As an entrepreneur, negotiation skills are essential to achieving success and growing your business. Once you are on track to grow your business to a million-dollar or multi-million-dollar business, you will find that you need to negotiate more often, and in more, and different circumstances.
One of the most common negotiation opportunities that we encounter as an entrepreneur will be negotiating compensation packages with our team (staff and freelancers). Both sides need to approach this process as a negotiation, and this includes the business owner realizing that you may need to be more creative in your offer to be able to attract the best talent. Negotiating with your team is one of the most common times you will do so – but it’s far from the only time, and there are tips that can help you as an entrepreneur.
Negotiation Best Practices
Before entering any negotiation, be well prepared. Know what you want to achieve, the potential outcomes of the negotiation, and any alternatives to the negotiation. Knowing your strengths and weaknesses, and understanding the other party’s needs and expectations, will help you make informed decisions.
Be open to compromise and have multiple options on the table. Flexibility will help you maintain a good relationship with the other party, and will also enable you to find a solution that works for both of you.
Confidence is essential in any negotiation. If you don’t believe in what you’re asking for, the other party won’t either. Be clear and assertive, and demonstrate your knowledge and expertise in your industry.
Listening is a crucial aspect of negotiation. Pay attention to the other party’s concerns, and ask questions to better understand their perspective. This will help you tailor your approach and find a solution that works for both parties. Listening is a highly underrated skill. Let’s also not forget our own communication skills have two sides … and just as important as strong listening skills is making sure you are also communicating in the way the other party needs.
Building strong relationships with your stakeholders is key to long-term success. Whether you’re negotiating with suppliers, investors, or partners, take the time to establish trust and rapport.
Common Negotiation Opportunities
Some common circumstances where entrepreneurs might need to use these negotiation tips include:
- Securing funding: Entrepreneurs often need to negotiate with investors or lenders to secure funding for their businesses. They must be prepared to make a compelling case for their business and negotiate favorable terms.
- Partnership agreements: Entrepreneurs may need to negotiate with potential partners to establish a mutually beneficial partnership agreement. This negotiation will require both parties to be clear about their expectations and goals.
- Sales contracts: Negotiating sales contracts with customers can be challenging, as both parties may have different expectations. Entrepreneurs must be skilled in negotiating favorable terms while maintaining a positive relationship with the customer.
The Negotiation Tip I Had to Learn
Without a doubt, if you only read two tips from this post, make sure to read these ones. Even though I learned them in my personal life, they are highly relevant to business and are closely connected. These lessons are essential!
Presenting Your Best Offer
For years – decades – I approached negotiations from the standpoint that I should present my best offer. I listen to what the other person needs, consider some of the things that I know they need but they do not realize, consider what I need, and present what I know is my best.
I knew this wasn’t the best way, but I had not fully realized it yet. I realized this–and realized what a mistake it was–one night when my husband and I were playing “thermostat wars”. This isn’t something we really fight over … it just tends to be that one of us wakes up too cold or too hot! If you share a thermostat with almost anyone, I know you understand.
We had talked about sleeping temperature. My recommendation was that we set the thermostat on 70. Our bedroom always feels noticeably warmer when you walk in (I haven’t measured but I would guess at least 5 degrees warmer), likely due to the large screen TV that one of us needs … *cough* not me 😉 So my thought process was that I don’t want to ever sleep warmer than around 75, so setting the temp at 70 should do it.
My thought process was: he wants it warmer – he would prefer the thermostat on 75, which would make it around 80 in the bedroom. (why?!) I really wanted it set on 65, which would make it around 70 in the bedroom.
Split the difference, so I offered 70 … a compromise.
My husband obviously though we were negotiating. Meaning that I would never bring my final offer to the table first, right?
If my offer was 70 … and his was 75 … then a compromise would be 73.
Wait! Wait wait wait … Then I had to backpedal.
I had to explain I had already done all of the math. He wants 75, I want 65, so I said 70 in the middle. He knows me well enough by now to know that *I already did all of the math*, right?
Hard to change it to 65 when you already offered 70.
I’m a big fan of being as transparent as possible, and for me this has often meant bringing my best offer to the table.
However, starting with your best offer leaves zero room for negotiation – because the other person often expects that you did NOT bring your best offer, that it is just your first offer, and that means there is room for negotiation.
My friend (and client) Lisa reminds me to give away things that don’t mean as much, so that you can get or keep the things that do. But when you bring your best offer to the table, that means the only things to give away are things that matter.
Like 5 degrees on the thermostat … just enough to feel like you’re sweating in bed in the summer.
Not Knowing, or Not Asking For, What You Want
It’s really hard to ask for what you want in a negotiation if you don’t even know what you want.
One of the most common places that I do this – and that maybe we all do this – is not in my business, but in everyday life: discussions and compromises with my spouse!
Past dynamics have played out here for me, and not everyone may have had some of my experiences (I hope).
For example, my husband always asks me what gift I want for my birthday or Christmas. For years – decades – in my past marriage, I never received gifts. In fact, one Christmas, one of my young sons (early elementary school aged at that point) asked why there were no gifts for mom under the Christmas tree – only for them and for dad. So the next year, and every year after, I purchased a gift for myself to wrap and place under the tree.
Forward many years, with my current husband, I couldn’t tell him what I wanted as a gift, because I had no idea what I wanted myself! I had trained my brain over years not to bother considering something that never happened. (A hope for you is that you are never in that spot).
But a couple of years ago, when my husband asked what I wanted for my birthday, I had been thinking for months how I needed a new tablet. My iPad was so old that I could no longer even update it. Yes, that old lol – it worked until it didn’t. Yet having a tablet comes in handy for work and for play. So when he asked me for about an idea for my birthday, I told him I could use a new tablet – an iPad would be great, but even an Android would really help.
Lo and behold – he gave me exactly what I asked for! Rather than some random funny or dorky thing he found on Amazon, which were usually pretty … interesting … creative? … unique! (anyone want a 5 lb gummy bear? Anyone?)
And he was happy to have given me something that he already knew I would like, versus what I now imagine usually happened – him worrying for time between the time he bought my gift and then gave it to me, all the while simply hoping that I would like it! Poor guy! I did the same thing the following Christmas – gave him an idea of something exact that I wanted, ended up with the exact thing I wanted (plus more).
And I realized, this is a true win-win. He gets to feel good, even before the gift has been given, and I get something I need or want. It was a skill that I had to retrain my brain – which is sad and actually detrimental spot for your brain to be in.
This philosophy relates to business negotiations as well, and the moral of the story is that you need to know what you want and need, so that you are able to ask for it. If you have not fully explored both of those questions before you get to the negotiation table, you’re missing an important step, and this is part of the preparation that you need to undertake.
You also need a list of everything you want – not only limited to what you need – including additional things that would be nice, but that you can do without if necessary, so that you have room to negotiate.
Vicky is the CEO and Chief Creative Strategist of Vicky Wu Marketing. She draws from 30 years of experience at the CMO level, the CEO level, marketing for Fortune 500 companies and multi-million and multi-billion-dollar organizations, PLUS strategies learned helping startups and nonprofits with limited budgets … now focusing on providing SMBs with effective and efficient marketing strategies – giving them access to the same level of expertise as the really big guys with deep pockets, that they may not otherwise be able to access.