10 Steps to Effective Negotiation

2009 | May 7 in Home Page News , Management , Leadership

By E-Myth Business Coach,

One of the essential skills for any entrepreneur is negotiation. How well you can negotiate a favorable agreement or deal for your business can often spell the difference between failure and success. Negotiation can occur between you and your employees, your vendors, your customers, or even your investors. Despite the possible sense of intimidation or distaste many business owners might have around negotiating, it is a productive skill that will enable you to build your business in positive ways — and it does not have to be approached as an adversarial tactic to be endured!

What's Your Price?

One of the fundamental keys to successful negotiation is to be certain of what you want to achieve and what you are willing to settle for. In their 1981 bestseller, Getting to Yes: Negotiating Without Giving In, Roger Fisher and William Ury state,

The reason you negotiate is to produce something better than the results you can obtain without negotiating. What are those results? What is that alternative? What is your BATNA — your Best Alternative To a Negotiated Agreement? That is the standard against which any proposed agreement should be measured.

The other key is to know, as best you can, what the other party's true needs and objectives are. In negotiating salary increase requests from employees, for example, it is essential to solicit the employee's perspective — and to be able to accurately assess what may not be said aloud. With vendors or suppliers, knowing their break points — the bottom line they are willing to go to — as well as your own leveraging strengths with them, is critical to negotiating deals that are mutually acceptable.

Ten Basic Steps

Entire books and business school curriculum's have been written on negotiating and negotiation skills. While we cannot provide everything you might possibly want or need to know, here are some basic steps for effectively negotiating a favorable deal or agreement:

  1. Decide on your starting position and your "bottom line," or lowest point you will accept in the deal.
  2. Consider the objectives and emotional motivation of the other party.
  3. Plan your sequence of proposals and possible counter-proposals. Open at the most you can reasonably ask for as this gives you room to negotiate.
  4. Prepare for the meeting by determining your own motives and objectives: Why are you negotiating? What do you expect to gain and why is it important to you? What do you think you will have to offer to achieve this?
  5. Be prepared with information, facts, comparable prices or costs, etc. Avoid going into any negotiation and coming across as either uninformed or unreasonably aggressive.
  6. If the other party makes the first offer or proposal, this can allow you to gauge your response and set the parameters of the negotiation to your advantage. Though some experts suggest that your proposal be the first one on the table, this tactic can allow the other party to open at a point that is more favorable to you than you may have anticipated.
  7. Start by discussing a mutually agreed upon point of the negotiation — something both parties will readily say yes to.
  8. When do propose a deal or an offer phrase as "I will do such-and-such for you, and you will do this for me." This establishes a position of confidence and authority.
  9. Make your arguments and proposals incrementally and strategically. Avoid going immediately to your lowest point of acceptance, or bottom-line.
  10. Know when it is time to close or break off discussion. If the other party is ready to close the deal, and it is acceptable to you, make it easy for them to do as little as possible by having everything ready to sign, etc.

Remember: your objective is what you want to achieve — your bottom line is what you absolutely have to achieve. These are not the same thing when you are negotiating!

Everybody Wins With Effective Negotiation

The ultimate goal of business negotiations is to produce two satisfied parties and to have paved the way for future negotiations when and where necessary. Having successfully completed negotiations it is tempting to think that it's all over once you and the other party have said, "Yes!" However, it isn't really "over" until it's over. That is, proper and effective closure is key to sealing a deal successfully.

Thomas Noble, an attorney, says this regarding the "rules of closure", as he calls them:

Master Negotiators know how to close. They consider every element of closure: when, where, documentation, pending issues. Novices either rush the end game or delay it interminably, with equally bad results. Rushing the end game usually means slapping a contract together with little time or thought; its ambiguities and deficiencies inevitably result in disputes. Delaying the end game means failing to ‘strike when the iron is hot' if you wait long enough, something will happen to prevent closure. Time kills deals.

As with any business leadership skill negotiation is learned in the doing. Knowing the fundamentals before going into any negotiations is essential for successfully securing your objectives while preserving strategic relationships with employees, customers or clients, vendors, or investors.

Share Your Negotiating Story

How have you developed your negotiation skills? Any tips you want to share with the E-Myth community? Post a comment and tell us about it.

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  1. .Joseph S. says:

    Great article. Never underestimate the value of BATNA.

    Submitted May 7, 2009 11:32 AM

  2. .Hy H. says:

    I think this was a great and valuable piece, but it might be equally valuable to cover off how to handle a shrewd negotiator - seeing that we might not all be equally proficient at negotiating. For example, one of the tips above says to make proposals (and therefore) negotiate incrementally. I learned from a pro that when dealing with someone who does this, you basically have to respond by saying "while I might agree to that, I won't commit until I see all the terms of what you're proposing". The reason is that while any one element might not seem to be a big concession, the entirety of all the concessions may make the deal very one-sided and unfair. So, see all the terms and elements of the other party's proposal before commiting to any one.

    Submitted May 7, 2009 11:48 AM

  3. .Eric C. says:

    These 10 steps are great of you are already in a relationship that is antagonistic or at the least adversarial.  This is not the best methodolgy for a win-win or partnership negotiation. 

    Submitted May 7, 2009 2:23 PM

  4. .Robert C. says:

    As someone who has been in the position of negotiating for others, as well as my own business, for almost thirty-five years, there is a significant element missing from the "Basic Steps" outlined in the article.  Effective negotiation includes a discovery process, much like sales, where you focus on the needs and wants of the other party through honest and open-ended questions.  This will enable you to discover many things, including strong and weak points, opportunities you may not have thought about, what is most and least important to them, and that almost inevitable issue that they're holding onto the tightest--and it's often something of more personal than serious monetary value.  It's usually an issue that will be a deal breaker if not resolved to the satisfaction of the other party, and can even be strong enough to be an entire deal maker.  In addition, the discovery process, if handled with sincerity and genuine curiousity, will demonstrate to the other party that you actually care about what they think, and about achieving a mutually fair outcome.

    Submitted May 7, 2009 3:28 PM

  5. .DInesh R. says:

    Very Goodpost     

    Submitted May 11, 2009 3:15 AM

  6. .Ravi M. says:

    Excellent for those who want the best results for all parties

    Submitted May 17, 2009 9:46 PM

  7. .Keith M. says:

    Great article and I agree with Robert C's comment...discovery is key!

    Submitted Jun 23, 2009 2:45 AM

  8. .Gabriel M. says:

    This is great and valuable information for business success.

    Submitted Oct 23, 2009 6:36 PM

  9. .Laura L. says:

    Jack Chapman's Negotiating Your Salary is a must read!!  Extremely powerful book with great strategies.

    Submitted Mar 13, 2011 10:15 AM

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