Introduction – Negotiation Skills
Negotiation skills aren’t just for hostage situations and flea markets. They are as essential for work-from-home entrepreneurs as coffee and Wi-Fi. Negotiations happen daily, from setting boundaries with your teenager to discussing rates with a client.
Negotiation proficiency transcends securing a great price. It’s also about forging stronger relationships and attracting repeat customers. Follow along for better business deals and to foster stronger connections. Who knows? You might even get your kid home by a reasonable hour.
Why Spend Time on Negotiation Skills?
Because you benefit less from deals than you could. Inexperienced negotiators often focus too much on price, which is like trick or treating for one type of candy.
To overcome other common misconceptions, read You Think Wrong: Insider Truths About Work-At-Home Myths.
Bargaining better has seven main benefits.
Get More Stuff
Price falls under this category, but there is much more to consider—quality, delivery, extended warranty, payment terms, return policy, marketing support, etc.
Strengthen Relationships
Discussion techniques can form a bond that says, “I hear you.” Others will begin to enjoy working with you and view your business as more than a commodity.
Dispute Resolution
We all come into conflict with other people. Learn diplomatic skills to settle differences.
Sell More
Good negotiators profit by selling more to new and existing customers.
Find New Markets
Listening to customers is like a video game cheat code for finding new business opportunities.
Reduce Risk
Consider negotiation strategies as a GPS, steering you clear of legal detours and risky potholes.
Demonstrate Credibility
Negotiating like a pro demonstrates competence. Giving and delivering on promises sets you apart from the competition.
What is Negotiation?
Negotiation is a conversation where different sides identify shared interests and strike a deal. What’s negotiable? Anything where two or more parties hold differing perspectives. Generally, negotiation points fall into one of the following categories.
Price
The amount of money charged for a product or service.
Payment Terms
Defines the when and how of payments, including payment schedules, amount, methods (e.g., cash, wire, check), and form (e.g., hourly rate, installments, lump sum).
Delivery
The timing and manner of delivering products—schedule, method, location, allocation of shipping costs, ownership transfer, and acceptance criteria.
Quality
Expectations and standards—definition of standards, required testing, auditing, inspections, and consequences of defects.
Quantity
The number of items (often related to bulk purchases)—number range, total units, units of measure, conditions for increasing or decreasing amount, and the impact of quantity on delivery schedules.
Intellectual Property
Ownership and usage rights for intellectual property—identify all intellectual property (IP), define who owns IP, and transfer conditions.
Non-Disclosure Agreements (NDAs)
Terms related to confidentiality—define confidential information, obligations of the receiving party, exclusions, length of agreement, and consequences of breach.
Dispute Resolution
How to settle potential disputes—define disputes, dispute resolution process (e.g., negotiation, arbitration, mediation, litigation), governing law (what local and state entity governs contract), and who pays dispute resolution costs.
Termination
Conditions for contract termination—reasons (e.g., mutual agreement, business shifts, breach of contract), notice timing and delivery, and penalties
Warranty
Promise or guarantee concerning performance and quality of work—definition, scope, duration, remedy for breach (e.g., refund, replacement, repair), and exclusions.
Indemnification
Liability and protection against legal claims, typically from parties outside the negotiation—scope, duration, remedies, and exclusions.
The Principled Negotiation Strategy
Fisher and Ury, in their book Getting to Yes: Negotiating Agreement Without Giving In, invented principled negotiation. It’s the best option for clients because it fosters long-term relationships. Below are the four main points of this style.
Principled Negotiation Tenets
Separate the People from the Problem
Demonstrate mediation expertise by focusing on issues versus allowing personal feelings toward individuals to affect the negotiation.
Focus on Interests, Not Positions
Look past what you’re told to determine underlying wants and needs. Learn the why behind positions.
Invent Options for Mutual Gain
Explore different ideas beneficial to both sides.
Insist on Using Objective Criteria
Base the deal on facts and standards versus opinions and conjecture.
Principled Negotiation Key Terms
Along with these tenets, we must define two more terms to understand principled negotiation.
- Best Alternative to a Negotiated Agreement (BATNA)— the best deal you can find outside this negotiation.
- Zone of Possible Agreement (ZOPA)—the range in which two parties can agree. It is defined as the overlapping range between two parties BATNAs.
While you can use ZOPA and BATNA with any negotiation point, in practice, they apply best to numerical negotiation points, like price or quantity.
Distributive Bargaining Range. Fanshawe College. Original Image, CC BY-NC-SA 4.0.
Effective Negotiation Skills & Strategies
How do you apply these discussion techniques to improve your negotiations? To answer this question, we’ll break negotiation into three phases.
- Preparation
- Communication
- Closing
We’ll walk through each phase’s meaning, followed by a practical application.
Preparation
The preparation phase spans from initial contact to when parties engage in bargaining. The better you prepare, the better your results.
Generally, a negotiation commences when a potential client expresses interest in your product or service. At this stage, you should research the client using public information and your network.
Then, schedule an initial conversation. Meanwhile, determine their industry’s standards for your service or product.
During your first conversation, be sure to cover:
- What are your goals for this project?
- Why is this project important to you?
- What is the expected timeline?
- What is your budget?
- Who are the decision makers for this project?
- What are your must-haves for this project?
Also, be ready to answer these questions.
- What are the key features and benefits of your product/service?
- What is the cost, and what does it include?
- Can you provide references or testimonials?
After this discussion, list all negotiation points (reference the list above) relevant to the current negotiation. For numerical points like price, determine your BATNA and estimate it for the other side. You will find a deal in the range (ZOPA) between these two BATNAs.
Now, focus on the other party’s interests. Channel your inner detective and infer them as best you can. Understanding their needs is a powerful way to improve your deals. We’ll dive into a scenario to sharpen your bargaining abilities.
Scenario Preparation Phase
You’re a web development freelancer meeting with a restaurant owner, Tom, who wants a webpage for his restaurant. It would be your first restaurant client, and Tom has never had a website for his business.
You meet with Tom over lunch. During your conversation, you learn Tom manages and owns the restaurant. His primary goal is for the website to attract more business. Additionally, he would cover ongoing fees or subscriptions and provide pictures; however, you’d handle setup and upkeep, including copywriting and uploading photos.
He wants to finish within 30 days. Also, his budget is $1500. You thank him for his time and tell him you will provide him with a proposal within 24 hours.
If you want a proposal template to save time, visit our products page. Choose from a general business proposal and the typical work-at-home entrepreneur fields, including web development.
The following day, you draw up a proposal. With Tom willing to engage in a long-term relationship, your strategy involves being aggressive on initial setup pricing to gain the opportunity for maintenance and updates. From experience, you understand clients purchase additional services once they’re on a maintenance agreement.
Your proposed pricing:
Initial Setup Cost
- Proposed: $3000
- BATNA: $2000
Monthly Maintenance Fee
- Proposed: $200/month
- BATNA: $100/month
Ad Hoc Work
- Proposed: $60/hour
- BATNA: $50/hour
Communication
Communication means sharing information, ideas, and feelings with others. In the context of a negotiation, the three parts are identifying interests, generating options, and bargaining.
Identify Interests
Identifying interests means figuring out the reasons behind the other side’s positions. By knowing interests, you can turn conflict into cooperation.
For example, a supplier demands a high price. You discover their position centers on covering ongoing financing costs. Therefore, you can find a mutually beneficial solution by offering a longer-term contract at a lower price.
Scenario Identify Interests
A few days later, you meet with Tom to finalize your deal.
In your first conversation, Tom shared two positions: the desire to finish within 30 days and a $1500 budget. You want to identify the interests behind these two positions.
You ask, “What’s driving your urgency to finish the site.”
Tom answers, “I will start a new lease soon, which is significantly more expensive.”
You ask, “Does this also impact your budget?”
Tom responds, “Yes, I only can afford $1500 a month. The website is part of my plan to increase sales to cover expenses.”
You respond, “Understood. Let’s figure out how to address these concerns.”
Generate Options
Generating options means finding ideas that benefit everyone. This phase has three parts: brainstorming, prioritization, and estimation.
Start your brainstorming with each person writing their ideas silently. This technique encourages participation from everyone rather than from the dominant voices. Then, discuss each person’s ideas and add any new ideas inspired by the discussion.
Permit both sides to veto any proposal. Afterward, both sides should assign a priority number to each option.
Select the top three options and calculate a financial estimate for each. Next, choose the option most suitable for both parties.
Scenario Generate Options
You say, “Let’s brainstorm ways to close this deal. I developed two solutions to cover your need for more revenue.
Option 1. What if we broke the project into two phases? In phase 1, we would highlight your backroom, photos, and menus and set up the website for $1500. Phase 2 will commence when you can cover the additional $1500. We would add features like online reservations, event promotions, and social media integration.
Option 2. We handle all your requirements upfront and break the $3000 fee into three monthly installments of $1000.
Both options include a $200 monthly maintenance fee and a $60 per hour special projects rate.
Do you have any ideas?”
Tom says, “What if you hosted a client meeting at my restaurant? If you reduce your fee, I could discount the event to cover only my costs.”
Bargaining
Bargaining is the final step of the communication phase, where you reach an agreement. It’s where both parties sort out any remaining differences and specify the terms of their deal. It has three phases: opening, negotiation, and agreement.
Here’s where you employ deal-making tactics. There are as many bargaining tactics as flavors of ice cream. Sign up for our newsletter to receive a list of the best negotiation tactics and six other freebies.
Opening
Usually, the process of generating options flows directly into bargaining. Still, it’s wise to signal a shift from a more collaborative discussion into a conflict negotiation.
You should always attempt to speak first. Set a positive tone by thanking the other side for the chance to work with them. Second, present your agenda. Finally, share your proposal.
Negotiation
The negotiation phase is where the donuts are made. It is a back-and-forth discussion over the agreement.
First, list the points of contention. Second, reference objective criteria to support your position—market rates, industry standards, or other benchmarks.
Third, listen to the response to identify the gap between your parties. Finally, present another offer with solutions and compromises on both sides.
The exchange will continue until you reach a deal or end the conversation. During the discourse, prioritize what’s important to you and remember the other side’s BATNA to avoid presenting a deal-killing offer.
Agreement
The agreement phase commences when both parties reach a deal. Beware of getting distracted by the joy of a deal and leaving too early. Before you end bargaining sessions, recap the agreement’s details. Also, outline the next steps and discuss the contract process. Now, you can grab your beverage of choice and celebrate.
Scenario Bargaining
Scenario Opening
You say, “Before we hash out the details, I’d like to thank you for this opportunity.
I’ve thought about your offer to host my clients. I will lower my fee by $500 for a cost-only event. Does that work?”
Tom says, “Works for me.”
You say, “Let’s discuss which option you prefer.”
Scenario Negotiation
Tom says, “Funds are tight with the new lease. I need to attract more business. Therefore, I want the entire website done at once. Could you reduce the $3000 fee to $2,000 and the other fees to $100 and $40.”
You pause a few seconds longer than usual, using the silence negotiating tactic you learned from our free list. Before you respond, Tom says, “You know what? I’m okay with the maintenance and ad hoc fees. I’d like to lower the main price.”
You say, “Would $2500 work?”
Tom says, “Still a little high.”
You respond, “How about we split the difference? $2,250?”
Tom says, “Deal.”
Scenario Agreement
You shake hands and say, “Thank you for the chance to work with you. To recap, you will pay $2,250 for website setup over three payments, $200 monthly for maintenance, and $50 per hour for ad hoc work.”
Tom says, “Agreed. As long as you finish within thirty days.”
You say, “You’re one step ahead of me. To finish within thirty days, I need to quickly receive photos, menus, logos, and anything else you want on your site. Also, let’s develop a contract.”
Tom says, “I’ll send it all by the end of the day tomorrow and forward the contract when you’re ready.”
You say, “Great. Can’t wait to start.”
You’re comfortable agreeing to an aggressive timeline because you learned valuable skills from:
Productivity Secrets 1: Love Extra Time for Your Business
Productivity Secrets 2: Unstoppable Strategies to Energize Your Work
Stop Procrastination: Break Free to Unlock Your Hidden Potential
Whip Work-Life Balance: Proven Ways to Win in Both Worlds
Closing
The closing phase ensures both sides understand the agreement. It’s also good to recap terms, timelines, deliverables, and payment terms in a follow-up email.
Once you receive confirmation from the other party, include the specifics in a contract and ensure both parties sign it. If the other party doesn’t want a formal agreement, request they acknowledge the terms in an email.
Closing Scenario
Following your meeting, you send Tom a summary email of your agreement. He agrees with your recap. You draw up a simple contract, and both of you sign it.
Now, it’s time to meet Tom’s needs. If you find customer onboarding challenging, see our products page for a customer onboarding checklist that will delight your customers.
Conclusion – Negotiation Skills
Too often, negotiators fight too hard to win the best possible terms. Do you want to earn a few more dollars only to lose a customer’s future business?
Negotiation is a dance, not a boxing match. The point isn’t to bloody your opponent but to leave them wanting more.
I love recommendations and feedback. Hit me up in the comments section or email me. I would love to hear from you and learn from your experiences and perspectives on negotiation.
For background on the who, what, and why of remoteworkadvice.com, check out our Home Page. Thank you for reading. Negotiate like a boss.
References – Negotiation Skills
- Fisher, Roger, William Ury, and Bruce Patton. Getting to Yes: Negotiating Agreement Without Giving In. New York: Penguin Books, 2011.
- Wheeler, Michael. Negotiation Mastery. Boston: Harvard Business Review Press, 2017.
- The Program on Negotiation at Harvard Law School. Harvard Business School Online. “Harvard Business School.” Last modified 2020. Harvard Business School Online.