After 40 years of negotiating hundreds of business deals and overseeing thousands more, I have developed the Six: the rules that have guided me in every successful negotiation. Following these rules in business negotiations will propel you to winning, value-creating outcomes.
1. Prepare
Most negotiators don’t lose deals at the table. They lose them before the conversation even starts by failing to adequately prepare.
Good preparation may be the single most important step a negotiator can take to ensure a successful outcome. In fact, 70% of a great outcome can be attributed to good preparation.
So, what does good preparation mean? Before walking into any negotiation, you should thoughtfully consider and align on:
- Your Goal. This is your north star or compass that reflects your most important need in reaching an agreement. Your goal keeps you on track throughout the negotiation when discussions might stray. Ensure your counterpart understands your goal and use it to show how your counterparts’ proposals may be lacking. Understand their goal as well. To reach an agreement, you will need to satisfy their goal in some respect.
- Your key Interests. These are the needs you have for the deal to work. Often, they are your decision-making criteria for reaching an agreement and are often grounded in your business strategy. Interests should be ranked in priority order to ensure that at least your most important needs are met in the negotiation. They often include things like “a fair price”, “more profit”, “exclusivity”, “innovation”, or a “strong working partnership”.
- The issues. These are the deal points that must be agreed upon to conclude an agreement. They might include things like the price/cost of an item/service, payment terms, or level of investment. For each issue, lay out your aspirational outcome, your bottom line, and what you expect your counterpart to propose. This will help you strategize on an opening offer and concessions that don’t cross your bottom line.
- Your alternatives. Knowing your alternatives gives you confidence and power to seek an agreement that works for you. Also, understand their alternatives and how much they potentially need you. You may realize you have more power than you thought.
- Your Power: Finally, consider the power you have from the company you represent, as well as how you show up personally. Is your company a known and trusted entity? Do you project knowledge and confidence? Are you using a tone and voice that invite your counterpart to work with you? These all help you reach an agreement that meets your needs.
2. Lead
Experience shows that those who lead the negotiation with confidence most often prevail. This is true because people tend to focus on the story and information they hear first. It is why “anchoring” your counterpart in your story, your needs and interests, your expectations, and your offer first can win the day. If you allow your counterpart to lead, the negotiation revolves around their narrative and demands, making it harder to achieve an outcome that fits your needs.
Leading the negotiation means taking charge of the agenda and communicating your expectations for how the process will unfold, while being open to perspectives and ideas from your counterpart so they feel they have some control (an important interest of theirs) over the outcome. Leading means always directing the conversation to your goals and interests (and theirs) when your counterpart strays.
3. Seek More Information
“Information is power”. Information allows one to fashion deals that work in practice and opens the door to more creative solutions.
If one understands the goals and interests that are motivating their counterpart, a deal can be fashioned that all can agree to. How does one get more information? By asking questions. Questions should be designed to learn the “why” behind your counterparts’ positions. For example, questions like “what do you hope to achieve?”, “What is your company’s strategy or business plan for the year?” or “What will be important to you in achieving a satisfactory outcome?” all help you uncover what it will take to reach a more impactful outcome.
Naturally, information is only usable if you truly listen to what is being said. Ensure you are actively listening and asking follow-up questions when you hear something you don’t fully understand.
4. Tell a Great Story
“Best Story Wins”. Most people are attracted to a great story and want to be part of that narrative if it resonates with them. Thus, business negotiators should develop a story that inspires their counterpart to act.
A great story begins with a vision for what could be if an agreement were to be reached. It lays out your unique capabilities and assets that make you more attractive than their alternative. It shares your core interests and decision-making criteria for reaching an agreement. A great story includes your strategy and plan for reaching the vision, so they know the vision is truly capable of being achieved. A great story ends with an ask, laying out what it will take to reach an agreement.
5. Be Aspirational
“You Don’t Get What You Don’t Ask for”. It is always bewildering that so many negotiators are afraid to ask for more, believing they don’t have the power or leverage to ask for what they need. Most often, they simply lack the confidence to make a bold ask. If you don’t ask, you won’t get.
Unfortunately, some negotiators take this rule too far by making an extreme demand that lacks credibility. It is a fine line between being aspirational and extreme. If you go too far, you will likely face an angry counterpart, a decline in trust, and a long way to go before reaching an agreement. Consider what you think is a reasonable ask, then ask for some more. We tend to underestimate what can be achieved in negotiation.
6. Persuade – Don’t Argue
Too often, business negotiations devolve into an argument over who is right and who is wrong. Each side offers reasons and facts for why their position is the right one. While facts can be an important part of a negotiation, they rarely win the day.
Neither side in a negotiation truly cares about the reasons their counterpart offers up. What do they care about? Having their interests and goals met. Thus, successful negotiators persuade their counterparts by showing how their position and offers meet both sides’ most important interests and goals. “You said this was important to you – here is how I am addressing or solving that need”. It is hard to argue when you frame up your position as a solution to their stated interests. Make sure your position meets your goals and interests as well.
Moreover, persuasion means showing what you have given to your counterpart and asking for something in return of equal value. This way, we set up an expectation that to get, you must give.
Winning business negotiators are thoughtful, strategic, and confident leaders of the negotiation process. Years of experience demonstrate that by employing The Six: Rules for Successful Negotiation, they can create more value and impact. Give it a try in your next business negotiation.
