Key Takeaways

  • The steps of negotiation generally include pre-negotiation, exchanging information, bargaining, closing, and follow-up, each critical to reaching successful outcomes.
  • Pre-negotiation should include deep preparation, understanding both sides’ goals, and assessing your BATNA (Best Alternative to a Negotiated Agreement).
  • During information exchange, active listening, trust-building, and clarifying priorities help shape a collaborative environment.
  • The bargaining phase benefits from strategic concessions, creative problem-solving, and awareness of psychological tactics.
  • Closing should focus on finalizing terms, addressing unresolved issues, and confirming mutual understanding.
  • Follow-up ensures compliance, strengthens relationships, and provides opportunities for future collaboration.
  • Advanced negotiation strategies — like anchoring, strategic concessions, and framing proposals — enhance outcomes and reduce risk.

There are many phases of negotiation, all of which are important to understand before you enter into a contract with another party. If you apply each phase of negotiation properly, you’ll have greater results. Before entering the negotiation phase, you’ll want to prepare yourself and your business so that you are all aware of what is required to appropriately negotiate the best results for your business.

There are several phases of the negotiation process, including the following:

  1. Pre-negotiation
  2. Exchanging information
  3. Bargaining
  4. Closing
  5. Follow-up

Pre-Negotiation

Before the actual negotiation begins, the parties need to prepare. This is when pre-negotiation takes place. You’ll want to prepare yourself and other team members before entering the actual negotiation stage. Be sure to understand the business’s short-term and long-term goals and objectives. Also be prepared to discuss what your business hopes to get out of the contract, how much revenue it wants to earn, and what type of relationship you want both parties to have. Some of the items to be discussed among your team during the pre-negotiation stage include the following:

  1. The purpose of preparing for the negotiation stage
  2. Interests
  3. Alternatives, in the event that the other party disagrees with your viewpoint
  4. Options
  5. Agreements

Deep Preparation and Strategic Planning

Effective pre-negotiation goes beyond listing your goals — it requires a thorough analysis of the negotiation landscape. This means identifying all stakeholders, understanding their interests and constraints, and clarifying your BATNA (Best Alternative to a Negotiated Agreement). A strong BATNA provides leverage and confidence during talks.

It’s also essential to define your ZOPA (Zone of Possible Agreement) — the range within which a deal can be struck. Mapping out possible outcomes and ranking priorities allows you to know where flexibility exists and where firm boundaries should remain.

Preparation also includes gathering data to support your position. For example:

  • Market benchmarks, pricing data, or comparable agreements.
  • Legal or regulatory requirements that affect deal terms.
  • Potential trade-offs and alternative solutions for key points.

The more comprehensive your preparation, the more strategic and less reactive your negotiation approach will be.

Exchanging Information

This stage will include the exchange of information. You’ll want to share information with the other party, inclusive of your business’s interests and objectives. You’ll want to identify what you expect to gain from the business deal. The more information you share with the other party, the easier it will be for that party to fully understand what you are looking for. The following 4 assessments are made during this stage:

  1. Trustworthiness
  2. Competency
  3. Likeability
  4. Alignment of interests

Building Trust and Understanding Priorities

Information exchange isn’t just about sharing your objectives — it’s an opportunity to build trust and uncover the other party’s underlying motivations. Skilled negotiators use active listening, open-ended questions, and strategic silence to encourage disclosure.

During this stage:

  • Establish credibility: Demonstrate reliability and transparency early to encourage reciprocity.
  • Explore interests: Beyond stated positions, seek to understand why the other side values certain outcomes.
  • Identify common ground: Look for shared goals that can serve as a foundation for agreement.

The more information you gather, the more effectively you can tailor proposals and frame your concessions later in the process.

Bargaining

This stage involves working with the other party to compromise on what you both want. This stage will require two things – compromising and creativity. You’ll need to compromise with the other party, as you can’t expect to have everything you want in the contract. And along with compromise comes creativity. In the event that the other party takes an entirely difference stance as to what they want in the contract, you’ll have to be creative and come up with other options for what to include in the contract.

For example, if the other party doesn’t agree to the pricepoint that your business wants, then you’ll have to work with the other company to come up with an appropriate price depending on the time and work being conducted. Similarly, the other party might want your services to be complete within 2 weeks, whereas you’ll need an entire month to complete the work. Such items are essential in the contract, and you’ll want to be sure that you and the other party fully understand and agree to such terms before the contract is drafted.

Strategic Concessions and Persuasion Techniques

Bargaining is the heart of negotiation, where leverage, creativity, and psychology intersect. Successful negotiators don’t rush concessions — they plan them strategically. One common technique is anchoring, where the first offer sets a reference point that influences the rest of the negotiation.

Key strategies for this stage include:

  • Trade, don’t give: Frame concessions as part of a reciprocal exchange rather than unilateral giveaways.
  • Use conditional language: Phrases like “If you can do X, we can agree to Y” maintain leverage.
  • Leverage time: Deadlines and pacing can increase pressure or create opportunities.
  • Employ framing: Present proposals in ways that highlight mutual benefit and minimize perceived risk.

Avoid positional bargaining — rigidly defending one stance — which often leads to stalemates. Instead, aim for integrative negotiation, where creative solutions expand the value available to both parties.

Closing

After you have compromised on all essential items that will be included in the contract, you can end the negotiation stage by reiterating what was discussed in the prior stages. Allow the other party to raise any potential concerns that they might have regarding the deal. Likewise, if you have any concerns, address them during this stage.

Once you have come to an official agreement, you can draft the actual contract. This phase might also include other items to be included in the contract, such as legal items. You’ll want to include information regarding legal dispute resolution, and when and how a legal suit will arise.

Finalizing Terms and Mitigating Risks

The closing stage is more than signing a contract — it’s about confirming mutual understanding and preventing future disputes. Before finalizing, revisit all negotiated terms to ensure they reflect verbal agreements accurately.

Effective closings often include:

  • Summarizing key terms: Review each major point to confirm alignment.
  • Addressing contingencies: Plan for “what if” scenarios, such as delays or unforeseen costs.
  • Clarifying next steps: Outline post-agreement responsibilities and timelines.

It’s also wise to discuss dispute resolution mechanisms — like arbitration clauses or escalation procedures — before signing. These provisions can save significant time and expense if conflicts arise later.

Follow-Up

The follow-up process will take place after the contract is drafted and signed by both parties. Even though the contract is now legally binding and the project is under way, you’ll still want to follow up with the other party throughout the project to ensure that the project is running smoothly. Furthermore, you’ll want to mitigate the risk if any unforeseen circumstances arise. For example, let’s assume that you hire a contracting company to remodel your garage and backyard. If an unforeseen weather event occurs, i.e. hurricane, then you can’t expect the contracting company to continue doing work on the outside of your home during such a significant weather event. Therefore, a follow-up should take place to potentially amend the contract as the period of time to finish the project will now be prolonged.  

Post-Negotiation Relationship Management

Follow-up isn’t just about ensuring compliance — it’s a strategic phase that can strengthen partnerships and pave the way for future deals.

Regular check-ins, progress reviews, and transparent communication build trust and reinforce commitments.

Consider scheduling follow-up meetings to:

  • Monitor performance against agreed benchmarks.
  • Address small issues before they escalate into disputes.
  • Explore opportunities for future collaboration or contract expansion.

Post-negotiation relationship management transforms one-time transactions into long-term partnerships and can significantly increase the overall value of the agreement.

Frequently Asked Questions

  1. What are the main steps of negotiation?
    The five key steps are pre-negotiation, exchanging information, bargaining, closing, and follow-up, each playing a crucial role in achieving a successful outcome.
  2. Why is preparation so important in negotiation?
    Thorough preparation helps define objectives, identify alternatives, and anticipate the other party’s needs — all of which strengthen your position and confidence.
  3. How can I improve my bargaining skills?
    Use strategic concessions, apply psychological techniques like anchoring and framing, and aim for integrative solutions that benefit both parties.
  4. What should be included in the closing phase?
    Ensure all terms are clearly defined, address potential risks, and outline dispute resolution processes before signing the agreement.
  5. What happens after a negotiation is complete?
    Post-negotiation follow-up includes monitoring performance, maintaining communication, and exploring opportunities for future collaboration.

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