In running business activities, entrepreneurs are required to have good negotiation skills to reach an agreement that benefits the parties. For example, when a business wants to cooperate with suppliers, entrepreneurs must negotiate to get the right price. Or when a business wants to attract investors, entrepreneurs must also be able to negotiate to get a cooperation agreement that benefits the company and business. In addition to reaching an agreement in a transaction, negotiation is also an alternative dispute resolution that is first carried out before being resolved at a higher stage if the dispute cannot be resolved through negotiation. Therefore, in negotiating, it is important to prioritize the common goals that are desired to be achieved so that the needs of the parties are accommodated and both get benefits (win-win solution). For this reason, in this article, we will provide some good negotiation tips so that KH Friend can reach the best agreement that is favorable for your business.
What is Negotiation in Business?
Negotiation is a discussion in which two or more parties attempt to reach an agreement through bargaining. Usually in a negotiation, each party tries to persuade the other to agree with its point of view. The parties involved in negotiations can vary. They can include talks between buyers and sellers, employers and prospective employees, to the governments of two or more countries. Just like in business, negotiation is how you get what you want, but still maintain good relationships with your business partners or clients.
What are the Types of Negotiation in Business?
Quoted from qontak.com, there are at least four types of negotiations in business. Here is the explanation:
Principled Negotiation
Principled negotiation is a type of bargaining that uses the principles and interests of the parties to reach an agreement. This type of negotiation often focuses on conflict resolution. This type of principled negotiation uses an integrative approach to serve the interests of the parties. There are four elements to principled negotiation:
- Mutual benefit: Principled negotiation invites parties to focus on finding mutually beneficial outcomes through bargaining.
- Focus on interests: Negotiators can identify and communicate their motivations, interests and needs in principled negotiations.
- Separate emotions from issues: In principled negotiations, parties can reduce emotional responses and personality conflicts, by focusing on the issues at hand.
- Objectivity: Parties to a principled negotiation can agree to use objective criteria as the basis for negotiation. Examples of objective criteria in negotiations include market prices, expert opinions, laws, and industry standards.
Team Negotiation
In team negotiations, many people bid for the deal on each side of the negotiation. Team negotiations are common in large business deals. In some cases, one person may perform more than one role. Here are some common roles in a negotiation team:
- Leader: Members of each team in a negotiation usually appoint a leader to make final decisions during the negotiation.
- Observers: Observers watch the other side’s team during negotiations, and discuss their observations with the leader.
- Ralater: The relater in the negotiation team works on building relationships with other team members during bargaining.
- Critics: While it may sound like a negative role, having a critic on the negotiating team can help to understand concessions and other negative outcomes of a deal.
- Builder: A builder in the negotiation team’s role is to make the deal. They can perform financial functions during negotiations and calculate the cost of the deal.
Multiparty Negotiations
Multiparty or multi-party negotiation is a type of bargaining where more than two parties negotiate to reach an agreement. An example of a multiparty negotiation is bargaining between several division leaders in a large company. Here are some of the challenges that are often experienced when conducting multiparty negotiations:
- Fluctuating best alternatives: With many parties involved in the negotiation, the best solution of the negotiation from each party may change more. This is because they have their own goals and interests.
- Coalition formation: Another challenge of multistakeholder negotiations is the possibility of forming coalitions or alliances. This can add to the complexity of bargaining.
- Process management issues: Managing the negotiation process between multiple parties can lead to a lack of governance and miscommunication. Therefore, it is important to choose a leader who can work with others to reach an agreement.
Hostile Negotiations
Hostile negotiation is a distributive approach where the most aggressive party in the negotiation reaches an agreement to fulfill their interests. Here are some examples of hostile negotiation tactics:
- Hard bargaining: This is a strategy where one party refuses to compromise to reach an agreement.
- Future promises: The party using this technique may promise the other party future benefits in exchange for current concessions. To respond, ask for the future promise in writing.
- Loss of interest: Another hostile negotiation tactic is loss of interest, where one party pretends to lose interest in reaching an agreement.
Effective and Profitable Business Negotiation Tips
Fundamentally, effective business negotiation is not about winning or losing. The goal in business negotiations is to establish a mutually beneficial relationship. You get what you want. Likewise, the other party benefits from business cooperation without feeling disadvantaged at all. To achieve this goal, you must develop a number of negotiation skills. This is because, often when discussing an agreement, especially about price, the first offer is always not what KH Friend wants. However, if you are committed to negotiating strongly, you may gain a number of advantages in business transactions. Summarized from several sources, there are at least ten tips that KH pals can do in conducting effective and mutually beneficial business negotiations. Here is the explanation:
Convey the Purpose and Objectives of the Negotiation
The first effective business negotiation tip is to try to take the initiative of the conversation without waiting for the other person to start. Convey your intention to carry out negotiations with confidence. Because confidence can help you take control of the discussion and make the other person understand your will. Also try to include detailed questions related to things that are still blocking and clearly state what your needs are in this negotiation.
Win-Win Solution
As mentioned earlier, there are no wins and losses in business negotiations. Therefore, look for a win-win solution. What you need to think about is what you want and what your partner wants. Also, think about what both parties lack. Then, propose an agreement that fulfills the needs of both parties and makes a profit. That way, they will both feel like winners after the deal is done.
Convey as Much Relevant Information as Possible
To achieve a win-win solution, both parties must convey relevant information and nothing is covered up. Because providing as much information as possible is one way to make others trust. Not only that, by giving as complete information as possible, KH Friend can convey the goals and expectations that you really want. But remember, you don’t have to open the whole card by giving strategic business information or confidential information. Simply provide information that is in accordance with the purpose of the negotiation.
Open Negotiations with a High Bid or Otherwise
If you are the seller, give a high price. Higher than the price that KH Friend can accept. At some point, the price will be bargained down. If you give a reasonable price from the beginning, you will still be asked to lower the price. So it’s best to put the highest bid first. If your business turns out to need support from other businesses, negotiate for a price reduction.
Set a Negotiation Deadline
Reaching an agreement in negotiation is not easy. However, protracted negotiations will also certainly take up a lot of time, energy, and thoughts. Not only that, you may lose the opportunity to find other prospects because you are fixated on protracted negotiations. Therefore, to avoid a stalled negotiation process, we recommend that you set a realistic negotiation deadline from the start. According to Don A. Moore, Professor at the University of California, setting a negotiation deadline can trigger agreement and creative thinking from both parties. In addition, you can also create an ‘artificial deadline’ to speed up decision-making from the other party. For example, you give a deadline for a special offer for the next week. After a week, the other party will not get the special offer. This is useful for creating ‘scarcity’ so that it will trigger other parties to make decisions more quickly.
Listening to the Problem from the Other Side’s Point of View
The worst negotiators are the ones who do all the talking, seem to want to control the conversation and endlessly explain their advantages. While good negotiators tend to be the ones who really listen to the other party, understand their issues, and then formulate an appropriate response. Try to gain an understanding of what is important to the other party, what limitations they may have, and where they may have flexibility. Also try to refrain from talking too much.
Use the Mirroring Method
The next business negotiation tip is to use mirroring to show that your KH buddy is paying attention to the other person. Mirroring is the repetition of keywords used by your negotiation partner. Repeating important words that the other person has just said can be very effective. Indirectly, your partner will think that you are paying attention to what they are saying. This shows that you are treating their views with careful consideration.
Offer the Best Alternative Solution
If both sides are adamant about their position on the offer, reaching an agreement becomes rather impossible. So, try to offer some alternative solutions. The goal is to be able to reach common ground even though the conversation is deadlocked. For example, KH Friend is talking about issue A with a solution, you should also have prepared plan B if plan A fails. This preparation is built with the mindset of mutual benefit for both parties.
Stay Professional
When negotiating, sometimes you may experience differences of opinion and may look upset if the other party seems to be patronizing you. If this happens, KH Buddy must remain professional and focus on the common goals to be achieved. And when the solution you offer is not acceptable to the other party, avoid imposing your will and try not to respond emotionally. Keep trying to find creative solutions that are mutually beneficial to both parties.
Make a Contract or Agreement
The last tip that is no less important and must be done when KH Friend has reached a negotiation agreement is to make an agreement or contract in writing. Usually before signing the main agreement, the parties will sign a Memorandum of Understanding (MoU) first as an initial agreement. In an agreement or contract, the parties can add penalties or punishments if the agreed work is behind schedule. For example, KH Friend as a client has agreed with the printing company that they will complete the work in 30 days. However, it turns out that the work was not completed on time and was only completed after 40 days.
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If this happens, Sobat KH has the right to impose a penalty on the party to compensate for the losses you have incurred. If you do not make an agreement from the beginning, when things like this happen, you do not have a strong basis to ask for compensation from the offending party.
KH Contact
To make your business negotiations run more smoothly, don’t forget to always apply a series of tips above! If the negotiation is quite complicated, do not hesitate to ask for help from the best legal consultant. After reaching an agreement, don’t forget to make a written agreement. Without a written agreement, the results of the negotiation will be in vain and may harm you in the future. Well, to conduct consultations related to negotiations and make contracts or agreements that are appropriate and in accordance with business needs, KH Buddy can ask for help from Kontrak Hukum. As a digital legal platform, Kontrak Hukum can ensure that you do not become a disadvantaged party in negotiations. You can help you to make a contract agreement according to your needs, ranging from confidentiality agreements, cooperation agreements, partnership agreements, profit-sharing cooperation agreements, and so on.
What are you waiting for? Make your business cooperation agreement at Kontrak Hukum by visiting the KH service page – Cooperation Agreement. If you have other business or legal questions, you can also consult for free through Tanya KH and through Direct Message (DM) to Instagram @kontrakhukum.
