Negotiation: Definition, Stages, Skills, and Strategies


Investopedia / Ellen Lindner

What Is Negotiation?

The term negotiation refers to a strategic discussion intended to resolve an issue in a way that both parties find acceptable. Negotiations involve give and take, which means one or both parties will usually need to make some concessions.

Negotiation can take place between buyers and sellers, employers and prospective employees, two or more governments, and other parties. Here is how negotiation works and advice for negotiating successfully.

Key Takeaways

  • Negotiation is a strategic discussion between two parties to resolve an issue in a way that both find acceptable.
  • Negotiations can take place between buyers and sellers, employers and prospective employees, or the governments of two or more countries, among others.
  • Successful negotiation usually involves compromises on the part of one or all parties.

How Negotiations Work

Negotiations involve two or more parties who come together to reach some end goal that is agreeable to all those involved. One party will put its position forward, while the other will either accept the conditions presented or counter with its own position. The process continues until both parties agree to a resolution or negotiations break off without one.

Experienced negotiators will often try to learn as much as possible about the other party's position before a negotiation begins, including what the strengths and weaknesses of that position are, how to prepare to defend their positions, and any counter-arguments the other party will likely make.

The length of time it takes for negotiations to conclude depends on the circumstances. Negotiation can take as little as a few minutes, or, in more complex cases, much longer. For example, a buyer and seller may negotiate for minutes or hours for the sale of a car. But the governments of two or more countries may take months or years to negotiate the terms of a major trade deal.

Some negotiations require the use of a skilled negotiator such as a professional advocate, a real estate agent or broker, or an attorney.

Examples of Negotiations

Negotiating can take place between individuals, businesses, governments, and in any other situation where two parties have competing interests. Here are two everyday examples:

Say you plan to buy a new SUV but don't want to pay the full manufacturer's suggested retail price (MSRP). In that case, you might offer what you consider a fair price. The dealer can accept your offer or counter with another price figure. If you have good negotiating skills, you may be able to drive the price down to a level where you're happy and the dealer is still able to walk away with a profit, albeit a slimmer one.

Or, suppose you've been offered a new job but don't consider the salary sufficient. An employer's first compensation offer is often not its best possible offer, so it may have some room to negotiate. In fact, a 2016 survey by the CareerBuilder website found that 73% of employers were open to negotiating a starting salary with job seekers. And if higher pay isn't a possibility, the employer may be willing to offer something additional, such as more vacation time or better benefits.

In both of these examples—as in most successful negotiations—both parties have made compromises, while also achieving their principal goals.

A 2022 study by Fidelity Investments found that while 58% of workers had accepted their employer's initial offer, 85% of those who attempted to negotiate got at least some of what they asked for.

The Stages of the Negotiation Process

Regardless of what you're negotiating over or with whom, negotiation usually involves several distinct steps.


Before negotiations begin, there are a few questions it helps to ask yourself. Those include:

  • What do you hope to gain, ideally?
  • What are your realistic expectations?
  • What compromises are you willing to make?
  • What happens if you don't reach your end goal?

Preparation can also include finding out as much as you can about the other party and their likely point of view. In the case of the SUV negotiation above, you could probably find out how much room the dealer has to bargain by looking up actual sales prices for that vehicle online.

Also, marshal any facts that will help you make a persuasive case. If you're negotiating for a new job or a raise at work, for instance, come armed with concrete examples of your accomplishments, including hard numbers if possible. Consider bringing testimonials from satisfied clients and/or coworkers if that will buttress your case.

Many experienced negotiators consider preparation to be the single most important step in the entire process.

Exchanging Information

Once you're prepped for the negotiation, you're ready to sit down with the other party. If they're smart, they have probably prepared themselves, as well. This is the point at which both sides will present their initial positions in terms of what they want and are willing to give in return.

Being able to clearly articulate your wishes is critical to the negotiation process. You may not get everything on your wish list, but the other party, if they want to reach a deal, will have a better idea of what it might take to make that happen. You will have a better idea of their position, and where they might be willing to bend, as well.


Now that both parties have laid out their case, you're ready to start bargaining.

An important key to this step is to hear the other party out and refrain from being dismissive or argumentative. Successful negotiating involves a little give and take on both sides, and an adversarial relationship is likely to be less effective than a collegial one.

Also bear in mind that a negotiation can take time, so try not to rush the process or allow yourself to be rushed.

Closing the Deal

Once both parties are satisfied with the results, it's time to end the negotiations. The next step may be in the form of a verbal agreement or written contract. The latter is usually a better idea as it clearly outlines the position of each party and can be enforced if one party doesn't live up to their end of the bargain.

Tips for Successful Negotiating

Some people may be born negotiators, but many of us are not. Here are a few tips that can help.

  • Justify Your Position. Don't just walk into negotiations without being able to back up your position. Bring information to show that you've done your research and you're committed to reaching a deal.
  • Put Yourself in Their Shoes. Remember that the other side has things it wants out of the deal, too. What can you offer that will help them reach their goal (or most of it) without giving away more than you want to or can afford to?
  • Keep Your Emotions in Check. It's easy to get caught up in the moment and be swayed by your personal feelings, especially ones like anger and frustration. But don't let your emotions cause you to lose sight of your goal.
  • Know When to Walk Away. Before you begin the negotiating process, it's a good idea to know what you'll accept as a bare minimum and when you'd rather walk away from the table than continue to bargain. There is no use trying to reach a deal if both sides are hopelessly dug in. Even if you don't want to end negotiations entirely, pausing them can give everyone involved a chance to regroup and possibly return to the table with a fresh perspective.

What Makes a Good Negotiator?

Some of the key skills of a good negotiator are the ability to listen, to think under pressure, to clearly articulate their point of view, and to be willing to compromise, within reason.

What Is ZOPA?

ZOPA is an acronym from the business world. It stands for zone of possible agreement. ZOPA is a way of visualizing where the positions of the parties to a negotiation overlap. It is within that zone that compromises can be reached.

What Is BATNA?

BATNA is another acronym from the world of business, meaning best alternative to a negotiated agreement. It refers to the next course of action a negotiator may take if a negotiation fails to arrive at a satisfactory conclusion. Veteran negotiators often go into a negotiation knowing what their likely BATNA would be, just in case.

The Bottom Line

Negotiating is essential part of day-to-life, the business world, and international affairs. Regardless of what you're negotiating, being a successful negotiator means knowing what you want, trying to understand the other party's (or parties') position, and compromising if necessary. A successful negotiation leaves everyone satisfied that they have gotten a deal they can live with.

Article Sources
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  1. CareerBuilder. "73% of Employers Would Negotiate Salary, 55% of Workers Don't Ask."

  2. Fidelity Investments. "2022 Career Assessment Study," Page 3.

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