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Tips to Successful Business Negotiation

Jun 9, 2008
Successful business negotiation can be worth a great deal to your business. It can mean the difference between securing a contract and losing a contract, and has the potential to be worth untold amounts of money to your business in the longer term. Thus, it's no surprise that good negotiators tend to go far in business.

Negotiation is relevant when it comes to closing contracts on favorable terms with suppliers and also during the sales process when dealing with potentially profitable clients and existing customers. For the business owner looking to close more profitable sales, learning the basics of negotiation is critical, and probably one of the most important skill to acquire early on.

The first thing to understand about business negotiation is that it's all about give and take except when you are negotiating a one off purchase. In this scenario, building and maintaining a relationship has almost zero value and you can definitely afford to be more ruthless. In this article I am looking at how you can negotiate effectively and create a long term business relationship in the process.

It is a good idea to do your research first and find out how the hungry the other party is for clinching a deal and / or gaining a new customer. Companies that are entering a new market will often be willing to make a loss in the first few years to rapidly build up a client base, whilst more established businesses will be looking to make a profit, however small, on every deal.

Obviously when negotiating in business you are out to get the best deal for your business, but it's important to understand that these objectives are mirrored on the other side of the table, and very few shrewd businessmen will be willing to allow such a one-sided negotiation where only one party wins. Therefore it's important to distinguish between what you must achieve and what the other party desires.

Mutual negotiation, on a psychological level, where it may appear that there has been some form of compromise, can have a significant effect on closing sales and negotiating contracts, and can leave the other party to the negotiation feeling as though both parties have got the best deal.

When involved in business negotiation, a key skill is to listen to what the other party is trying to achieve and then to try to understand their personal motivations during the negotiation process. This can help you understand more readily what the other side of the table desires, thereby enabling you to come up with suggestions that may help the deal through.

Don't fall into the trap of forcing yourself onto the other side. Listen to what they have to say, and put yourself in their shoes to understand their objectives before taking things forward. It's also a good idea to be relatively cagey in terms of what you desire, and revealing this too early in the negotiation process offers a key opportunity to the other side to negotiate a bargain at your expense.

Initially, after you have found out what requirements the other party has, start off by asking for more favorable terms then you are willing to settle for, thus building in some leeway for "giving in" to the requirements of the other side. Sometimes it is a good idea to walk away on friendly terms and reconvene another meeting at a later date after the first rejection.

Finally, negotiation is best conducted on friendly, personal terms. It's easy to create a positive relationship with the other party prior to negotiation, simply through the way you talk and interact with them in the pre-negotiation stages.

Knowledge is power and negotiation in business is very much about understanding other people and their plans, motivations and desires. People respond better to those that they share a good personal bond and for the limited effort required to achieve that bond it is well worth it.
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