Learn how to negotiate with clients, staff, suppliers and other businesses with our top ten negotiation tactics.
Business negotiation is part and parcel of setting up and running a company. Negotiating everything from the cost of supplier services to staff salaries takes skill and patience. Business negotiation is a balancing act – and one that many small business owners feel uncomfortable doing. Running a small business can feel like all the power is with the other party but by using some clever negotiation tactics, you can negotiate with confidence and get a successful outcome.
How to negotiate successfully
Good negotiating skills help you manage your staff, solidify relationships with clients and vendors, and allow you to get the best from new business opportunities.
The biggest myth of negotiation is that success is measured by how close you are to achieving your goal. This makes it appear as a ‘winner takes all’ situation, which naturally leads to a fear of negotiation for most people. According to research by salary.com, 87% of people are sometimes or always apprehensive about salary negotiations, and nearly one fifth find negotiating unpleasant.
The key to successful negotiation is to not think of it as winning or losing. Negotiation is really about collaboration – a win/win situation where both parties walk away feeling they’ve been listened to and have worked together to achieve a satisfactory outcome. According to Danish firm MarketWatch Centre for Negotiation, 42% of people negotiating say they get more value from the deal when negotiation is based on trust and collaboration.
Below are some useful negotiation tactics to help you get the best value from your negotiations.
Watch this: There is a lot of research into the skills and techniques that you can use to influence people. In this popular video from Influence At Work six principles of persuasion are explored from Dr Cialdini’s book Influence:
10 steps to successful negotiation:
1. Decide your negotiation goals
Having a clear idea of what you want your negotiations to achieve is a good starting point. Whether it’s preferential deliveries or lower prices for materials your business needs, write down your goals and rank them in order of importance. Draw a line on the list that is your minimum position – anything less, and you will walk away from the negotiation – and the ideal outcome. A successful outcome will fall between those two points.
It’s a good idea to always have a plan B if you’re not going to be able to negotiate your goals and need to walk away – and understand what impact that would have on your business. Make sure that the goal of your negotiations is better than that offered by your plan B.
2. Research before you negotiate
Preparation, before you start negotiating, is crucial for success. Researching the other parties you’ll be dealing with will help you predict and prepare for the position they’re likely to take during the negotiations. Find out information such as their background and financial status, examples of any past deals and agreements, their company culture and any personal information on the other party’s negotiating team and the negotiation style they use.
Start your research online. Search for the company name or the names of the people you’ll be dealing with using sites such as LinkedIn, and look through results found in trade magazines and news articles. Visit their website and see if it has a press release section and read up on their recent activity. Talk to other companies that work with them to get a view of what they’re like to negotiate with.
Researching a third party isn’t about unearthing weaknesses. The more you know about the other party – their interests, aims and concerns – the better the offer you can put on the table and the more chance you’ll have of your final proposal being accepted.
Research can also help to ground the negotiations with facts. You’ll be able to argue your position more persuasively if you can cite relevant facts or statistics such as competitor pricing, terms of agreement, alternative options or – in the case of staff pay discussions – salaries for similar job roles.
3. Adopt a positive attitude
Negotiations are not a battle, so avoid entering them in a combative mood. Be aware of your emotions. Remain calm, even if the negotiations are not going your way, and avoid increasing tensions with shouting, threats or other angry outbursts. Instead, adopt a purposeful, professional approach and use collaborative language – such as “let’s see how we can work together on this” to move negotiations to a positive resolution.
Even little things can derail negotiations, such as feeling hungry, tired or bored. Before negotiations make sure you’re feeling well, get plenty of rest, and schedule negotiations after lunch or breakfast so you don’t let hunger affect your mood. According to research by Cornell University professor Emily Zitek and Dartmouth College professor Alexander Jordan, being hungry elevates a sense of entitlement, leading to poor decisions and an inability to see things from another person’s perspective.
Watch this: Making sure negotiations are effective is the subject of this popular video from the Stanford Graduate School of Business – it may be US-based and a few years old, but its principles are timeless and universal:
4. Share information to build trust
A good negotiation tactic is to share information with the other party – either directly related to the negotiation, or small details about your life or your business.
It works because people negotiate more easily with those they feel they know someone – making sharing details a good way to break the ice at the start of negotiations. Small personal details about yourself or your business help build trust and fosters a positive atmosphere with shared interests. Crucially, it gets you past misconceptions and assumptions that can form when people don’t really know each other.
5. Use anchoring: make the first offer
Rather than adopt a poker face and refuse to make the first move, research has found that the person who makes the first offer when negotiating is more likely to get the outcome they want. This is based on the psychological principle of ‘anchoring’ – by making the first offer, you effectively set the stage for the negotiation and it’s this offer that both parties then work around. Anchoring has the effect of making people overly reliant on the first piece of information or offer that’s put on the table.
Anchoring example: Car dealers use anchoring to great effect for new car sales. When a customer looks at a car with a £30,000 price on it, the sales person will often immediately offer to knock 5% off, lowering the price to £28,500. The buyer thinks they’re getting a good deal from the outset – they’ve already made a saving without the hassle of tough negotiating – and that they’re getting a better deal compared to how they would have felt if the car was originally priced at £28,500 in the first place.
The trick to using anchoring as a successful negotiation tactic is to not be conservative with your first offer – aim higher than you normally would. If you’re on the receiving end of an initial offer, you’ll need to protect yourself from the anchoring effect. Simply let the other person know that their request is way off the mark and present a new offer yourself – known as counter-anchoring.
6. Ask questions and listen
Making assumptions during negotiations is a sure-fire way to fail. We form assumptions based on a wide variety of visual cues, such as looks, attitude, communication skills and status. It means you can walk into a negotiation with assumptions that aren’t based on reality.
Rather than believe your assumptions, always ask questions and check your understanding and facts. A good approach is to listen carefully, and if you find yourself thinking a ‘fact’ about a third party that you’ve not checked, take the time to ask.
The most successful negotiators are generally people who listen, ask lots of questions, and who genuinely follow the other party’s arguments and reasons rather than leaping to inaccurate conclusions.
Watch this: Want some help learning how to listen better? This Ted Talk video features sound expert Julian Treasure explaining how to be a better listener and really hear what people are saying:
7. Create multiple solutions
While you should set a clear goal for your negotiations, don’t be afraid to discuss a range of alternative options if things aren’t moving forward. Rather than sticking rigidly to one outcome and wasting the opportunity for meaningful discussion, explore alternatives. For example, if a client is pressuring you to lower your prices rather than refusing to budge, offer a set of pricing packages for them to choose from which include the lower prices but that make concessions elsewhere such as minimum orders or shorter payment terms.
8. Know when to make strategic concessions
Be prepared to compromise. Forget the old-fashioned notion that making concessions during negotiations makes you look weak. It makes strategic sense to give ground in a negotiation if it helps you achieve your main goal, but make sure that you’ve done your homework beforehand.
With good preparation, you’ll have identified aspects of the negotiations that are critical for the other party. Look for areas that matter to them, but that are less important to your business such as multi-year agreements or shorter payment terms. You can concede these points as you negotiate, and then ask for concessions on areas that are crucial for your business.
9. Closing the deal
At the end of any negotiation – even if you haven’t struck a deal – recap the points covered so that both sides know what was agreed. Don’t be in a rush to wrap things up – take time to clarify any points that might not be clear, and renegotiate if you realise both parties have a different view of the outcome. Follow-up with a written summary, including all the points you’ve discussion and agreed.
10. Knowing when to walk away
While today’s negotiation tactics are more focused on collaboration, understanding and actively listening, at the end of the day your business and its commercial future will be impacted by the outcome. That’s why it’s important to know when to walk away from a negotiation.
If the negotiation means that your business will be in a worse position from the outcome – payment terms have become unfavourable or price discounting would eliminate all margin – then it’s best to walk away. Thank the other side for the meeting but explain that the terms simply aren’t in your company’s best interests. Don’t view this as a negotiation failure – it’s still a win for your business as you’ve kept your values and business goals in mind.