Negotiation skills are a key tool for every small business owner. You need to employ them every day for situations ranging from the trivial, like creating a rotating vacation schedule for your team, to the extreme like renewing a contract with your top customer. The importance of the situation will likely dictate how much preparation and effort you expend on it, but at their core negotiations are all the same in the sense that they require a group of parties to reach a point of agreement—even if that point is to completely disengage.
The art of negotiation is the interplay required to get to that point. And, while some will argue that success is measured by how close to your desired outcome you achieve, that is not the only possible definition. A commonly held view today is that the most successful outcome is one dynamically achieved over the course of negotiations that gives everyone at the table an equally favorable deal. In such a situation, even a lack of a deal can be considered a successful outcome if through negotiation both sides discover that doing business actually makes little sense for either of them.
Negotiation is often broken into two high-level strategies: Competitive and Collaborative. The former is one in which an “I win” result is pursued, and the latter is one in which a “win-win” result is pursued. (For a more in-depth discussion of the differences between the two, read this enotes post.) However, within those broad definitions live a number of different strategies and tactics which can be helpful in many small business negotiations. The following describe some you might want to try, and provide insight into how to hone your negotiation skills.
A Harvard Business Review Post, Implementing Strategies in Extreme Negotiations, looks at negotiation tactics that work in “extreme” business situations—those in which stakes and risks are especially high.
- Hypothesize motivation and inquire to validate your hypothesis. The post notes that in most negotiations each side makes assumptions about the other that often turn out to be wrong. It suggests that a key negotiation technique is one in which you ask questions designed to test your assumptions. For example, instead of simply assuming a company is trying to take advantage of you by raising prices, ask them to justify the price increase. Then, use their answer as your starting point for negotiations.
- Focus on process rather than resolution. The post describes a deadlocked situation in which two parties could not reach agreement on a large post-merger infrastructure decision. Once the negotiation changed to a discussion of how to break down the big decision into multiple smaller parts, the group began to work together and was in a better frame of mind to create a solution to the larger problem.
- Take a purposeful approach to negotiations rather than a combative one. The post illustrates this shift as one in which instead of asking “what do you want?” asking “why do you want it?” and instead of thinking that negotiation strength comes from being right, sticking to your guns, and making threats, understanding that strength truly comes from being open to new ideas, understanding motivations, and thinking creatively.
A recent Forbes post, Six Surprising Negotiation Tactics That Get You The Best Deal looks at negotiation theories from Wharton professor Adam Grant. Among his suggested tactics are:
- Share information about yourself. Studies have shown that better negotiation outcomes are achieved when you share something about yourself, even something as small as your favorite food, with the other party. This technique helps you start building trust, which fosters a positive negotiation environment.
- Make the first offer. This may sound counter-intuitive, but studies have shown that people who make the first offer are more likely to get what they want because they set the stage and the starting point for negotiation.
This Entrepreneur post provides several tips for setting the texture and temperature for negotiations.
- Offer a hot drink. Studies show that the sensation of heat makes someone a more generous negotiator, thus a good way to start a negotiation is to have your partner hold a hot drink or other warm object.
- Choose the optimal chair. One study showed that those sitting in hard rigid chairs made lower counter-offers than those sitting in soft cushy chairs. Use this to your advantage when choosing a chair, or offering one.
A free report from Harvard Law School, Business Negotiation Strategies: How to Negotiate Better Business Deals, provides case studies that illustrate several useful negotiation strategies. (You’ll need to provide your email address to get it.)
- Make multiple simultaneous offers. When faced with pressure from a customer to lower your price, providing your buyer a set of packages to choose from can be a useful response. For example, you might hold the price on your original package, offer a lower price version that excludes certain items or provides a shorter warranty, and offer a higher-price package as well.
- Try a “Shut-down move.” If you know that your buyer is considering multiple options, and is actively shopping offers between competing companies, look for a way to stop the process. For example, you might offer a lower price or better terms that expire once the buyer leaves the room. Of course, you may be giving away your bargaining position if it is refused, but it may be enough to close the deal right then and there.
- Renegotiate bad deals. Perhaps you signed a disadvantageous contract when you just started your business because you had little to offer or to loose, or perhaps you agreed to terms you didn’t fully understand. In either case, there is no need to live with a raw deal, or with one that is hurting your business. The report looks at a renegotiation of Chicago’s unfavorable parking meter management contract and identifies four key steps for re-negotiation: Appealing to a sense of fairness, refusing to meet contested terms, putting heavy hitters in charge of negotiations, and appealing to powerful outsiders for help.
A recent Washington Post article provides excerpts from an interview with The Art of Negotiation author Michael Wheeler. Wheeler advocates the following negotiation strategies:
- Improvise. Wheeler compares negotiations to jazz music in which two strong artists find a way to both express themselves and to create a compelling, coherent performance. Business negotiators are, he argues, like jazz masters taking cues from each other to create the performance in real time, rather than simply playing pre-defined or pre-assigned set pieces. Improvisation during negotiations, and reacting to new information revealed during the negotiation process Wheeler suggests, can result in far better outcomes than in those where participants tenaciously hold to their pre-defined starting positions.
- Tell Stories. Wheeler’s book is comprised of stories that illustrate his points, and he advocates story telling as a way to make your points more concretely and to make them resonate. Stories Wheeler says, are “how we understand things — those narratives. I don’t know about you, but I don’t dream in spreadsheets.”
The following single-topic posts provide other helpful negotiation tips:
- Try Strip-Lining. The practice gets its name from the fishing term which describes letting a fish swim away before reeling it in, and consists of asking a customer point-blank whether their objection is a deal-breaker, and offering to walk away if it is. A recent NY Times You’re The Boss blog post provides several examples of how to use strip-lining to your advantage in negotiations, as well as when it may not be appropriate.
- Curb Deception. Negotiation and deception often go hand-in-hand, and numerous studies have shown that in general people are very poor at identifying when others are not being truthful. This Harvard Law School post outlines twelve steps you can take to discourage others from acting deceitfully in negotiations, including showing how both your goals are linked, highlighting potential future business opportunities, and suggesting that there are limited alternatives to the deal.
- Understand Cultural Differences in Negotiation Style. 25 Fascinating Charts Of Negotiation Styles Around The World provides a comparison of differing cultural communication styles, goals, and expectations. It includes a chart of communication patterns that illustrates how each culture moves from discussion to decision. For example, Americans want to start negotiation quickly and want to reach a conclusion quickly, while Canadians are low-key and want to achieve harmony, the French want to vigorously and logically debate, Hungarians “value eloquence over logic and are unafraid to talk over each other” and the Chinese use meetings for information gathering and expect decisions to be made off-line.
As a small business owner, you may think that you have little leverage when negotiating with large companies or even with a single consumer for a big-ticket item or project. However, before you give up more than you’d like, try some of the strategies discussed here to create a winning deal for everyone involved.
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