Buyers and sellers tend to see their interests as opposing. But both share one critical goal: closing the deal. Skillful negotiations can help both sides feel like they’ve gotten a good deal. This process demands time and talent. A few simple tactics can help any buyer or seller achieve success at the negotiation table.
Price Isn’t Everything
It’s easy for both buyers and sellers to fixate on price. This is a key component of negotiations, but it’s hardly the only factor. Terms also matter. What stake is transferred if it’s not a full sale? How much control does each party have? What’s the financing arrangement? Terms beyond price allow buyers and sellers to establish clear priorities, and to then get those needs met.
Know Your ‘Walk Away’ Number
Price isn’t everything, but it does matter. You must know the highest and lowest price for which the business could reasonably sell. You must also determine your walk-away number. This is the final point at which you will no longer negotiate. The figure depends on your best alternative to a negotiated agreement (BANTA). This number requires research and discipline. You can’t just come up with it on the fly.
Make Strategic Concessions
Every negotiation requires concessions. You should ensure the other party notices and appreciates your concessions. Ensure they know you have given up something of value, then ask them to return the favor. If you don’t trust them to reciprocate, consider making a concession contingent on them You might also consider making concessions in installments, over the course of the negotiation session—not all at once. This increases their value.
Understand the Other Party
You must know your opposition. Know their interests. Even in high stakes negotiations such as the 1978 Camp David negotiations, knowing what the other side wants can mean the difference between success and failure. Don’t assume you know. Get to know the other party, and offer them concessions that cater to their needs.
First is Often Best
Everyone knows not to tip their hand. Yet making the first offer sometimes confers some advantages. The first price named in a negotiation session significantly affects the negotiation. This strategy works best when you have an information advantage. If you don’t, you may want to avoid inadvertently low-balling yourself with an initial offer. First offers are often anchors. Ensure you anchor the deal well.
Don’t Fear Costs
When negotiation progresses, it’s easy to get tunnel vision as you become more fearful of walking away empty-handed. This is often the best option. You need to know your alternatives if you must walk away, and can’t let fear of costs deter you from protecting your own best interests.
Second Guess After Shaking Hands
Second guessing a deal can actually be helpful. Asking yourself what you could have done better may make you a more effective negotiator. Of course, not all self-reflection is equal. It’s better to think about what you should have done rather than what you should not have done.
Know Your Facts
Both buyer and seller must know their facts before walking into negotiations. You must know the value of the asset, the needs of your negotiation partner, and their previous negotiation history. You need a clear idea of what to expect from due diligence, an understanding of which terms are likely negotiable, and a basic understanding of negotiation psychology. Put in some effort to learn about negotiation generally, and negotiating with your deal partner specifically, before you begin talks.