How Do You Negotiate a Business Deal?
Negotiation is an art, and to master it, we've gathered firsthand experiences from CEOs and Founders on the tactics that have led to their success. From creating win-win scenarios to using silence as a strategic tool, explore the fifteen powerful strategies these experts have employed in their high-stakes business deals.
- Create Win-Win Negotiation Scenarios
- Propose First Offer Advantage
- Employ Tactical Empathy
- Leverage Data-Driven Presentations
- Demonstrate Cumulative Value Benefits
- Align with Client Objectives
- Utilize Success Storytelling
- Increase Leverage with Strong Growth
- Propose Reciprocal Excellence
- Foster Transparency and Shared Vision
- Show Potential for Long-Term Partnerships
- Build Rapport and Foster Trust
- Recognize the Power of 'No Deal'
- Articulate Mutual Partnership Value
- Use Silence as a Negotiation Tactic
Create Win-Win Negotiation Scenarios
For one of our major clients on a long-term contract, one strategy that enabled me to succeed was creating win-win scenarios. Rather than adopting an entrenched bargaining position, I prioritized appreciating the client’s fundamental interests and apprehensions. As they spoke, I actively listened and kept an open mind to come up with suggestions for responding to their key concerns without sabotaging our objectives as a business. This method fostered trust and good faith towards each other, resulting in both parties agreeing on something amicable to all parties concerned, thus leading to a strong, lasting partnership.
Propose First Offer Advantage
I recently had to negotiate a year-long contract for software that my team was using internally. In order to save on the expense over the next year, I reached out to the company to ask what they could do for us. Our situation was outside of their normal offer to save when you pay one year upfront, so it required chatting with them about it.
The tactic that helped the most was putting the ball in their court first. That forced them to think about the situation and come back with an offer. That offer was better than what I would have initially asked for, so I immediately was in a winning situation. From there, I was able to negotiate slightly lower to make the deal even sweeter for us. Lesson learned: Always ask what someone can do and have them propose the first offer; then you can renegotiate from there. You never know where someone will come in, and it's better to have them start the negotiation.
Employ Tactical Empathy
Negotiations are a key part of running a small business. In fact, I find myself negotiating with many people on a daily basis. Whether that be negotiating with an employee, or with a potential client who may sign up for our services, or even with my own kids.
One instance remains unforgettable. I had to negotiate with a potential client on a seven-figure agreement. The client was averse to signing any agreement at all, while all our agreements are generally 12 months or more. They were adamant that they didn't want any ongoing retainers, preferring a one-time, project-based approach.
One of the key reasons for this hesitation stemmed from their experience with other agencies and the ROI they achieved from similar marketing campaigns. They believed that the agreement made the deal skew in our favor. They feared that the agreement provided no recourse for an exit for non-performance. I deployed tactical empathy and started off by addressing the elephant in the room. A common technique in negotiation, as indicated in the book “Never Split the Difference” by Chris Voss, is to do an accusation audit. I carried out an accusation audit by verbalizing all the negative feelings that the client was feeling about the agreement. This softened the client, and he started to surface his real objection about performance.
I proposed a 12-month agreement with a seven-figure value, but with a twist. I suggested a performance-based structure, where a significant portion of the fee would be tied to specific key performance indicators (KPIs). This way, they would only pay for results, and we would share the risk—aka, we put our skin in the game.
After a series of back-and-forth negotiation rounds, we reached a mutually beneficial agreement. The client agreed to the 12-month deal, with a seven-figure value, and a performance-based structure that aligned our interests.
Leverage Data-Driven Presentations
During a client meeting with a potential investor, I had to justify our valuation and negotiate favorable terms, deftly using detailed, data-driven presentations.
I fully explained the essential financial projections, market analysis, and case studies to support our growth potential and past accomplishments. Backing up our claims with real, data-rich evidence bolstered my business acumen and made my company appear more reputable. The detailed, unabashed communication impressed the investor, who agreed to our terms. Much was accomplished as a direct result of this negotiation: My company snagged an influx of crucial funds and left with a rapport with an investor that we could bank on to leverage in future dealings.
The deal went through beautifully, and we were able to ramp up our growth plans, increase the breadth of our product offerings, and greatly expand our market footprint. We had prepared and aligned ourselves with transparency with investors, and because of that, support was forthcoming.
Demonstrate Cumulative Value Benefits
I once had to negotiate a major deal with a key client who was hesitant about committing to a long-term contract. To address their concerns, I used a tactic I call "value stacking." This involves clearly demonstrating the cumulative benefits they would receive over time.
During the negotiation, I broke down the value of our services into specific, tangible outcomes. I shared detailed case studies showing how our digital marketing strategies had significantly boosted other clients' ROI. By providing a clear, data-driven projection of the benefits, we were able to build trust and align their goals with our services. This approach not only secured the deal but also laid the foundation for a strong, ongoing partnership. Value stacking proved to be an effective way to highlight our expertise and ensure mutual benefit.
Align with Client Objectives
When we were fighting for a vital collaboration with a big client, negotiating a deal for my company once required a novel technique. The client seemed to have quite rigid terms, so I knew a conventional negotiating tactic wouldn't work. I was able to succeed in part because I used common objectives.
I spent some time learning the client's long-term goals and present difficulties before the appointment. Instead of arguing against their requirements right away during the negotiation, I offered a picture of how our partnership might alleviate their problems and promote our mutual development. As a concession, I suggested a pilot project so they could test our worth without making a complete commitment upfront.
This strategy turned the argument from one of confrontation to one of cooperation. The client accepted the pilot after appreciating the customized solution, which finally resulted in a full-scale collaboration.
Utilize Success Storytelling
During a crucial negotiation with a potential client, we faced hesitation about the investment required for our digital marketing services. To overcome this, I employed the tactic of "success storytelling." Instead of focusing solely on the numbers, I shared compelling success stories from past clients.
One story highlighted how a similar business saw a 50% increase in online sales after implementing our strategies. I walked them through the steps we took, the challenges we overcame, and the measurable results we achieved. This narrative helped them visualize the potential benefits and built their confidence in our capabilities. We closed the deal and established a strong, trust-based relationship by making the potential success tangible and relatable. This storytelling approach proved invaluable in conveying our value and securing the partnership.
Increase Leverage with Strong Growth
When I negotiated the sale of my last SaaS startup, the most important tactic was to shift the negotiation so that I held all the leverage. The company trying to acquire my business first made a very low offer because, for a few months, sales had been stagnant. I turned down the offer and went to work, really focusing on Facebook marketing, until we had four to six months of consistent, strong growth. Then I went back to them, and because of the strong growth, I was able to negotiate an offer that was double their original offer.
Propose Reciprocal Excellence
One notable negotiation occurred while finalizing a contract with an outsourcing company for customer-service support. We were struggling to agree on network security protocols. The tactic that led us to success was 'reciprocal excellence'—I proposed that we share our best practices in network security to help them improve, while they maintain high-quality customer service. It projected mutual benefit and signified our investment in their success, leading to a satisfactory agreement.
Foster Transparency and Shared Vision
One memorable negotiation occurred when we were looking to expand Toggl Track's functionality through an acquisition. We identified a startup with an innovative approach to task automation, which complemented our existing tools beautifully. Negotiations initially stumbled over valuation disagreements. I took a step back, reassessing our approach, and decided to open up about our organization's long-term vision, how their team would be integral to it, and shared testimonials from our employees about our company culture.
In this negotiation, patience and transparency were key. By being open about our intentions and the potential growth we envisioned together, we created a sense of trust and shared destiny. This approach not only bridged the initial financial gap but also turned the negotiation into a discussion about partnership and mutual success, which was instrumental in closing the deal.
Show Potential for Long-Term Partnerships
One negotiation that stands out in running my vehicle rental company involved securing a fleet of new vehicles under favorable terms. The key tactic that helped me succeed was demonstrating the potential for a long-term partnership with the supplier. I started by being completely transparent about our budget constraints and specific needs. This openness turned the discussion into a collaborative effort, where the supplier was encouraged to propose solutions that aligned with our operational goals and financial limits.
I made it clear that I had the authority and readiness to close the deal promptly if they could meet our terms, which incentivized them to offer competitive pricing and flexible terms. Additionally, I always make it a point to compare offers from various suppliers. This not only gives me leverage in negotiations but also a clear perspective on the market. By showing that I was informed and had options, I was able to negotiate from a position of strength, ultimately securing a deal that benefited both our company and the supplier.
Build Rapport and Foster Trust
One tactic that proved invaluable during this negotiation was building a strong rapport and fostering trust with the supplier's representative. I made a conscious effort to understand their concerns, priorities, and constraints.
By actively listening and demonstrating empathy, I was able to establish a collaborative dynamic. Moreover, I was transparent about our business goals and the importance of this partnership. This open communication helped build trust and credibility, which is essential in any successful negotiation.
The rapport and trust we established allowed us to navigate through complex discussions and find mutually beneficial solutions. For instance, we agreed on a pricing structure that provided us with cost advantages while ensuring fair compensation for the supplier.
Ultimately, this negotiation tactic enabled us to secure a favorable long-term contract, ensuring a reliable supply chain and contributing to the growth and success of our business.
Recognize the Power of 'No Deal'
Sometimes the best negotiation tactic is 'no deal.' I've walked away from many deals. Recently, a friend opened a retail location in the area. He wanted some help with marketing but didn't have the kind of budget that I require to allocate brainpower to a new client. I gave him some pointers and the budget I need to get involved, and then I walked away.
Had we done a deal, I wouldn't have been happy, and therefore not engaged in the project because the budget wasn't there. He wouldn't have been happy because to him, the budget he had available was a lot of money, and I wouldn't have been able to prioritize his project. It was better for both of us to walk away.
Down the road, if his business grows, we might revisit the deal. Or, he may refer people who are qualified clients because I've done nothing to sour our relationship. He got some free advice, and hopefully, his business will do well. Whenever you enter a negotiation, you always need to be able to say no to it. Spend some time before talks begin, where you set some mental boundaries on the minimum requirements for you to enter the deal. If they can't deliver what you need, then it's better to walk away.
Articulate Mutual Partnership Value
During a crucial negotiation for my gift service company in Brazil, I had to secure better pricing for bulk purchases of gift items. One tactic that significantly aided my success was clearly articulating the mutual value of our partnership with the supplier. I started by outlining how a steady stream of large orders from us could help stabilize their production schedules. I also agreed to be flexible with payment and delivery terms, making the deal more attractive.
Furthermore, I presented market research to demonstrate the growing demand for unique and personalized gifts, emphasizing how our partnership could tap into this trend. I highlighted the potential for increased sales during peak seasons, assuring the supplier that aligning with us would be beneficial. By framing the negotiation around the value we could offer each other, I successfully negotiated better prices and exclusive access to specialized products, enhancing our ability to provide distinctive gift solutions for special occasions.
Use Silence as a Negotiation Tactic
In negotiating a lease for our new office space, one successful tactic I employed was the power of silence. During discussions, I let the landlord present their terms fully without interjecting or rushing to counter-offer. By doing so, I created an atmosphere that allowed for genuine dialogue and demonstrated that I was thoughtfully considering their proposal. This often made the landlord feel heard and respected, which fostered a more collaborative environment.
My advice to anyone in negotiation is to listen more than you speak; this not only shows confidence but can also give you crucial insights into the other party's priorities and potential areas for compromise.
