Negotiation

Definition: The act of discussing an issue between two or more  parties  with competing interests with an aim of
coming to an agreement
How you negotiate when it comes to landing a sale reflects your respect for the customer and how deeply you
care about the life of that relationship. Too often salespeople and entrepreneurs listen to bad advice about hard-
core negotiating tactics. In reality, those who are peak performers at negotiating show a lot of style and grace
under pressure--something their co-negotiators remember and appreciate.
Here are some negotiating tips to keep in mind when it comes to the art of the deal:
1. Be prepared. Always go into a negotiation well rested. Long, drawn-out meetings--or, worse, negotiating over
the long haul for several months--are exhausting. Make it a rule not to get exhausted. If you do start to feel worn
out, take a powder for a while.

The person with energy has the will to continue. Do everything in your power not to weaken your position by
losing energy. Notre Dame football coach Lou Holtz puts it brilliantly: "Nobody quits unless they think they are not
going to be successful. When someone is running in a marathon, as long as he thinks he is going to finish, he will
continue. It is only when he starts thinking he is not going to make it that he will quit before he
completely exhausts himself."
You're at your weakest when you're tired. Fatigue stops the positive thoughts necessary for good negotiations.
That's why, the day before every negotiation, you need to make sure to eat well, watch your alcohol intake and
get at least eight hours' sleep. This ensures you'll be in top mental and physical condition and that your head is
clear to negotiate successfully. Things will better if you walk into the deal just plain feeling good.

2. Remember, it's only a game. Herb Cohen, America's great negotiator and author of You Can Negotiate
Anything, says, "Negotiation is just a game. You care about the outcome, but not that much." That's one reason
it's often hard for entrepreneurs to remain neutral when they negotiate--they're too emotionally attached and
sensitive when it comes to representing themselves and their company. It's much easier to take an unbiased
position when representing somebody else's money, time, family, product, service or even career, but when it hits
close to home, it is no longer a game.

The more emotionally attached we become to an outcome, the harder we try to get our way. Pretty soon we
begin to lose our perspective. It's important to stay neutral.

3. Don't take a hard-and-fast position. When you start negotiating, remind yourself that you want this
agreement to work satisfactorily for everyone involved. If you take a position that says, "Either this goes my way
or it's not going," you could end up very sorry. How do you deal with people who try to force you to take a
position? Refuse to negotiate with them. Remain calm and mature no matter how they try to beat you down. If
your prospects throws out an ultimatum, such as "Either you throw in 10 sets of widgets for free with this order or
I won't do business with you," it's time to stop the game. Say something like, "I would love to work with you, but it
doesn't sound like it could work right now." Because this type of individual may be looking for trouble, you must
weigh your words carefully and get them out of your way fast.

4. Be prepared to walk away. Remember, negotiating is a game, and if you don't care about the outcome that
much, you can detach yourself from the situation and walk away. The purest negotiations occur when you have
plenty of other prospects in the pipeline and plenty of money in the bank.

If an inflexible customer is the only customer you have going for you, it can be difficult to negotiate objectively.
"Control of the negotiation lies with the party who is perceived to need the deal the least," says expert negotiator
and sales consultant Barry Elms. When you care the least at the negotiating table, you have the most strength.

Most people feel they've either failed or walked away from an opportunity when they turn something down, says
Joanna Tamer, president of Los Angeles-based S.O.S. Inc., a consulting firm for new media developers,
publishers, distributors and retailers. But in reality, says Tamer, "there is no shortage of opportunity. If you say
yes to something, whether it turns out to be good or bad, you still have to say no to the next thing that comes
along because you have already filled that space."

Tamer's detachment in the face of negotiation is the key to her success with clients, which include big names like
Blockbuster, Harper-Collins and Time-Life Inc. "When I negotiate for myself or my clients," says Tamer, "I tell
them and myself: `Remember, there's no shortage of business out there. If this deal doesn't fly, it isn't going to
end my career or kill your future business.' "

Keeping this positive attitude is important. And when you say no, Tamer advises, be alert because something will
show up soon to fill the place of the deal that didn't work out. "You may feel awful when something doesn't work
out--but later, you'll be amazed how happy you are that it didn't," she promises. "If it had worked out, the new
opportunity that is in front of you now never would have presented itself."

5. Practice compassion, and negotiate in good faith. Show compassion by listening for the real reason behind
your customer's objection or hesitation. Let customers air their feelings, make comments, present objections and
feel comfortable telling you whatever is on their minds. Then and only then will all parties come to the negotiating
table in good fait

The process of bargaining that precedes an agreement. Successful negotiation generally results in
a Contract between the parties.
Example: Nelson wishes to purchase a property from Newman. Nelson is willing to pay up to a certain price and
desires certain Conditions placed on the sale. Newman will accept anything over a certain price and may be willing
to help finance the purchase for a higher price. In negotiation Nelson and Newman attempt to come to an agreement
over the price and conditions. When they agree, a sales contract is Executed.

Gale Encyclopedia of Small Business:

Negotiation
Top

Negotiation describes any communication process between individuals that is intended to reach a compromise or
agreement to the satisfaction of both parties. Negotiation involves examining the facts of a situation, exposing the
both the common and opposing interests of the parties involved, and bargaining to resolve as many issues as possible.
Negotiation takes place every day in nearly every facet of life—from national governments negotiating border
disputes, to companies negotiating work agreements with labor unions, to real estate agents negotiating the sale of
property, to former spouses negotiating the terms of a divorce. Small business owners are likely to face negotiations
on a daily basis when dealing with customers, suppliers, employees, investors, creditors, government agencies, and
even family members. Many companies train members of their sales forces in negotiation techniques, and many
others hire professional negotiators to represent them in business dealings. Good negotiation requires advance
preparation, a knowledge of negotiating techniques, and practice.

Regardless of the type of negotiation, experts recommend entering into it with a cooperative rather than a
competitive attitude. They stress that the point of negotiating is to reach agreement rather than to achieve victory.
"Any method of negotiation may be fairly judged by three criteria," Roger Fisher and William Ury wrote in their
book Getting to Yes: Negotiating Agreement without Giving In. "It should produce a wise agreement if agreement is
possible. It should be efficient. And it should improve or at least not damage the relationship between the parties."
When one of the parties uses "hard" negotiating techniques—or bullies and intimidates the other side in order to
obtain a more favorable arrangement—it only creates resentment and poisons future negotiations. Instead, the idea
should be to find a win/win solution that satisfies the needs and interests of both parties.

Preparing for a Negotiation

Good negotiation requires advance preparation, an understanding of the underlying assumptions and needs to be
satisfied on both sides, a basic knowledge of human behavior, and mastery of a range of negotiating techniques,
strategies, and tactics. In his book Fundamentals of Negotiating, Gerard I. Nierenberg outlined a number of steps
toward adequately preparing for a negotiation. The first step is to "do your homework" about the other side. In nearly
every negotiation, this will entail research to uncover their underlying motivations. In negotiating a business property
lease, for example, it may be useful to find out the cost to the landlord of keeping the building vacant. The next step
is to assess your own side's needs and establish objectives for the negotiation. It is important that the objectives
remain relatively fluid, however, so as not to hinder the negotiation.

Another element of preparing for a negotiation involves deciding whether to use an individual or a team as your
representative. This decision needs to be considered separately for every negotiation, and will always depend to
some extent on what the other side is doing. A negotiating team offers a number of potential advantages. For
example, it enables a small business to involve people with different areas of expertise in order to avoid
misstatements of fact. Teams can also play into negotiating strategies and help gain concessions through consultation
among team members. However, it is important to note that bringing extra people can be harmful to a negotiation
when they do not have a distinct function. Using a single negotiator also offers some advantages. It prevents the
weakening of positions that often occurs through differences of opinion within a team, and it also may help gain
concessions through the negotiator's ability to make on-the-spot decisions.

The next step in preparing for a negotiation involves choosing a chief negotiator. Ideally, this person should have
experience and training in negotiations, as well as a strong background in the area of the problem to be negotiated.
Another important element of negotiation is selecting the meeting site. For a small business, holding the meeting on
its own premises may provide a psychological advantage, plus will save on travel time and expense. It may also be
helpful in enabling the negotiators to obtain approval from managers or use their own facilities to check facts and
find additional information as needed. Holding a negotiation at the other side's offices, however, may help the
negotiators to devote their full attention to the task at hand without distractions. It may also play into negotiating
strategy by enabling the negotiators to temporarily withhold information by claiming a need to speak to higher level
people or gather more information. A third alternative for a meeting site is a neutral location. Whatever site is
chosen, it should be large enough to accommodate all parties and feature a telephone, comfortable chairs, visual
aids, and available refreshments.

The Negotiation Process

Fisher and Ury recommend conducting negotiations according to the process of "principled negotiation." Their
method has four main tenets:

1. Separate the people from the problem. The idea should be for both sides to work together to attack a
problem, rather than attacking each other. To achieve this goal, it is necessary to overcome emotional
responses and set aside egos.
2. Focus on interests rather than positions. The natural tendency in many negotiations—for
example, dickering over the price to be paid for an antique—is for both sides to state a position and then
move toward middle ground. Fisher and Ury warn against confusing people's stated positions with their
underlying interests, and claim that positions often tend to obscure what people truly hope to gain through
negotiation.
3. Generate a variety of options before deciding what to do. The pressure involved in any type of negotiation
tends to narrow people's vision and inhibit their creativity, making it difficult to find optimal solutions to
problems. Instead, Fisher and Ury suggest developing a wide range of possible solutions as part of the
negotiating process. These possible solutions should attempt to advance shared interests
and reconcile differences.
4. Base the result on objective criteria. No one will be happy with the result of a negotiation if they feel that
they have been taken advantage of. The solution is to find and apply some fair standard to the problem in
order to guarantee a mutually beneficial result.

Fisher and Ury's principles provide a good overall guide for the actual negotiation process. In his book, Nierenberg
offered a number of other tips and strategies that may be effective in promoting successful negotiations. For
example, it may be helpful to ask questions in order to form a better understanding of the needs and interests of the
other side. The questions must be phrased diplomatically and timed correctly in order to avoid an antagonistic
response. The idea is to gain information and uncover basic assumptions without immediately taking positions.
Nierenberg stressed the importance of listening carefully to the other side's responses, as well as studying their facial
expressions and body language, in order to gain quality information.

Nierenberg noted that good negotiators will employ a variety of means to accomplish their objectives. Small business
owners should be aware of some of the more common strategies and techniques that they may see others apply or
may wish to apply themselves. One common strategy is forbearance, or "patience pays," which covers any sort of wait
or delay in negotiations. If one side wishes to confer in private, or adjourn briefly, they are employing a strategy of
forbearance. Another common strategy is to present a fait accompli, or come to a final offer and leave it up to the
other side to decide whether to accept it. In a simple example, a small business owner may scratch out one provision
in a contract that he or she finds unacceptable, then sign it and send it back. The other party to the contract then
must decide whether to accept the revised agreement. Nierenberg warns that this strategy can be risky, and
encourages those who employ it to carefully appraise the consequences first.
Another possible negotiating strategy is reversal, which involves taking a position that seems opposed to the original
one. Similarly, feinting involves apparently moving in one direction in order to divert attention from the true goal.
For example, a negotiator may give in on a point that is not very important in order to make the real objective more
attainable. Another strategy involves setting limits on the negotiation, whether with regards to time, the people
involved, or other factors. It is also possible to change the participation in the negotiation if it seems to be at
an impasse. For example, a neutral third party may be enlisted to help, or one or two people from each side may be
sent off to continue the negotiation separately. It may also be helpful to break down the problem into small pieces
and tackle them one by one. Another strategy might be to trade sides for a short time and try to view the situation
from each other's perspective. All of these techniques may be applied either to gain advantage or to push forward a
negotiation that has apparently reached an impasse