9 Lessons for Better Business Negotiation

For some people, the negotiation process is second nature. But for many, negotiation strategies aren’t an inborn skill; lots of business professionals need to practice and improve their business negotiation skills so they don’t always end up on the losing end of every bargain.

After all, everyone at a bargaining table has one thought in mind: “What’s in it for me?” So for a business owner to get what they want, they’d better be prepared to answer that question by learning negotiation tactics.

Negotiation can be powerful. It can help a soon-to-be employee negotiate a much bigger salary than the original offer. It can help a business owner barter for services worth hundreds or even thousands of dollars to help grow their bottom line. It can help two or more parties navigate the dispute resolution process, or it can assist two partners in setting up their partnership agreement.

This guide walks through ten strategies that business owners can follow to help improve their negotiating skills.

Nine Essential Business Negotiation Strategies

Here are ten different strategies and tips for business owners who want to improve their odds of successful negotiations, even if they’re still new to the negotiation game.

Know what everyone wants

This premise sounds simple, but it can be incredibly difficult to implement. A business owner needs to have a good grasp of what everyone at the negotiating table wants. That knowledge can help guide a successful negotiation.

For example, a business owner needs to know specifically what they want out of the transaction or negotiation. Maybe they’re negotiating with a potential supplier, and they know that they need a specific quantity of products per month. They likely have a price range in mind, too. If that business owner didn’t have those terms clearly defined in their own mind, they might accidentally accept the first terms that the supplier offered, even if they weren’t all that favorable.

Meanwhile, a negotiator needs to consider what the other party wants. That knowledge can help them counter those needs more effectively. Going back to that business-owner-supplier negotiation mentioned above, the business owner would benefit from knowing what the supplier’s limits are in terms of turnaround times, order thresholds (or order minimums), and more. If they understand those limits, they can aim their own negotiations for the middle ground that the supplier might be more willing to accept.

Be patient

In negotiation, patience is power. Amateurs rush a deal with their impatience, but veteran negotiators (or newbies pretending to be veterans) let the full negotiation process run its course.

Many skilled negotiators advise that a business owner should never take the first offer. Not only are those terms the most favorable for the business owner, but a delay (even a self-imposed one) can push the other party to be a bit more aggressive with their offerings. If nothing else, if they’re in a hurry, they might rush to close the deal.

Even if a business owner has a strict deadline for that negotiation’s outcome, they might find it helpful to conceal that as much as possible. If the other person knows the owner is in a rush, they might feel that they can win them over with a less mutually beneficial agreement.

Know the cut-and-run point

One of the biggest problems with auctions for the purchasers is that people get whipped into an enthusiastic frenzy during the process and bid, and ultimately purchase, something at a much higher price than they would have ever considered possible. They fail to know their ceiling bid.

That same scenario can happen in simple and complex negotiations alike. Business owners need to know their fallback position: what’s the bottom line amount (or top, in some cases) that they’ll accept? Knowing this line can help them avoid leaving the negotiation table with a signed contract that they already regret.

What is the hill worth dying on at the bargaining table?

There’s no avoiding making concessions at the negotiating table. Both parties involved need to feel like they’ve gotten something out of the negotiation, after all; if one feels cheated, they probably won’t make a deal to begin with.

In the business world, one of the most effective negotiation strategies is simply defining the proverbial “line in the sand.” A business owner needs to decide in advance what are they key concessions they will not make. They need to define what’s really, truly important to them in that deal.

For example, if a business owner is bringing on an investor who’ll have equity in the company, their “line in the sand” might be maintaining control over the company. They might be willing to increase the investor’s ownership stake from 30 to 35%, but they wouldn’t be willing to take it from 45 to 50%. If the investor would only accept a 50% stake, then the business owner would know it was time to walk away.

Match the benefits to the other party’s wants

This goes back to the “know what everyone wants” advice mentioned earlier. If a business owner expects anyone to give them something at the negotiating table, they have to provide value and benefits in return.

Expert negotiators find the unfulfilled wants that the other party has (even ones they haven’t voiced), and they’ll bring them up during the negotiating process. For example, suppose a business owner is negotiating with a brand affiliate or influencer. Maybe they can’t pay the influencer their proposed monthly fee or per-post rate, but they know that the influencer would benefit from the business’s services. In that case, they might be able to draft a negotiated agreement that has a lower out-of-pocket cost for the business but still benefits the influencer. Win-win solutions and common ground are huge in negotiations.

Find workable compromises

This goes back to point number 4. A business owner can’t live without certain things, but they can be flexible on others. That’s why it’s a good negotiation skill for business owners to know where they can give a little bit (and just how flexible they can be).

But making concessions doesn’t mean that a business owner can’t expect something in return. In fact, it’s perfectly reasonable for a negotiator to expect the other party to make a concession of their own. As long as the entrepreneur keeps setting boundaries for their non-negotiables (and maintains them), they can find ways to meet in the middle without losing anything of real value.

Never undercut the business’s value

Too often, new business owners sell themselves short when they’re trying to build relationships or win a client’s business. They might even do so unintentionally at the negotiating table. If a business owner concedes too much on price, they can unintentionally weaken their reputation. For example, if a business owner is willing to take a hit to their bottom line, they may lose some credibility. That supplier or client might come to expect a deal going forward. A newer independent contractor who does work for cheap just because they’re a greenhorn in the industry might unintentionally send a message to clients that they don’t value their own services.

Understandably, that’s best avoided. It’s better for a business owner to stand by their worth.

Don’t back down

Odds are, a business owner knows when they’ve offered a good proposal, so they should stand by it. It can be tempting to back down, especially if the other party is creating a tense situation by being condescending or demanding. No one wants to enter a legally binding agreement because they didn’t stick to their guns.

When possible, a business owner should walk their potential client or business partner through the objective criteria that supports their proposal. Or better yet, experienced negotiators might even ask the other party to show them why the offer isn’t a good fit; sometimes placing the burden of proof on the other person can help the owner avoid backing down on their non-negotiables. It might even help them find creative solutions to problems they didn’t realize existed.

And of course, there’s always that law to follow: a business owner shouldn’t be afraid to walk away from a negotiation. That’s an essential skill.

Document the business deal ASAP

It’s one thing to negotiate effectively. But talking at the negotiating table and actually signing a legal contract are two different things. It’s generally prudent for business owners to get the agreement in writing and signed as soon as possible. If too much time passes between the agreement and the contract stage, one or both parties might stop and reconsider the terms they agreed on.

That’s not to say that negotiators should rush headlong into legally binding contracts. But it’s best to “strike while the iron’s hot,” so to speak. Even if an attorney needs to review the agreement first, it’s wise to get it signed quickly. That’s what turns a successful negotiation into a successful deal.

Long story short: whenever a business owner finds themselves in a situation where a negotiation is taking place, they can apply these nine principles to help strike a winning deal.

Disclaimer: The content on this page is for information purposes only and does not constitute legal, tax, or accounting advice. For specific questions about any of these topics, seek the counsel of a licensed professional.