Whether you’re a budding entrepreneur or a serial startup wizard, are a recent addition to your sector, or were a serious decision-maker for your former employer, the entrepreneurship journey can prove unique and challenging every time you begin. Developing essential entrepreneurial skills can help you navigate those uncertain years while you’re building your business and maintain prosperity as your business matures. Arguably, one of the most critical skills any entrepreneur can build is the art of negotiation.
Assembling a toolkit of effective negotiation techniques can help you build the relationships necessary to gain investors, establish arrangements with service providers, and close sales leads. Similarly, negotiation skills can help you ensure your negotiations lead to a lasting agreement that is satisfactory for all involved. Finally, negotiation techniques can prevent your business from succumbing to the conflicts and roadblocks that can hinder long-term success.
So, how do you build effective negotiation techniques? Many entrepreneurs choose to utilize negotiation training developed specifically to achieve each of the above goals and more. We’ve outlined a few of the most important for entrepreneurs to give you a head start.
1. Do Your Homework
Whether you’re fresh out of business school or have a strong working knowledge of your industry, thorough preparation is an essential step in the negotiation process for entrepreneurs. Take the time to study the other parties involved, including learning their strengths and weaknesses, likely goals, potential concessions, and the value of any products or services they offer. Then, do the same for yourself and identify potential roadblocks, areas of concession, and common goals.
Preparation takes place in a more literal sense, as well. Many entrepreneurs choose to role play in advance of the negotiations process. In addition, be sure to arrive on time, well-rested, and professionally dressed for the best opportunity at achieving a positive outcome.
2. Engage in Active Listening
Effective negotiating means making the benefits your business can offer well-known to the others at the table. However, efforts to truly listen to the ideas, benefits, and offers made by others are just as important for a successful negotiation process. For most entrepreneurs, engaging in active listening is the most effective way to ensure they are, in fact, listening to and understanding the statements of others. More importantly, it is a powerful way to play upon one of the most common emotional needs humans have – the desire to be heard and understood.
Active listening tactics can include maintaining eye contact, non-verbally affirming that you’re listening with nods or smiles, asking questions, refraining from interrupting, and summarizing what the other person has said to check for understanding. Incorporating these into your negotiations reassures the others at the table that you value and understand what they have to say and helps you move forward with an informed decision.
3. Make a Strong Opening Offer
Research by Northwestern University suggests that there is a strong correlation between the first offer and the final outcome of the negotiations. In addition, follow-up offers are thoroughly influenced by a reasonable opening offer and often must make concessions right away to prove a valuable counteroffer.
If you’ve done the preparation necessary to establish your goals and potential concessions and weigh them against that of your opponent, you have a strong foundation to build your opening offer. Making the first offer can help you establish the tenor of the negotiations process ahead, as you inevitably cause all other parties to make an offer in relation to your own. With that in mind, ask for every item on your goals sheet and avoid accommodating the other parties in advance of their offers – you may be making unnecessary concessions.
4. Manage Your Emotions
The common advice for entrepreneurs beginning negotiations is to leave the emotions at the door. However, while entering negotiations with strong emotions like anger or fear in play can certainly be a detriment to your negotiation skills, it isn’t necessarily wise to eliminate all emotions. In fact, efforts to neutralize negative emotions and showcase others may help you avoid being taken advantage of during the negotiations process.
In particular, showing empathy – the capacity to understand where the other parties are coming from – could prevent others from engaging in questionable business tactics. Studies by the Journal of Business Ethics have shown that empathy is a deterrent against unethical bargaining techniques. Avoiding decisions influenced by anger, pride, or resentment and making a genuine effort to understand others’ positions is an effective way to negotiate with your emotions in check.
5. Know When to Close and When to Walk Away
Kenny Rogers had the right idea when he suggested that a skilled gambler knew just when to hold ‘em and when to fold ‘em (not to mention when to walk away and when to run). Entrepreneurs that enter into business negotiations with the perception that the deal must be closed no matter what negotiate with a feeling of desperation driving their decisions. However, if you begin the process with a firm outline of concessions you’re willing to make as well as deal breakers that will signify when it’s time to walk away, you enter negotiations with the power of this knowledge at your back.
Adequate preparation for both outcomes is key to strong negotiations as an entrepreneur. Work through several potential closing strategies to help you close the deal when negotiations go your way. Practice respectfully bowing out, so you’re ready for the conversation should things go awry.
Andres is the Managing Partner at SNI. He previously served the role of Chief Innovation Officer. His multi-disciplinary and lingual skills broaden SNI’s ability to effectively teach and consult in a wide range of industries, languages, and cultures.