Business negotiation strategies for better deals and partnerships

Published Wednesday 5 November 2025

Table of contents

• Types of business negotiation strategies
• Do your homework
• Communication techniques for better negotiations
• Don't be anchored
• Know where you can compromise
• Aim for a win-win (be nice)
• Have a plan B
• Building your negotiation skills for business success
• FAQs on business negotiation strategies

Key takeaways

• Prepare thoroughly by researching the other party's business, learning industry terminology, and clearly identifying your own value proposition before entering any negotiation.

• Apply the 70/30 communication rule by spending 70% of your time listening and 30% talking, while asking open-ended questions that start with "what," "how," or "why" to gather crucial information.

• Avoid anchoring bias by staying focused on your research when faced with unrealistic opening offers, and counter with your own well-researched figures rather than being pulled toward their initial number.

• Develop a strong BATNA (Best Alternative to a Negotiated Agreement) before negotiating so you can walk away confidently if the deal doesn't meet your minimum requirements.

Types of business negotiation strategies

Not all negotiations are the same. Knowing which approach to use can help you get the best outcome for your business. Most strategies fall into a few main types.

Collaborative negotiation

This is the approach where both sides benefit. You work with the other party to find a solution that works for everyone. It's useful for building long-term relationships with suppliers or key customers.

Competitive negotiation

This approach focuses on getting the best possible deal for your business. It can be useful for one-off deals where a long-term relationship is not a priority.

Compromise negotiation

In this approach, both sides give up something to meet in the middle. It's a quick way to reach an agreement when time is short and can help you move forward efficiently.

Do your homework

Research and preparation form the foundation of successful negotiations. Thorough preparation gives you confidence and helps you identify opportunities and potential obstacles, similar to how national economic bodies set targets for metrics like the World Competitiveness Ranking to position themselves effectively.

Here's what effective preparation involves:

• Learn industry terminology: Familiarise yourself with key terms and concepts so you're not confused or intimidated by jargon
• Research their business: Study their products, services, competitors, and market position to understand their strengths and weaknesses
• Know your value: Identify what you bring to the table and why they should want to work with you – it's not always about price

Communication techniques for better negotiations

How you communicate is just as important as what you say. Clear and confident communication can make all the difference.

• Listen more than you talk. Try to spend about 70% of your time listening and 30% talking. This helps you fully understand what the other party needs.
• Ask open questions. Instead of questions with a simple "yes" or "no" answer, ask questions that start with "what", "how" or "why". This encourages the other person to share more information.
• Confirm you understand. Briefly summarise what you've heard back to the other person. This shows you're listening and ensures there are no misunderstandings.

Don't be anchored

Anchoring is when the first number mentioned in a negotiation becomes a reference point that influences all subsequent offers. Understanding this tactic helps you avoid being manipulated and use it strategically yourself.

How anchoring works:

• The first person to mention a price sets the "anchor"
• All other numbers are compared to this initial figure
• Extreme anchors (very high or very low) can pull the final agreement in that direction

Defending against anchoring:

If someone opens with an unrealistic number, stay focused on your own research. You can say you are "a long way apart" and present your own figure. This helps keep the negotiation on track.

Know where you can compromise

Strategic compromise means identifying what you absolutely need from a deal versus what you're willing to trade away, a principle seen in high-level government assessments where certain feedback is weighted more heavily; for example, in one Treasury measure, the Treasurer's responses account for 50% of the total score. This approach helps you make concessions that cost you little but encourage reciprocal movement from the other party.

• Define your must-haves: Decide what terms are essential to make the deal worthwhile
• Identify low-value concessions: Find areas where you can give ground without significant cost
• Make concessions visible: When you compromise, clearly communicate what you're giving up
• Expect reciprocity: Your visible flexibility encourages the other party to make their own concessions

Aim for a win-win (be nice)

Negotiating is about finding an outcome that works for everyone. Focus on reaching a result that benefits both sides.

Win-win negotiations create better outcomes and stronger business relationships than aggressive tactics. When both parties feel they're getting value, they're more likely to honour agreements, as seen in large-scale collaborations like the National Housing Accord, which aims to deliver tens of thousands of new homes through a joint effort.

• Builds trust: Cooperative behaviour triggers positive brain responses that make people more open to agreement
• Reduces resistance: People who feel attacked become defensive and less willing to compromise
• Protects relationships: Maintaining respect preserves opportunities for future business

Both parties can win. Being respectful and positive can help you get better results.

Have a plan B

Your BATNA (Best Alternative to a Negotiated Agreement) is what you'll do if the negotiation fails. Having a strong alternative gives you confidence and prevents you from accepting poor deals out of desperation.

Developing your Plan B:

• Identify alternatives: What other suppliers, customers, or options do you have?
• Assess your position: Can you walk away without serious consequences?
• Set your limits: Know the worst deal you'd accept before walking away
• Keep it private: Don't reveal your alternatives – it weakens your negotiating position

Why Plan B matters:

A strong alternative means you can negotiate with confidence. You will make better decisions and secure deals that support your business.

Building your negotiation skills for business success

Negotiation is a skill that gets better with practice. As a small business owner, every deal you make shapes your future. By preparing well and communicating clearly, you can turn negotiations into opportunities for growth. When you have a clear view of your finances, you can negotiate with confidence. See how simple it can be when you try Xero for free.

FAQs on business negotiation strategies

Here are some common questions and answers about business negotiation strategies.

What are the 5 C's of negotiation?

The five C's are collaboration, communication, compromise, creativity, and credibility. Keeping these in mind helps you work towards a successful outcome where both parties feel respected.

What is the 70/30 rule in negotiation?

This rule suggests you should spend 70% of your time listening and 30% talking. It helps you fully understand the other party's position before you respond, leading to better-informed decisions.

What is the 80/20 rule in negotiations?

The 80/20 rule highlights the importance of preparation. It suggests that 80% of your success in a negotiation comes from the preparation you do beforehand, while only 20% is the actual discussion.