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For a business, having negotiation skills is important. Because this ability is really needed to attract investors or customers to collaborate. So how do you win negotiations in business?
How to win negotiations in business cannot be taken lightly. Because it is different from negotiation skills which can be formed from a lot of flying hours, to win negotiations requires a special strategy. With this strategy, it is hoped that it will be able to encourage more optimal negotiator performance.
According to RAIN Group research, it was found that sales negotiators who perform the best have three times the chance of achieving the set price target. In addition, sellers are also 13 times more likely to be very satisfied with the results of their negotiations.
Business negotiation strategies must be prepared in advance. This is because business negotiations can be very tricky. You must be able to get the highest benefits or get what you want in business negotiations. However, the party you are negotiating with also wants the same thing.
Negotiations are sometimes like disguised "war". However, you must still appear friendly in front. You have to be firm, but also flexible. Business negotiations are how you get what you want, but still maintain good relationships with your business partners or clients.
Business negotiations are full of contradictions. Therefore, you must understand business negotiation strategies to successfully achieve your goals.
What is Negotiation in Business?
Negotiation is a discussion in which two or more parties attempt to reach an agreement through bargaining. In negotiations, each party tries to persuade the other party to agree with its point of view.
Negotiations involve some give and take, meaning one party will always come out on top in the negotiation. Others, however, had to concede even if the concessions were nominal.
The parties involved in negotiations can vary. They can include talks between buyers and sellers, employers and prospective employees, or the governments of two or more countries.
Business Negotiation Strategy
Business negotiations are not about winning or losing. The goal to be achieved in business negotiations is to establish a mutually beneficial relationship. You get what you want. Likewise, other parties benefit from business collaboration without you feeling disadvantaged at all.
To achieve this goal, you must develop a number of negotiation skills. Often, when discussing a price agreement, the first offer is always not what you want. However, if you commit to negotiating strongly, you may gain some advantages in business transactions.
Summarized from the Master Class, there are at least six effective business negotiation strategies used in reaching an agreement.
1. Prepare Yourself
Preparation requires many things that you may need to do, such as:
- Thoroughly understand the other party's business by reviewing their website, their press releases, articles written about their company, and so on. A thorough Google and LinkedIn search is recommended here.
- Review the background of the person you are negotiating with by reviewing the bio on the company website, the person's LinkedIn profile, and by conducting a Web search
- Review what similar agreements other parties have completed, and their terms. For public companies, some prior agreements may be filed with the SEC.
- Understand the offers and prices of the competitors of the party you are negotiating with.
2. Listen and understand the problem from the other party's point of view
The worst negotiators are the ones who do all the talking, wanting to control the conversation and relentlessly explaining their superiority. While the best negotiators tend to be people who listen to the other side, understand their issues, and then formulate an appropriate response.
Try to get an understanding of what is important to the other party, what limitations they may have, and what flexibility they may have. Also try to refrain from talking too much.
3. Win-Win Solution
As mentioned earlier, there are no winners and losers in business negotiations. Therefore, look for a win-win solution. The thing you need to think about is what you want and what your partner wants. Also think about what both parties don't have.
Then, propose a deal that meets both parties' needs and produces a profit. Both parties felt they had won after the agreement was reached.
4. Open negotiations with a high offer or vice versa
If you are in the position of seller, offer a high price. Higher than the price you can accept. At some point, the price will be negotiated down.
If you give a reasonable price from the start, you will still be asked to lower the price. So, it's best to place the highest bid first. If your business needs support from other businesses, negotiate to ask for a price reduction.
5. Set a Deadline for Your Offer
If you are sure you have made a reasonable offer, give your negotiating partner a deadline to accept it or not. This deadline is not a fixed price. Your partner may even make their version of a counter offer. However, by setting a deadline, you give confirmation to your partner that you are serious.
6. Use the Mirroring Method
The next business negotiation strategy is to use mirroring to show that you are paying attention to the person you are talking to. Mirroring is the repetition of keywords used by your negotiation partner.
Repeating important words that the other person has just said can be very effective. Indirectly, your partner thinks that you are paying attention to what they are saying. This shows that you treat their views with careful consideration.
7. Send Clues with Body Language
Body language can be more “sound” than you stating your opinion directly. For example, if you are offered a cheap price, you can jerk your body.
Your reaction can communicate the message that you disagree more deeply than any vocal response. Your partner will also try to recalculate their offer.
8. Accept the Best Alternative
If both parties persist in their respective offering positions, reaching an agreement becomes somewhat impossible. If a deal must happen, try to accept the best alternative offered.
9. Make a Strong First Impression
A study revealed that the first 5 minutes are a very important time in a negotiation. Therefore, make a strong impression in the early minutes to win the negotiation.
10. Convey the Goals and Objectives of the Negotiations
Try to take the initiative in the conversation without waiting for the other person to start. Convey your intention to carry out negotiations with confidence. Because self-confidence can help you take control of the discussion and make the person you are talking to obey your wishes.
Try every time you express your wishes, include detailed questions regarding things that are still stuck in your mind and state clearly what your needs are in this negotiation.
11. Study the person you are talking to
Try to learn about the details of the needs of the person you are talking to. Then, sort and detail so that you can meet your needs well. This makes it easier for you to communicate with them and makes your presence very important to them.
12. Listen to the person you are talking to
Try to be professional by listening to your negotiating partner until the end. Let them explain their needs, never interrupt the conversation.
From this conversation, you can analyze the important points in the problem being discussed. Apart from that, you can also analyze gaps that allow you to increase your bargaining power to win negotiations.
13. Be Calm
Calmness is the key to victory in negotiations. Although, maybe you meet an annoying negotiation opponent who wants to win on their own. The solution is that you can refuse them firmly but remain polite without offending or provoking their anger.
14. Building Trust
Stay away from arrogant attitudes that express your wishes without paying attention to the person you are talking to. Instead provide clear and accurate information. Because no one likes discussing with someone who is arrogant and conceited. If the vibrations created are positive then negotiations tend to go well.
15. Try to get to the point
Don't waste a lot of time negotiating which will be detrimental to both parties. Because prolonged negotiations will drain your energy and make you lose focus. Make a list of the points you want to negotiate with the other person.
16. Keep Negotiations Civil
This principle is also known as the “don't be an asshole rule.” Nobody really wants to do business with a difficult or rude personality.
Even after negotiations are complete, you may want to do business with this person again, or the transaction may require ongoing involvement with representatives of the other party.
Building good long-term relationships should be one of the goals in negotiations. A collaborative, positive tone in negotiations is more likely to result in progress toward closure.
17. Understand Deal Dynamics
Understanding the dynamics of a deal is critical in any negotiation. So be prepared to determine the following:
- Who has influence in negotiations? Who wants a deal more?
- What time constraints does the other party have?
- What alternatives do the other parties have?
- Will the other party get a significant payment from you? If so, leverage will tend to be in your favor.
18. Don't focus on one problem
Maybe you want to avoid getting stuck on a problem that seems difficult to solve. Sometimes it is best to suggest that an issue be put aside for now and both parties move on to making progress on other issues. Creative solutions may come to you later outside the heat of negotiations.
19. Never Accept the First Offer
It is often a mistake to accept the first offer from the other party. For example, if you're selling your home and receive an offer, consider countering with a higher price or better terms (even if there are no other offers).
If you don't reciprocate, the other party will worry that they are offering too much and may end up with buyer's remorse and trying to get out of the deal. And buyers expect there to be a counter because they expect their first offer will likely be rejected.
20. Prepare a Letter of Intent or Term Sheet to Reflect Your Agreement
It is often helpful, at the right time, to prepare a Letter of Intent or Term Sheet to reflect your views on the key terms of an agreement.
A terms sheet can help speed up reaching an agreement, save on legal costs, and continue momentum for the deal. It is more informal than a definitive agreement and is easier to reach agreement on.
For example, Letters of Intent are often prepared and approved in connection with mergers and acquisitions (see Negotiating an Acquisition Letter of Intent). And here are some great examples of forms to review that can help you put together such a document:
- Letter of intent for joint venture
- Term sheet for office space rental
- Venture capital term sheet
- Term sheet for investments by strategic investors
- Acquisition letter of intent, beneficial to the buyer
- Term sheet for selling a company, benefiting the seller
What are steps to negotiating successfully?
After learning a number of important strategies in negotiating, what you need to do is practice your negotiation skills. Then, apply what you know to real negotiations.
However, there are a number of small but important details for you to know in carrying out a business negotiation strategy. Here are some tips.
- Listen and understand the problem from the other party's perspective. Try to gain an understanding of what is important to the other party, what limitations they have, and where they have flexibility. Refrain from talking too much.
- Get ready. Learn the ins and outs of your negotiating partner. Review the background of the person you are going to negotiate with and what agreements they have made with other parties.
- Keep negotiations professional and polite. Nobody wants to do business with someone with a difficult or rude personality. Be friendly to build long-term relationships.
- Understand deal dynamics. You have to be astute in reading the situation, who has influence in the negotiation? Who wants a deal more? What obstacles do partners face? What alternatives do they have? If your reading is correct, you are one step ahead in negotiating.
- Always keep an initial version of the draft agreement. This allows you to frame how the deal should be structured. Partners tend to be reluctant to make major changes to your documents. Therefore, you have won the battle by initiating the terms of your choice.
- Be prepared to walk away from negotiations. Leaving doesn't mean failure. This is a negotiation tactic that is indeed risky. If you walk away from negotiations, your partner may try to adjust their offer again. However, if not, you have to be ready to thwart it.
- Don't take too long to reach an agreement. The longer it takes to complete a deal, the more likely it is that something will happen to derail it. You have to respond quickly so that an agreement can be reached quickly.
- Don't get hung up on the deal in sight. There are many other competitive alternatives. By having various alternatives, your negotiating position can improve and you can make the best decision.
- Never accept the first offer. The first offer is often not in your favor. Your negotiating partner will think you will bid again at the price you want, so he will increase or decrease the appropriate price. Negotiate until you come to a price limit that you can accept.
- Consult the best consultants and lawyers. If the negotiations you are carrying out are quite complicated, don't hesitate to ask a third party for help. They will make sure you don't become a disadvantaged party in the negotiations.
You can apply the methods above to win negotiations in business to increase business income. Apart from needing negotiation skills, to increase sales you also need other supporting factors. For example, making promises before negotiations also requires good marketing.
Conclusion
No business success is created by chance. In this competitive world, mastering effective business negotiation strategies is one of the main keys to achieving your dream business goals.
By implementing the 7 business negotiation strategies that have been discussed, you will be able to face every challenge with confidence and resilience. Remember, negotiation is an evolving art and requires practice and experience to become proficient.
With the spirit of never giving up and the business negotiation strategies outlined above, you will become an excellent negotiator, bringing your business to unshakable glory.
These are a number of business negotiation strategies and tips. Hope your business negotiations go smoothly!