Fundamental Negotiation Principles for Business. Good Business Negotiation Strategies.

June 25, 2009 by kutenk · 2 Comments
Filed under: Negotiation 

Good Business Negotiation Strategies

What strategy is best for negotiating when business value is intangible? Generally, the most effective negotiating strategy is one with high, but realistic, expectations that include small concessions. The savvy negotiator should have a realistic sense of what can be accomplished. He chooses from a range of strategies and tactics to fit the situation. Knowing what is realistic is only achieved through experience. Different stages of the negotiation typically require different strategies.

Negotiations are dynamic situations—the tone and balance can change dramatically throughout the discussions. The perception of value can change as well. It is not advisable to prescribe a set strategy before negotiations begin.

A few fundamental points are worth mentioning:
    Examine the company and understand its strengths. Learn as much as possible about the other party—its strengths and weaknesses, its market segments, and its customers. Understand how the seller’s technology and intangible assets are important to the buyer.

    Keep the focus on areas of mutual interests. Emphasize the common ground. Asking for too much could sour the atmosphere.




    Try to break a large problem into a number of smaller issues that can be more easily negotiated.

    Anticipate concessions and plan a few in advance. A no‐concessions strategy is dangerous, since concessions are usually expected. Do not compromise too early, but have a few in your bag. A smart negotiator compromises by giving up something, in order to get something in return. For example, ask for a promissory note early on and eventually concede to a royalty payment.

    Do not be afraid to introduce a few trial proposals. The other party’s response can be very illuminating about their preferences and assumptions.

    The corollary to asking good questions is keen listening. Listen for things that give clues to the other party’s assumptions. Skillful listening is an important talent of successful negotiators.




    Determine the shareholders’ indifference curve ahead of time. In other words, think about what combinations of price and terms shareholders would be indifferent to. Would they accept $8 million cash and $7 million in stock, or $4 million cash and $15 million stock? This is not about the total amount of the payment, but about the relative preference for different types of payment.

    Treat every buyer and every person with respect. Do not put them off. Do not jerk them around. Stay true to your word. It will pay dividends later.

Every transaction contains uncertainties. Each party will have a different perception of those uncertainties and have a different attitude toward risk. A skilled negotiator will recognize these differences and use them to achieve a joint solution.

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