Whether you're negotiating salary at a new job, asking for a raise, or managing a business deal, negotiation is a necessary professional skill. But negotiations are not easy and can take a long time to reach an agreement. Getting it right is essential, as even a small mistake can cost you the success of the deal.
We explain the dos and don'ts of negotiating and explain why negotiation skills are important in business.
What not to do when negotiating
Despite your best efforts, one wrong move can derail a negotiation. We spoke to consultant and author Molly Fletcher to find out. The Winning Guide to Negotiations: How to Close a Deal in a Conversationabout common negotiation mistakes to avoid.
1. Don't do things haphazardly.
The key to successful negotiations is preparation, and that means more than knowing the numbers and facts.
“Failing to prepare is preparing to fail,” Fletcher warned. “Preparation means gathering and understanding hard data, for example from peer companies, but it also means having 360-degree awareness.”
Proper preparation means knowing the needs, values, hopes and fears of decision makers and other stakeholders – in other words, not assuming that anything is non-negotiable.
“Gather as much data as you can up front and be prepared to ask strong diagnostic questions to get clear answers,” Fletcher says. “Negotiations rarely have a clear roadmap.”
The better you prepare, the better your chances of negotiating.
2. Don't rush.
Negotiations take time, especially if you want them to go smoothly. For example, it's important to take the time to build a genuine relationship with the other party.
“Share tidbits of personal information that demonstrate openness and a desire to connect,” advises Fletcher. “This can turn the negotiation from an adversarial battle into a productive conversation.”
Additionally, don't be afraid to incorporate pauses, which can help everyone regain perspective and clear out excessive emotion.
“Negotiating doesn't have to happen all at once,” says Fletcher. Communicating and negotiating effectively over time can help you build and maintain successful business relationships over the long term.
3. Don't take anything personally.
Fletcher knows it's easy to get carried away during a negotiation, especially if the outcome affects you personally, but getting too emotional can undermine your argument.
Fletcher's advice for coming out unscathed? “Challenge yourself to turn moments where you feel attacked or defensive into moments of curiosity where you are ready for feedback,” she says. “Emotions can easily work against you in negotiations.”
Fletcher also recommended being aware of your emotional triggers and knowing how to back away when you feel like things are going in the wrong direction.
4. Don't accept a bad deal.
Negotiations can be a long, exhausting and stressful process. You may feel pressured to agree to unfavorable terms, but Fletcher says that no matter which side you're on, it's a bad idea to just settle for terms.
“It's important to remember that an agreement isn't necessarily better than no deal,” Fletcher said. “It can be disheartening having spent time and energy trying to get an agreement, but that clarity is important.”
Before you negotiate, you need to know exactly what you're willing to give up. “Ask yourself, 'What does success look like? At what point am I comfortable giving up?'” Fletcher says. After all, giving up on a deal should always be an option.
5. Don’t over-negotiate.
Even if you're lucky enough to come out on top in a negotiation, Fletcher warns against overdoing it: Think about the consequences of over-negotiating: You might get what you want, but at what cost?
“Don't get into a situation where you borrow too much and can't repair the relationship,” Fletcher warns. “Realize that this is a relationship and a conversation that will hopefully continue over time.”
What to do during negotiations
Avoiding big mistakes can get you to the negotiating table, but you need to act smart to close a good deal. Here are some proactive tips for successful negotiations:
6. Make the offer first.
Part of being a good negotiator is taking control of the deal. For sellers, making an initial offer establishes the baseline for the contract. It's an effective way to lock in the terms that matter most to you from the very beginning of the negotiations.
7. Offer stated terms, not price ranges.
Providing a price range only gives buyers an advantage: they focus on the low end of the price range and close the deal at that rate.
Start by offering a higher price, taking into account your direct and indirect costs, and then find ways to add value to the deal without lowering your price too much. When making concessions, do so incrementally, and stick to your minimum price target.
8. Use your words wisely during negotiations.
You don't have to do all the talking in a negotiation. Say what you need to say and combine it with direct contact. This direct approach builds trust and makes it more likely that the other party will accept your proposed terms.
Keep in mind that your communications strategy should be focused on managing long-term customer relationships, not just closing a deal.
9. Ask open-ended questions and be a good listener.
Instead of yes-or-no questions that don't provide detail or context, choose questions that help the other party understand how they will benefit from the negotiation and ensure they understand the overall agreement. Listen to their concerns and objections, and counter them with answers that leave no room for doubt.
10. Propose a win-win scenario.
An agreement that ultimately benefits only one party leads to a sour business relationship. One-sided negotiations reduce trust and intimacy. Both you and the other party need to be confident that you are getting a fair deal.
Negotiation nuances to understand
While there's no perfect way to negotiate, there are some tactics that are more productive than others. Here are some examples of negotiation nuances to understand:
Close the deal while adding value.
When signing a contract, make sure you add value to the deal rather than undervaluing your own value.
For example, if you're selling a cable package, you might be happy if they agree to subscribe to your service. But a skilled negotiator will go the extra mile to offer premium channels, upgraded equipment, etc. Furthermore, these extra options will be more acceptable if you also add in a discount that gets the customer more for their money.
When you aim to create customer satisfaction, not just close the deal, you build customer loyalty that boosts your company's bottom line.
Never disparage a product or service.
Adding too much negativity to your negotiations will alienate customers. For example, if a customer is considering a cable package and comments that the price is higher than expected, the worst thing you can do is agree with them.
If a customer has their undivided attention on you, they probably want you to convince them to purchase your service or product, but agreeing that a package costs too much is simply admitting that the service isn’t worth the money.
Instead, counter this assertion by acknowledging the customer's concern and providing more context. Try saying things like, “That may seem like a lot, but we lose money because of all the channels available to you,” or, “Yes, some of you may say that, but we offer bulk discounts that make our prices much more affordable than they appear.”
By respecting both your customers' concerns and your own products and services, you will make a much better impression on them and ultimately increase their trust.
The Importance of Negotiation Skills
Negotiation is a skill that goes hand in hand with the skills you need to be a better salesperson. You may be tasked with negotiating lower credit card processing fees, real estate transactions, dispute resolution, business mergers, product sales and purchases, employee salaries, and more. You may also need to negotiate when asking for a raise.
It's not all about the money. Developing your negotiation skills can also help you become a better leader and improve your everyday interactions. Learning to prepare, communicate effectively, and listen can help you in every aspect of your career, business, and life.
Developing negotiation skills is not just beneficial for business leaders and sales managers, but for all employees as it helps them manage conflict and improve their communication skills, which in turn benefits the whole business.
