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Tim Berry on business planning, starting and growing your business, and having a life in the meantime.

Three Simple but Powerful Rules for Negotiation 11

Seems like negotiation week for me. I published this post about Seth Godin’s take on business development, and then another on how win-win is the only win in business negotiations. That leaves me thinking about negotiations I’ve been involved in, things that have worked, and things that haven’t worked. And I end up wanting to post the three rules here, because it seems like they always work.

Disclosure: I’ve never taken a negotiation course; not the ones they advertise in magazines, and not one in business school either. These rules are things I learned the hard way.

1. How does it feel to be them?

Call it empathy. “Walk a mile in their shoes” is a good old-fashioned saying. I know a lady who would say “see it through my eyes.” There’s no substitute for understanding the other side of the negotiation. What are they thinking? And, by far the most important, what do they want?

2. Find the win-win

There are no zero-sum games in long-term business deals. You have two winners or two losers, never just one winner and one loser. Sure, you might be able to get that kind of a victory (we win, you lose) in a negotiation sometimes, if you make that a goal … but that won’t last. Businesses wise up. Relationships that aren’t good for both sides don’t last.

So look for that in every negotiation. How can they get what they want, and you get what you want? Maybe both sides get slightly less, but both win. That’s the goal.

3. Negotiate before the contract, not with the contract

The most common mistake in negotiation is dealing with the legal contract. First, you have to realize that only a tiny minority of legal contracts ever determine anything. You have to sue for breach of contract to make a contract really matter, and if it comes to that, you already have a disaster. The vast majority of disputes are dealt with by discussion, revision, and, for the really hard ones,  mediation.

I’m not an attorney, so don’t take this as legal advice. In practical experience, though, what I’ve seen that works is that you get all your terms straight first in simple memos (yes, definitely, written; just not legalese) and then do the contract. The contract is the last step.

(Photo credit: Dmitriy Shironosov/Shutterstock)

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  • http://NRF george davis III

    Tim. I spent many years negotiating across the desks and tables of the retail fashion industry. I learned early on that “It’s not a good deal unless both sides walk away believing they got a good deal”. Good preparation; knowing the history of the relationship and the numbers and their impact on the proposed deal, can go a long way in achieving your side of the equation.

  • http://www.onesherpa.com Andee Sellman, One Sherpa

    Great post Tim.
    Three great points that are really easy to apply.
    I so love a post that is simple and meaningful!

  • http://www.therisetothetop.com Team The Rise To The Top

    Love this post, especially the part about walking a mile in their shoes, trying to figure out what they want. Understanding the other side of negotiation is key to making your negotiation in the first place. Thanks for posting these Tim, I really enjoyed the post!

  • http://www.licensinghandbook.com Jeff Gordon

    As a professional negotiator, I would love to agree that win-win is THE process to play by. The problem is that if you play win-win and your opponent is playing win-lose, guess who is going to lose? (Read more on win-win vs win-lose with Jim Camp and “Start with No!”)

    So rather than focus on which process I’m going to try to use, I focus on the Five Fundamental Skills for Effective Negotiation (shameless plug, since I’m one of the authors of the skills: ). But these Five Fundamentals do take information gathering and strategy into account (the first two skills, actually) – which are exactly what the 3 things you mentioned are really doing.

    The net result is that I’m thoroughly prepped for every negotiation and I have given due consideration to the other side’s needs. But ultimately, as a negotiator, I’m there to satisfy my client’s interests while really only seeking to give the other side JUST ENOUGH to meet their own needs. Is that win-win? Win-lose? Depends on how you look at it. :)

  • http://www.myretailer.ca Vadim

    Thanks for a good post!

    The win-win mentality is actually described in length in Stephen Covey’s book “The Seven Habits of Highly Effective People”. Its a must read for all business owners

    http://en.wikipedia.org/wiki/Abundance_mentality

  • http://radsmarts.com Robin Dickinson

    Hi Tim, this is my first visit to your excellent site.

    Much of my time is spent helping clients negotiate large, complex deals that inevitably boil down to the fundamentals.

    To your points I would add a few of the things that constantly arise (in no particular order) …

    1) Determine their best-case outcome for the deal, and then determine yours;

    2) Clearly identify what your list of non-negotiable and negotiable parameters are, and if possible, determine theirs;

    3) Clearly understand their decision making process – including time-line and internal dependencies;

    4) Identify their ‘compelling event’ i.e. what’s driving them to want to ‘buy’. This is critical to ensure conceptual buy-in;

    5) Never, ever “lick the plate clean”. Screwing people backfires;

    6) Be exhaustive in your preparation. It pays off.

    There are many more, but I’m amazed how few people fail to even consider the above points – even with millions at stake.

    Best to you,

    Robin

  • http://www.MyrtleBeachGolfWorld.com jason

    great post. Too often I have dealt with clients who negotiate with a contract. Which really limits the amount of negotiating they can do. It seems with most people, as soon as most people need an attorney to assist them they basically close negotiations.

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  • Nils

    Absolute! Walk the walk and talk the talk. After almost 25 years in retail and as a buyer I can agree with all what you write. You have to go into a partnership to get best possible deal in the long run. Sure you can screw them but they will never sell you again so what did you gain?

  • http://www.stratgrow.com Strategic Growth Advisors

    Hey, Tim. This is one splendid post.

    I completely agree with item number 2. Most negotiation deals these days are played on an even playing field. The other person almost always wants a sweeter deal than the other but eventually end up with a very sour one.

    Keep those helpful articles coming!

  • http://twitter.com/emcsmedia Edin Shaba

    Great article!
    I would have titled it ‘Three Simple but Powerful Rules to prepare for Negotiation”. What i mean is you don’t want to ‘walk in their shoes’ and find the win-win the day of the negotiation (though some negotiations can stretch temporally).Strategy= ‘you’ve understand their pain’
    Tactics you are coming prepared with the “if i give you this,you give me that”, “if you do this, i’ll will do that”.

  • Kim

    Yes I agree 100% A good ole gentlemans handshake beats any type of leagalese.
    If we need that kind of contract then we do not need to be doing business .