How To Negotiate Effectively

Tips for negotiating a better business deal

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Negotiations can feel intimidating, but they are imperative for you to advance in your career or business. The key is to prepare and learn how to successfully negotiate to benefit yourself, your family, or your business. You could be leaving money on the table that could benefit you for the rest of your life.

For example, leaving $1,000 on the table in a salary negotiation means you may have given up over $181,000 if you invested this money over 30 years at a 10% yearly return. If you negotiated a five-cent reduction in the cost of manufacturing your business’s product and you ship more than 50,000 units a year, this could end up saving your firm $2,500 a year.

Learn how to prepare for negotiations, start the conversation, understand and make counteroffers, close the deal, and what to do if negotiations go awry. You will leave understanding the best tips to enter into negotiation.

Key Takeaways

  • Preparing for negotiations by understanding each party’s goals will allow for negotiation to create value for both parties.
  • Taking the opening gambit, or making the first offer, leads to a psychological advantage in negotiations.
  • Using factual support and providing multiple counteroffers are tactics to help with a counteroffer.
  • Silence and walking away from the table are sometimes necessary strategies to help when negotiating is not going well.

Preparing for Negotiations

The first step to negotiation is understanding what your goals are and the goals of those whom you are negotiating with so you both can work toward common goals. Do you want a new position with a higher salary but the firm you work at is trying to cut costs? Are you trying to get a better deal for your business, but the distribution agent has market power? Knowing what you hope to walk away with will help you build confidence entering the negotiation.

Adequate preparation can help you become mentally prepared to negotiate. Do your research on whom you are negotiating with. Formulate supporting arguments for why you believe you have earned a raise, new position, or new business contract. Calling on past experience and responsibilities in your current role—and having facts to support your goals—means you’ll know what the job or contract entails and what you bring to the table.

How To Start Negotiations

Making the first offer can be a powerful statement and help set expectations and perceptions right away. This is sometimes called the “opening gambit,” which can create a psychological advantage by convincing the other party that you are confident in what you are negotiating for.

As long as the offer is made in good faith, the other party will have to react to your offer. This is also called an “anchoring bias,” which means that the first offer tends to serve as an anchor that pulls the counteroffers back toward it.

For example, if you want a salary of $55,000 and you ask for $60,000, the Human Resource manager will have a hard time proposing $40,000 since the offers are so far off. They may have to counter with $50,000, which may ultimately set up the negotiation to get exactly what you hoped for. Instead, if the Human Resource manager offered first and suggested $40,000, you may feel uncomfortable asking for $60,000 as it is farther away from the initial offer. The party with the opening gambit has the advantage in negotiations.

The one drawback to making the first offer or demand is that you give away information. If your offer, body language, tone, and volume of speech are too much out of line, it could signal urgency or that you are not prepared. It may even offend the other party and halt the negotiation.


A lack of preparation can hurt the opening gambit, but intentionally choosing to negotiate the offer first is a signal of strength if adequately prepared.

Making the Most of Counteroffers

If the other party makes the first offer or a counteroffer and you don’t like it, don’t assume the worst. Rather, consider the intent behind the offer and ask for clarifications, if necessary, about what they are proposing. Maybe there is a budget issue for the next quarter, but there is flexibility in a few months for a raise. Understanding the intent will allow you to prepare for a counteroffer that may be more in line with the goals you had for the negotiation.

When you make a counteroffer, address all of the changes you want. For example, if you are negotiating a job offer, propose all changes at once so the Human Resource manager knows what you want to walk away from the table with. If you only propose one thing, they may think once they fulfill that one item, you’ll accept the job. If you keep asking for other items after the other party returns to the negotiating table, they may not remain generous.

If you are worried about becoming anchored to their offer, you can ask for more time to think it over so you can strategize, or you can offer multiple counteroffers.


By making multiple counteroffers, you show that you are flexible, and can gain valuable information about the other party’s desires in the negotiation.

For example, if you are offered $45,000 along with two weeks of vacation and a $1,500 conference travel budget, you may choose to make different counteroffers varying the salary, vacation time, and conference budget, assuming you value each offer equally. Another way to re-anchor the negotiation with your counteroffer is to use the factual evidence you found when preparing for negotiation. This can be a persuasive way to support your counteroffer.

How To Close the Deal

When it is time to close the deal, determine the process. More often than not, it involves signing a written contract, but sometimes, it may be a handshake. If there is a handshake before more formal paperwork is signed, there may still be some bargaining techniques the other party may try. For example, the other party may come back to the table if they have trouble selling the deal internally, and ask to renegotiate terms.

It can be difficult to know whether this is done in good faith or is a negotiation tactic. If new terms are proposed, you should consider also asking for a favorable adjustment so the other party knows you will not make unreciprocated concessions.


Sometimes discussing a deadline for negotiations earlier in the negotiation process may help close the deal.

What To Do if Negotiations Aren’t Going Well

If you do not think negotiations are going well, don’t be afraid to use silence to your advantage. When the other party negotiates, allow yourself a few moments to absorb what they say. If their counteroffer is outrageous, the time also gives you a moment to collect your thoughts, and may even indicate to the other party that this offer is unacceptable, before responding.

Dealing With Hardball Tactics

In cases where the other party uses hardball tactics such as take-it-or-leave-it strategies or belittling your alternatives, it is better to ignore the negotiation tactic and focus on what their offer contains. This allows you to continue to focus on making a strong counteroffer that meets your goals and the goals of the other party.

What To Do When Negotiations Break Down

In extreme cases where negotiations are becoming unproductive, you may want to take a break to allow yourself time to strategize with your team or managers before coming back to the table. This is less common in job negotiations, but can be rather common in business negotiations.

The Bottom Line

To become an effective negotiator, it takes preparation, practice, and reflection. After each negotiation, think about the tactics that did and didn’t work so you can mirror or improve them next time. By learning the important skill of negotiation, you can dramatically improve your financial position and improve existing and future contracts for your business.

Frequently Asked Questions (FAQ)

What should you not say or do in a negotiation?

Do not make unreasonable demands and threats or use coercive tactics. Also, manage your emotions and do not respond quickly, especially when the other party may start to anger you. This can lead to negotiation mistakes. Focus on creating value for both parties, relying on factual support that you prepared in advance, and negotiation techniques you have learned in order to be successful.

Why might a negotiator choose not to negotiate?

Sometimes the timing of negotiation is wrong and a negotiator may step away from the table as a result. Even if the negotiator has evidence and support for their offer, it is not worth negotiating if the timing is wrong. Poor timing could result in hurting the trust between parties, which risks future negotiations.

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  1. Graziado Business Review. “Negotiating Effectively: Make the First Move a Strategic Choice.”

  2. Harvard Law School. “5 Dealmaking Tips for Closing the Deal.”

  3. Harvard Law School. “10 Hard-Bargaining Tactics To Watch Out for in a Negotiation.”

  4. Harvard Law School. “7 Tips for Closing the Deal in Negotiations.”

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