you think they want?
What are you already agreed on?
Where's your thinking already aligned? What do you think they’d say yes to?
4. Plan your offers and possible counter-offers.
What are the different scenarios that could happen?
What are your non-negotiables?
Where can you compromise?
At what point will you walk away?
When preparing, think about your best possible outcome and then determine your bare minimum. Tell yourself, “For this to work out perfectly, I’d want … .” And remember, your objective is what you want to achieve—but your bottomline is what you absolutely have to achieve. These aren’t the same thing.
Steps for negotiating
5. Start by stating and agreeing to the thing being negotiated.
Do you have the same goal in mind? (e.g. an employee promotion, a new vendor contract, etc.)
6. Decide if you’re going to make the first offer.
If you allow the other party to make the first offer, you’ll be in a position to react. If you start, however, you’ll be in a better leadership position. Even though you won’t have the advantage of knowing their offer, you can set the parameters of the negotiation.
7. Make your offers incrementally and strategically.
If you know your ideal outcome, monetary or otherwise, start above that value (if you want an increase) or below it (if you want a decrease). That’s the only way you have any room to negotiate. Then as you go back and forth with offers and counter-offers, you may reach a desirable agreement before hitting your bottom line.
8. Close the discussion at the right time.
If you’ve done your prep work, you’ve identified the lowest offer you’ll accept. If you reach that point in the negotiation with no agreement, end the meeting. If you do reach an agreement that satisfies everyone, be ready to close the deal. Make it easy for them to do as little as possible by having everything ready to sign.
Everyone wins with effective negotiation
The ultimate goal of business negotiation is to end with two (or more) satisfied parties and to have paved the way for future negotiations when necessary. If you’ve ever successfully completed a negotiation, it’s tempting to think that it's all over once you and the other party have reached an agreement. However, it isn't really over until it's over. Proper and effective closure is key to successfully sealing the deal.
As with any business leadership skill, negotiation is learned by practicing. Knowing the fundamentals before going into any negotiation is essential for successfully securing your objectives while preserving strategic relationships with employees, clients, vendors or investors. If you struggle with negotiating, start practicing with small negotiations in work or life. It gets easier once you start.