Five Tactics for Negotiating a Successful Business Deal
Every entrepreneur should master this skill if they want to grow their company.
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Whether you're a seasoned CEO or an up-and-coming entrepreneur, knowing how to negotiate a successful deal is key to the overall health of a business. "Communication and willingness of both parties to create a mutually beneficial outcome is the best way to get a deal done," says Kim Perell, head of the Side Hustle Accelerator at Entrepreneur. "Being too rigid and only thinking about your own interests will jeopardize a deal, and the opportunity to have a good working relationship once a deal closes.
However, there are several obstacles you might need to overcome when negotiating a business deal. "The most common issues come from not communicating what you really want and not asking enough questions to determine what the other party really wants," negotiation expert Linda Swindling explains. "Your job is to research and to ask questions until you understand." Interested in hearing more about how to negotiate a good business deal? We asked Perell, Swindling, and Ed Brodow, author of Negotiation Boot Camp ($16.95, amazon.com), to share their advice, and this is what they had to say.
Since all great partnerships are based on trust, Perell suggests meeting face-to-face with your potential partner as often as possible to build rapport and mutual respect. "Ask questions outside of the deal specifics, such as their long-term vision for the company, challenges, and opportunities," she advises. "Try to uncover a shared interest or common experiences or give a compliment on something specific, like an award they won, article published, or new client. Work to understand their values, beliefs, and vision and how you can support that as a partner."
Be clear about your needs—and theirs.
To ensure the needs of both parties are met, Perell says it's crucial to determine your "must-haves" before starting negotiations with a potential business partner. "Be realistic—you can't have everything," she says. "Be prepared to compromise on anything outside of your 'must haves.'" And since the ideal outcome in any business deal is for everyone to walk away feeling like the outcome is a win-win, Swindling says it's imperative to be clear about the other parties' expectations. "This will help you prepare to negotiate a more agreeable deal with a greater likelihood that the other parties will uphold their side if there are challenges later," she says.
Be cautious of negotiation tricks and negative tactics.
There are all sorts of tricks and tactics that potential business partners might use during a negotiation that Swindling says you should keep an eye out for. "Common tricks and negative tactics are designed to throw people off emotionally and to gain an advantage in a business negotiation," she explains. "Behaviors like flinching, sighing, or eye-rolling are sometimes used to make someone question their requests, as is pretending to suddenly need to check with a higher authority." And while these antics may seem merely annoying or illogical, Swindling says they could make you second guess yourself. "Remember that it is your choice to stand your ground or walk away from a bad deal," she says.
Don't be afraid to compromise.
If you feel your needs aren't being met while negotiating a business deal, Perell says not to settle. "The first offer is rarely the best offer, and there is generally always room to negotiate," she explains. But that doesn't mean you should be unwilling to compromise at all. It's a give and take. "If you give something up, it's important to get something in return. You should be flexible and work on finding a win-win outcome. You will have to have a good working relationship once the deal closes."
Get it in writing quickly.
Since recollections of discussions can change or vary, Brodow says it's essential that any verbal consensus reached concerning a business deal be outlined in writing within 24 hours of negotiations. "All verbal agreements, especially those made over the phone, should be summarized in a deal memo immediately," he explains. "Get the other party to initial it, because otherwise, it becomes your opinion versus theirs." However, Perell says it's important to remember that sometimes a potential business partner may need approval from a board or shareholders before committing to a deal. "If this is the case, give them one week to put the terms in writing or else consider focusing your time and energy elsewhere."