I am currently working on a negotiation course that I plan to offer on Udemy and on my own platform Podnah. Here is the current draft of the outline:
How to Win in Business Negotiation
Introduction
In this course we will focus primarily on business negotiations and negotiations you will encounter when making significant purchases or sales.
When you are negotiating, your instincts can be relied on and you can draw from them. It is important to remember though, like any other skill, these instincts can be honed and your negotiation abilities can be improved by learning the process of how to prepare for and work through a complicated negotiation.
I discovered this when I first started trading with people. Sometimes you make a good trade, sometimes you regret the trade. You should learn from each trade.
When you experience your first win at a negotiation, you may well become hooked. You may want to negotiate all the time. But know that negotiation doesn’t have to always be adversarial nor does it have to be in a “winner takes all” format. Many successful negotiations end with both sides feeling like they made the best deal.
My experience negotiating took me from working at a pawn shop while in college, where I had to buy and sell merchandise on a daily basis, to working as an insurance and injury lawyer where I had to negotiate large civil litigation settlements between two warring parties.
What I learned at the pawn shop would stay with me for the rest of my life. And I would apply those lessons as a lawyer, real estate investor and startup founder.
As I entered the workforce as a young lawyer, I was often lured away from my instincts in order to follow what other lawyers were doing. I found myself moving away from my instincts and it seemed like I had lost my edge.
After finishing law school I found myself negotiating with other lawyers to settle personal injury or property damage cases. These negotiations might be on the phone, by correspondence or in the form of a mediation that was typically administered by a mediator or a judge.
I noticed that negotiating on behalf of a client was very different from negotiating for myself. I also noticed that negotiating a personal injury settlement was very different from haggling over price when buying something on behalf of the pawn shop.
In a personal injury case, there are multiple considerations in play: will any of the money be taxable? Will it be enough to cover future surgeries or treatment? Will the defendant require the plaintiff to sign a confidentiality agreement? To name just a few.
I discovered that negotiating on behalf of other people, as lawyers or professional negotiators often do, seemed much more difficult than if I personally negotiated to buy a house or commercial building as an investment property for my own portfolio. Why was that?
I believe it was for several reasons. First, the lawyers are not the actual parties, but representatives of the parties tasked with the responsibility and duty of negotiating on their behalf and in their best interests. This dynamic changes things – a lot.
When you are negotiating for someone else, you may feel a duty to not make things worse, or you may feel like pushing the envelope perhaps too far. Everyone is different but in my own experience, I find myself a little more conservative when negotiating on a client’s behalf because I don’t want to make things worse.
Also, interjecting lawyers and mediators complicates the process because now there are more cooks in the proverbial kitchen. It adds another layer of complexity to an already complex situation.
How does the client know who to trust? How does the client know the lawyer or mediator isn’t looking out for their own self-interests over theirs? If the lawyer is pushing the client towards settlement, is it because the lawyer needs money now, or is it because they don’t think they can win at trial?
Your instincts tend to be suppressed and your “duties to your client” take charge. This inner conflict I believe is counter-productive.
Fear of messing up your client’s case can cause you to be too conservative. On the other hand, if you are overly confident without a rational basis, you can maybe bypass a good outcome in settlement and decide to try the case instead.
Also, I learned that in particularly long negotiations, like we might experience in a multi-party, and multi-day wrongful death mediation, exhaustion can set in and the parties may agree to an unfavorable deal simply because they want the process to end.
In my experience, the more people that get in the way of me trying to negotiate, the worse I perform. I do best when I deal with my own interests directly with the other person and their interests.
If you are taking this course, you will probably be negotiating on your own behalf or on behalf of your company. I will share with you the approach and techniques I’ve used that have worked in the past and also the mistakes I have made along the way.
What I’ve learned negotiating for a living is that negotiating is more an art than a science. And, like any art, the more you do it, especially with the help of some training, the better you’ll get at it. Like learning to play guitar, winning at negotiation can be learned intellectually, but it really needs to be practiced in order to improve your skills.
Let’s get started!
Key Concepts / Definitions
Distributive Negotiation
Distributive Negotiation is the type used when each side is trying to maximize their own benefits without regard to any ongoing relationship.
Integrative Negotiation
“Integrative Negotiation,” on the other hand, is when the negotiating parties have a relationship they value and so they want to explore outcomes where both parties maximize benefits. This is also known as a “win-win” approach.
Mixed Motive Negotiation
And finally, “mixed motive” negotiation employs both aspects of the above. They want to maximize value where their mutual interests intersect, but want the maximum benefits for themselves where they don’t.
Best Alternative to Negotiated Agreement (BATNA)
Your BATNA is the next best deal or outcome for you if this negotiation fails.
Knowing your BATNA and the other side’s BATNA will help you understand the stakes of the negotiation. If your BATNA is great, then the stakes are much lower if this falls through. If theirs is great, they may not be as motivated to come to an agreement if what you’re offering isn’t as good as what they can get elsewhere.
Assessing your BATNA is crucial because it helps you determine the strength of your position and the value of potential agreements.
Can you improve your own BATNA? Can the other side improve theirs?
How to Assess Your BATNA
Identify Your Alternatives:
Make a list of all possible actions you could take if negotiations fail. These could include seeking other suppliers, pursuing a different job opportunity, or exploring other options available to you.
Evaluate Each Alternative:
Assess the feasibility, cost, and potential benefits of each alternative. Consider how each alternative aligns with your goals and priorities.
Determine the Best Alternative:
Identify which alternative is the most attractive or beneficial to you if no agreement is reached in the current negotiation.
Assess the Value of Your BATNA:
Consider the value of your BATNA in comparison to the potential agreement. If your BATNA is strong, you may have more leverage in the negotiation.
Consider the Other Party’s BATNA:
Try to estimate the other party’s BATNA. Understanding their alternatives can help you negotiate more effectively.
Reassess Your BATNA Throughout the Negotiation:
As the negotiation progresses and new information becomes available, reassess your BATNA to ensure you are making informed decisions.
Use Your BATNA Wisely:
Knowing your BATNA can give you confidence during negotiations. Use it strategically to set limits, make proposals, and drive the negotiation toward a favorable outcome.
Preparation
I believe good preparation is the single most important factor in winning at an important negotiation.
But what does this mean and how do you do it?
Preparing means knowing what your BATNA and theirs too.
What do you know about the other side? Do they know more than you do? How motivated are they to strike a deal?
If buying real estate, this means knowing the market you’re in well. It also means knowing your financing inside and out (what you can and cannot afford, interest rates, etc) and what other options are available in the market.
If selling your company, it means knowing what other companies like yours are selling for. This also means knowing your buyer.
The concept is actually quite simple – if you’re car shopping, you should know what options and models are available across the class of vehicle you want.
Here are some examples of ways to prepare effectively:
Define Your Objectives:
Clearly define what you want to achieve in the negotiation. Identify your priorities and what you are willing to compromise on.
Research the Other Party:
Learn about the other party’s goals, interests, and potential constraints. Understanding their perspective can help you anticipate their behavior and prepare your strategy.
Understand the Context:
Consider the broader context of the negotiation, including market conditions, industry trends, and any relevant legal or regulatory issues.
Gather Information:
Collect relevant information and data to support your position. This could include market research, financial data, or industry benchmarks.
Develop Your BATNA:
Identify your Best Alternative to a Negotiated Agreement (BATNA). Knowing your BATNA gives you leverage and helps you assess the value of potential agreements.
Set Realistic Goals:
Establish realistic expectations for the negotiation. Define your ideal outcome, your acceptable outcome, and your walk-away point.
Plan Your Strategy:
Based on your goals and research, develop a strategy for the negotiation. Consider the appropriate level of assertiveness and cooperation based on the situation.
Anticipate Objections and Responses:
Anticipate potential objections or challenges from the other party, and prepare responses and counterarguments.
Practice and Role-play:
Rehearse your negotiation strategy and responses with a colleague or mentor. Role-playing can help you refine your approach and build confidence.
Plan for Concessions:
Determine in advance which concessions you are willing to make and under what circumstances. Be strategic about when and how you make concessions.
Consider the Negotiation Environment:
Consider the physical and logistical aspects of the negotiation, such as the location, timing, and seating arrangements.
Prepare Your Opening Statement:
Prepare a clear and concise opening statement that outlines your objectives and sets the tone for the negotiation.
Plan for Documentation:
Decide how you will document the agreement, including any written contracts or agreements that need to be drafted.
Knowing the Other Party
I also like to know something about the other party. What do they do for a living? How are they thinking about this deal? Are they richer than me or not? Are they smarter than me? What do they know that I don’t know?
Prepare before you negotiate by trying to identify both parties’ interests and objectives and how you might achieve them.
What is your counterpart’s perspective? What are their interests? What is their reputation?
Thinking through the negotiation from their point of view will help you understand what they want and how you can give that to them while also creating value for yourself.
For example, maybe the other side wants something that costs you nothing to give, but means a lot to them.
You can use things like this to sweeten the deal and get to yes.
But you will have to ask questions in order to know what things they are looking for.
Understanding The Negotiation Dynamic
What is your role in the negotiation? Are you buying or selling something?
Are you negotiating for yourself or on another’s behalf?
Tactics you might use to get a hostage released are going to differ from those you use when trying to buy investment real estate, or if you are selling your own company.
How you approach the negotiation will also likely change if you are negotiating on behalf of someone else.
What are you negotiating over? Money or something else? What are the stakes?
Low stakes purchases often involve haggling over price and money can be saved if you know the motivation of the buyer or seller, and what the alternatives are.
But high stakes negotiations, like when selling your business or buying investment real estate have many more moving parts, and thus require much more thought and preparation.
Power and Influence in Negotiation
Sources of power in negotiation / Overcoming power imbalances
The most common situation is a large financial disparity between the two parties. This might include an insurance company negotiating a settlement with a single mom.
Or this might be a first time home buyer trying to purchase their first home and they not only barely have the money, they have never bought anything that expensive.
This might also include a small company selling their business to a much larger company that has a team of lawyers and financial advisers.
How do you overcome such imbalances?
First, realize that if they are selling the house, they want the money and to make the sale as bad as you do. Same for the company buying your business. Prepare by identifying your BATNA and their BATNA so you can intelligently discuss why you should reach an agreement.
Building Rapport and Trust
Building rapport and trust is essential in negotiations as it can help establish a positive relationship with the other party, leading to more open communication and increased likelihood of reaching a mutually beneficial agreement.
Some strategies for building rapport and trust:
Active Listening:
Listen attentively to the other party, show genuine interest in their perspective, and demonstrate that you understand their point of view.
Empathy:
Try to see the situation from the other person’s perspective and acknowledge their feelings and concerns.
Open Communication:
Be open and honest in your communication, and encourage the other party to do the same.
Consistency:
Be consistent in your words and actions to build credibility and trust.
Respect:
Show respect for the other party’s opinions, even if you disagree with them.
Shared Goals:
Find common ground and emphasize shared goals to create a sense of collaboration.
Transparency:
Be transparent about your intentions, interests, and constraints to build trust.
Positive Body Language:
Use open body language, such as maintaining eye contact, smiling, and nodding, to convey openness and warmth.
Mirroring:
Mirroring the other person’s body language and communication style can create a sense of rapport and connection.
Authenticity:
Be authentic and genuine in your interactions to build trust and credibility.
Nonverbal Communication
Nonverbal communication refers to the transmission of messages or signals through body language, facial expressions, gestures, and other nonverbal cues.
Nonverbal communication can convey emotions, attitudes, and intentions, and plays a significant role in building rapport and trust in negotiations. Examples of nonverbal communication include:
Facial Expressions: Facial expressions can convey a wide range of emotions, such as happiness, anger, surprise, or confusion.
Body Language: Body language, including posture, gestures, and movements, can convey confidence, openness, defensiveness, or discomfort.
Eye Contact: Eye contact can convey interest, attentiveness, and sincerity. However, cultural norms regarding eye contact vary and should be considered.
Gestures: Gestures can enhance verbal communication and convey meaning, such as pointing, nodding, or using hand movements to emphasize a point.
Tone of Voice: The tone of voice can convey emotions and attitudes, such as confidence, enthusiasm, or sarcasm.
By paying attention to nonverbal cues and using them effectively, you can enhance your communication skills and build rapport and trust in negotiations.
Creating & Sharing Value – The “Mutual Gains” approach
Can you invent value without committing to a specific course of action?
What options can you generate that exploit differences and that interest the other side?
Can you bundle multiple options to make the agreement more appealing?
Try to have at least two “bundles” that create value open to the negotiation.
Buying and Selling
There’s a different dynamic if you are buying versus selling.
In some cases, sellers are motivated to sell, even more than buyers want to buy. How bad do they need the money? How hard is it to sell what they are selling?
Are there competing buyers? Or are you the only one? The more you know the better.
Great negotiating comes more from knowing the subject and the situation better than the other person.
A good deal does not mean someone has to win and someone has to lose. It really is possible for both sides to win.
Are you buying or selling a small item like something on Craigslist, a house, commercial property or are you selling your business?
I’ve found that if you are buying or selling an item, regardless of the amount of money at stake, the process and mechanics are the same in how you think about it.
Negotiating something with a lot of moving parts is very different than just haggling over price. While haggling over the price of something at the pawn shop is in its truest essence “negotiating,” the main thing at stake in that transaction is the price of a consumable good.
However, when you are selling your business, there is a LOT more at stake than just the price. Will there be a non-compete? If so, for how long? What is the basis for the sales price – earnings? What are your post-sale obligations?
Likewise, if you are selling your rental house, you have multiple issues to consider – will you take those funds and buy another rental house? What if you can’t find another at that price? Will the buyer offer to finance the purchase?
Sure, you’re not going to spend a lot of time haggling over the price of a coffee table you found on Craigslist, but you will spend months possibly negotiating a multi-million dollar acquisition of a business.
Be creative – if the other side cares about other things than just money, be creative in how to get to yes.
Don’t be Afraid
When a significant amount of money or other issue that is very important is at stake, fear can take over and drive us to behave in a less than optimal way.
It is certainly healthy to have respect for the consequences if you lose the sale or if the negotiation goes south. But fear that comes simply from worrying that the deal won’t work may drive you to make concessions you would not otherwise make.
Effective Communication and Relationship Building
It is important to communicate clearly with the other side and ask questions if something is unclear. Try to build rapport and trust. People can and will walk away from an advantageous deal because they don’t want to deal with a difficult person. So don’t be that difficult person.
Building trust is important and something I personally stress in my own law practice and business dealings. I want to demonstrate to people that I am trustworthy and will do what I say I will do. I have never found this to be a bad thing in business.
On the other hand, nobody wants to deal with an untrustworthy or deceitful person. People are so used to being dealt with dishonestly, that it is refreshing to them when they discover you are honest and above board in all your dealings. People appreciate reaching an agreement with an honest person.
Finally, always leave the door open to make a deal. Also, if someone says “no,” that doesn’t always mean you can’t eventually get to “yes,” so keep that in mind. In other words, always leave your door open for the possibility of reaching an agreement.
So just remember to be polite and respectful and remember your non-verbal queues can come across. People will walk away from an advantageous deal to them if they don’t like you or if you offended them. If you do this and you fail to reach an agreement, at least it won’t be because you offended them.
Common Negotiation Tactics
These might include the “take it or leave it” or “this is my final offer” or something similar. It is important to respond to “hardball” tactics in a de-escalating manner and maintain control throughout the process.
There are various negotiation techniques that people use to achieve favorable outcomes in different situations. Here are some common negotiation techniques:
Active Listening:
Listen carefully to the other party to understand their perspective, needs, and concerns. This demonstrates empathy and helps build rapport.
Building Rapport:
Establish a positive relationship with the other party by finding common ground and showing genuine interest in their viewpoint.
Asking Open-Ended Questions:
Use questions that require more than a yes or no answer to encourage the other party to elaborate and share more information.
Mirroring:
Repeat or reflect back the other party’s words or feelings to show understanding and encourage further discussion.
Emotional Labeling:
Identify and label the emotions the other party may be feeling to show empathy and create a more collaborative atmosphere.
Setting Clear but Realistic Goals and Priorities:
Define your objectives and priorities before the negotiation to stay focused and make informed decisions.
Creating Value:
Look for opportunities to create value for both parties by exploring creative solutions and trade-offs.
Anchoring:
Make the first offer or propose a starting point to influence the direction of the negotiation.
Exploring BATNA (Best Alternative to a Negotiated Agreement):
Understand your alternatives if the negotiation fails to help you assess the value of potential agreements.
Negotiating in Stages:
Break the negotiation into smaller, manageable parts to address different issues separately and build momentum.
Silence:
Use silence strategically to encourage the other party to speak or consider your offer.
Managing Time:
Use time constraints to your advantage by setting deadlines or creating a sense of urgency.
Framing:
Presenting the negotiation in a way that highlights certain aspects or benefits to influence perception and decision-making.
Concession Management:
Plan and manage your concessions carefully to maintain leverage and achieve your goals.
Closing the Deal:
Clearly summarize and confirm the agreement reached to ensure both parties are on the same page.
These techniques can be used alone or in combination depending on the negotiation context and your goals. Adaptability and a willingness to adjust your approach based on the situation are key to successful negotiations.
Choose the Right Negotiation Strategy
Choosing the right negotiation strategy depends on various factors, including the nature of the negotiation, the relationship with the other party, and your objectives. Here are some key considerations to help you choose the right negotiation strategy:
Understand Your Goals:
Clarify what you hope to achieve through the negotiation. Your goals will influence the strategy you choose.
Assess the Relationship:
Consider the past and potential future relationship with the other party. A collaborative approach may be more suitable for ongoing relationships, while a competitive approach may be necessary for one-time transactions.
Analyze the Situation:
Evaluate the context of the negotiation, including the urgency, complexity, and importance of the issues at hand. This can help you determine the appropriate level of assertiveness and cooperation.
Consider Your BATNA:
Assess your Best Alternative to a Negotiated Agreement (BATNA). A strong BATNA may give you more leverage to pursue a competitive strategy, while a weak BATNA may require a more cooperative approach.
Understand the Other Party’s Perspective:
Consider the goals, interests, and constraints of the other party. Understanding their perspective can help you choose a strategy that is more likely to be successful.
Select the Right Approach
Based on your goals, relationship, and the situation, choose a negotiation approach that aligns with your objectives.
Common approaches include:
Collaborative (Win-Win): Focuses on maximizing value for both parties through cooperation and problem-solving.
Competitive (Win-Lose): Focuses on maximizing individual gain, often at the expense of the other party.
Compromising (Compromise): Seeks to find a middle ground where both parties make concessions to reach an agreement.
Avoiding (Withdrawal): Involves avoiding or delaying the negotiation, often used when the costs of negotiation outweigh the benefits.
Be Flexible: Be prepared to adapt your strategy based on the dynamics of the negotiation. Flexibility can help you respond to changing circumstances and improve your chances of reaching a favorable agreement.
By considering these factors and selecting a negotiation strategy that aligns with your goals and the context of the negotiation, you can improve your chances of achieving a successful outcome.
Negotiating with Clients, Customers and Colleagues
Are you going to see these people again or have an ongoing relationship with them?
This will help guide you in how you deal with tough spots you’re negotiating over. (i.e., landlord tenant situation)
When dealing with clients or customers, always remember they can leave you a bad review!
Famous Negotiation Techniques
In the field of negotiation, there are several renowned experts and practitioners who have developed their own approaches and techniques that are often considered influential.
Roger Fisher and William Ury – Principled Negotiation (Getting to Yes):
Focuses on separating the people from the problem, focusing on interests rather than positions, generating options for mutual gain, and insisting on using objective criteria.
Chris Voss – Tactical Empathy (Never Split the Difference):
Emphasizes the importance of understanding and empathizing with the other party’s emotions and perspective to build rapport and gain insights that can lead to better outcomes.
William L. Ury – The Power of a Positive No:
Advocates for a positive and assertive way to say “no” by focusing on protecting your interests while maintaining relationships and exploring alternatives.
George Kohlrieser – Hostage Negotiation Techniques (Hostage at the Table):
Draws on experiences from hostage negotiations to highlight the importance of building trust, managing emotions, and creating a safe environment for effective communication.
Herb Cohen – Negotiation Jujitsu:
Advocates for using the other party’s energy and resources to your advantage, rather than directly opposing them, by deflecting attacks and turning them into opportunities for mutual gain.
Gary Noesner – FBI Negotiation Techniques (Stalling for Time):
Shares insights from his experience as an FBI negotiator, emphasizing the importance of active listening, building rapport, and managing time pressure in high-stakes negotiations.
Jim Camp – Start with No:
Focuses on overcoming resistance and objections by encouraging the other party to say “no” early in the negotiation process, which can lead to a more open and honest dialogue.
Negotiation Examples
My experiences
When I bought my first house and knew that I should offer less than the realtor suggested. But based on her advice, they offered the price she suggested and they took it without hesitation. I knew I had made a mistake
When I bought my office building, I offered considerably less than the asking price even though I had a realtor. I let my instincts guide me. The seller accepted and the realtor remarked he was amazed they took an offer that low.
Experience selling the cheap motorcycle at the pawnshop. Priced too cheap, they thought something was wrong with it.
Judge mediated negotiation in PI case – exhaustion and too many people making choices leads to less than optimal outcomes.
Client selling a business – important to know all the details and to seek advice before things go sideways after the fact. What terms are most important? Did you read over all the details in the contract? What kind of business are you dealing with? A litigious or dishonest one?
The Teddy Roosevelt Story
Theodore Roosevelt campaign photo incident – how they reversed the roles and shifted the perception of value. This story was told to us in the Harvard negotiation course held in Cambride.
Roosevelt’s campaign manager thought about the problem and sent the photographer this message: “Planning to distribute three million copies of campaign speech with photographs. Excellent publicity opportunity for photographers. How much are you willing to pay to use your photographs? Respond immediately.”
The photographer sent back a telegram: “Appreciate opportunity, but can only afford $250.”
By taking the time to prepare thoroughly, you can approach the negotiation with confidence and increase your chances of achieving a successful outcome.
