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The Art of Negotiation

10/04/2011 10:57 am ET | Updated Dec 04, 2011

Negotiation in business is vital; it affects every part of your business. Even though negotiation is vital some entrepreneurs fail to understand negotiation etiquette.

Being able to negotiate is the part of the whole essence of business.

Wikipedia says ''negotiation is intended to aim at compromise.''

There are five rules to negotiating:

Rule one: Don't be greedy
Rule two: Everybody has got to be a winner
Rule three: Stay calm, cool and collected
Rule four: Know your bottom line
Rule five: Strategy

Rule one: Don't be greedy

Being greedy in negotiation often means that you are 'in it to win it' and are ignoring the fundamental rule that negotiation is about compromise. I have seen countless entrepreneurs lose clients, suppliers investors and strategic partners because they were being greedy in negotiations.

One of past clients ran a recruiting firm and was offered a contract to find 20 sales staff for a big UK-based company. His normal fee was 20 percent of the basic salary (for each recruit), however when the negotiations started he didn't budge even though it was a rather large order and a repeat client. The client asked if he would drop to 10 percent and then when my client wouldn't budge he then said 15 percent. My client said no as he was being greedy. He ended up losing the big contract and the repeat business his client had been giving him.

Rule two: Everybody has got to be a winner

Rule two reaffirms rule one, if you are greedy both parties don't leave as winners. In business every party has to walk away smiling and excited about the deal that has just been made. Often when I am negotiating I have a bottle of champagne ready on ice to toast after the deal has been done. If your suppliers, clients, investors and strategic partners feel good about working with you then not only will you have their business for years to come, they will also refer others.

Rule three: Stay calm, cool and collected

Body psychologist in my opinion will always make the best negotiators. Have you ever heard the saying that language is 5 percent oral and 95 percent physical? In negotiations whoever you are negotiating with will be looking for physically signs to let them know what is going on in your head, a drop of sweat, fidgeting hands, tapping of the feet anything that can give a signal that what he/she is saying is making impact. You also should look for physical indicators. If you stay calm, cool and collected it means that you have not shown your cards which is a powerful position.

Rule four: Know your bottom line

Knowing your bottom line is vital. Before you enter into negotiations you should know to the cent what you are prepared to negotiate to and once that point has been reached you should be prepared to walk away.

I was working with a client a couple of months ago who was negotiating her fees and before the negotiation took place we had agreed what her bottom line was, however when she entered the conference room that all went out the window. She ended up negotiating down to half her normal fee and started resenting the client that she began working with.

Walking away from a deal that doesn't work with your bottom line shows confidence and business nuance. Why cut off your nose to spite your face.

Rule five: Strategy

Sun Tzu says in the Art of War '' the battle is won before it even begins'' this is all down to strategy; you need to know who you are negotiating with, what you are negotiating and why you are negotiating. There are a few strategies that I have seen over the years and the popular ones are:

1. No risk clauses
2. Getting personal/charming your client
3. Fear/scarcity
4. Ratchet system
5. Contingent clauses

In order to execute the perfect negotiation strategy you have to know the Who, What and Why, because then you are negotiating from a place of knowledge and not just taking a stab in the dark.

Finally know your perfect deal! Before you enter the conference room think about what you would like the outcome to be, ensuring that you are following the five golden rules of negotiating.

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