Monday, 6 January 2014

Billy's Twelfth Law: Tim's law of Negotiation. If you are not willing to walk away you are not are begging

You don't get what you deserve, you get what you negotiate.

Chester L. Karrass
I am not a great negotiator, so I turn to my friend Tim Thompson for this law.  Many of you are probably great negotiators.  For those of you who need some work, this may be helpful to you.  Here is why.

When we start out as entrepreneurs, we want and need to make sales.  The idea that the customer is always right or that the customer is number one is a predominant part of our thinking.  As our businesses develop, we add costs, staff, products and new customers.  The problem is when it comes to negotiating; many entrepreneurs give away too much just to make the sale. 

Here are some of the reasons we don't negotiate the way we should: 

  1. We are desperate...we really need the business.
  2. We really don't want to be turned down by the customer.
  3. We want to make the customer to be happy.
  4. We don't want the customer to take his or her business elsewhere.
  5. We desire certainty in the outcome.
For many of us, and I include myself in this group... this desire to please as another example of the fourth law of the greatest strength being your greatest weakness.   The problem, as Tim pointed out to me, you need to take the chance that you will lose the business, the feature or the terms you were looking for. 
Walking away is difficult, but is sometimes necessary.  This is a tough concept to learn and even tougher to implement.  As entrepreneurs, especially new entrepreneurs, we hear messages such as: “sales are everything” and “the customer is always right”.  Taken to the extreme… this is dangerous.  Sometimes, you can respond with options, rather than having a take it or leave it attitude, but you must have a point at which you are willing to say no.
I have seen too many cases where business owners were so desperate for a sale that they failed to take profit and cash flow into account.  Unfortunately, it doesn’t take too many bad deals to take down an entire enterprise.

One lesson I try to provide to my entrepreneurship students is to ‘fill in their gaps.’  If your financial skills are weak, fill them in.  The same holds true for negotiation.  You must learn how negotiate.  Take a course, read a book, learn from friends, but most importantly, determine what you need to see if there is a deal which is fair to both parties and not just to your customers.

Men vs. Women

I have heard it said that men are better negotiators than women.  I don’t know if that is true in the general population, however; amongst entrepreneurs some of the best negotiators I know are women.  So ladies, don’t let gender be an excuse not to negotiate well. 
Some of my negotiation tips are:
  1. Know what you need…have you walking point.
  2. Don’t try to take everything off the table.  You want people to deal with you again.
  3. Not all business situations should happen.  Perhaps you can’t pay what your supplier needs for her products or services.  Doing a deal under these circumstances is bad for both parties. 
  4. Try to find alternatives instead of compromises. 
  5. Remember a future law…your head must say yes, but your gut can say no. 

So here is a quote with which to start the New Year:

“You must never try to make all the money that’s in a deal. Let the other fellow make some money too, because if you have a reputation for always making all the money, you won’t have many deals.”
 – J. Paul Getty

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