Many negotiators believe they have only two choices: take a hard-line approach to maximize results or accommodate the other party to preserve the relationship. Successful negotiations rarely require either extreme.
A more effective strategy is principled negotiation, a framework introduced by Roger Fisher, William Ury, and Bruce Patton in their book, Getting to Yes. Rather than treating negotiation as a contest with winners and losers, principled negotiation seeks solutions that are fair, practical, and durable.
Separate the People from the Problem
Business negotiations often become personal. Emotions, assumptions, and communication issues can distract from the real objective.
Successful negotiators address concerns without attacking the other party. They listen carefully, ask thoughtful questions, and keep the discussion focused on the issues rather than personalities.
For example, two business partners negotiating the terms of an office lease renewal may disagree over rental rates. One party may worry about controlling operating expenses, while the other may need additional revenue to justify recent building improvements. Once those concerns are identified, the conversation shifts from conflict to problem-solving.
Focus on Interests, Not Positions
Positions reflect what someone says they want. Interests explain why they want it.
A tenant may insist on lower rent. The property owner may refuse to reduce the rate. Those positions appear incompatible until each side discusses its underlying interests.
The tenant may need predictable occupancy costs to support future growth. The owner may need stable cash flow to satisfy financing requirements. With those interests on the table, the parties may reach an agreement through a longer lease term, scheduled rent increases, or tenant improvement allowances instead of a simple rent reduction.
Understanding interests often reveals solutions that positions alone never uncover.
Create Options That Benefit Both Parties
Negotiation should not end with the first acceptable proposal. Before deciding on a final agreement, explore multiple solutions that create value for everyone involved.
Commercial real estate transactions offer numerous opportunities for creative solutions. Instead of negotiating only the purchase price, the parties might discuss financing terms, closing timelines, due diligence periods, repair credits, lease assignments, seller financing, or future expansion rights.
The broader the discussion, the greater the opportunity to reach an agreement that meets the objectives of both parties.
Use Objective Standards
Negotiations produce better outcomes when both parties rely on objective information instead of opinions.
Market data, comparable sales, professional appraisals, engineering reports, industry benchmarks, and legal requirements provide an independent basis for evaluating proposals.
For example, when negotiating the sale of an office building, both parties may rely on recent comparable sales, capitalization (cap) rates, and current market conditions rather than unsupported opinions about value. Objective criteria reduce unnecessary conflict and improve confidence in the final agreement.
Know Your BATNA
No negotiation should end simply because both parties reached an agreement. The agreement should improve your position compared to your best alternative.
This concept, known as your Best Alternative to a Negotiated Agreement (BATNA), a term coined by the authors of Getting to Yes, serves as one of the strongest tools in any negotiation.
Before negotiations begin, ask yourself:
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What will I do if we cannot reach an agreement?
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Is that alternative acceptable?
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Can I strengthen my alternatives before negotiations begin?
A commercial real estate investor evaluating several office buildings has a stronger negotiating position than one focused on a single property. Likewise, a seller with multiple qualified buyers has greater flexibility than one with only one prospect.
If the proposed agreement does not exceed your BATNA, walking away is often the best business decision.
Preparation Produces Better Results
Principled negotiation requires thorough preparation, understanding the interests of both parties, reliance on objective information, and identifying solutions that create long-term value.
Whether you negotiate the purchase of an office building, a commercial lease, or a business acquisition, this approach leads to stronger relationships, better decisions, and agreements that stand the test of time.
