High-profile disputes at BA and Royal Mail have highlighted the importance of strong negotiation. How can business owners sharpen their own deal-making skills?

The creation of a coalition government has thrown a spotlight on a key skill as crucial in business as it is in politics-negotiation. Likewise, when messy industrial disputes linger, such as those at BA and Royal Mail, the talents of experienced negotiators are crucial. But new research suggests that a third of the UK's small-business owners and managers don't see themselves as "naturally strong negotiators". And as few as one in 10 try to talk terms only when faced with cashflow problems.

Yet the T-Mobile findings also highlighted examples of big savings in small companies willing to negotiate: costs of a translation service cut from £75,000 to £39,000, rent reduced by £7,000, and £1,500 of free photography. So what's the secret? Every tough business discussion throws up its unique set of circumstances, but there are 10 top tips than can help time and again.

1 Know what you want
Too many negotiators come away disappointed because they didn't define their bottom line before they went to the table. Darren Fell, managing director of online accountancy service Crunch, had decided he wasn't going to pay the full price even before he started talking with a software supplier. "I suggested a reduced price and offered instead to help with their PR by becoming a case study for them," he recalls. "It's about building a relationship."

2 Understand the context
Ask yourself: Is this a one-off deal or something that will lead to a longer-term relationship? Jeremy Shaw, chairman of marketing agency Kitcatt Nohr Alexander Shaw, explains: "If you're buying a carpet in a souk, chances are you will never go there again. So if you upset the guy, do you really care?

"If, at the other extreme, you're negotiating a merger, you have an absolute interest in everyone working well together afterwards, so maintaining good relationships is at a premium."

3 Know who you're dealing with
It pays to understand who they are and what they want. Simon North, co-founder of Position Ignition, a careers advisory service, says seeking an outcome that is good for all involved is the best place to start. But how will you know what it is if you don't find out before you start negotiating? he asks.

"You need to do your homework first to find out about the person you're dealing with, their life and work, and the things that matter to them."

4 Create rapport
It pays to develop a positive atmosphere in which talks can move forward constructively. "Because negotiations can often be tense affairs, it can sometimes help to lighten the mood," explains Peter Savage, an associate at law firm Morrisons.

Savage recalls a case when a tough liability deal was proposed for a Polish client. "We filed out of the room to consider our response. When we returned, we confirmed we had a package to present, but I first asked the other team to confirm their financial limit was in Polish zloty, not sterling. Thankfully, this had the desired effect of opening a constructive discussion rather than triggering a walkout."

5 Build trust
Your opponents need to understand that you intend to be fair, especially in sales pitches. Ashley Ward, a serial chief executive who has led seven businesses, says he was trained in aggressive sales.

"Now, I've developed a gentler approach, which I call 'intravenous salesmanship' because it gets under customers' skin," he explains. "Sales should be about communicating and building trust-you spot a genuine need and suggest a way in which you can help."

6 Use the power of human contact
Technology makes it possible to carry out negotiations remotely. But there is no substitute for looking your opponents in the eyes, says Savage at Morrisons. "It also allows people to break from the meeting and reconsider ideal and best alternative positions," he adds.

7 improve your skills
Companies that achieve more of their business aims have often made a big effort to raise skill levels of all key staff.

"Negotiation is a vital business discipline," says David Freedman, sales director of Huthwaite International, which provides sales and deal-making training.

"There may never be a 'negotiation director' sitting at the boardroom table, but by recognising the strategic importance of excellent negotiation and bridging gaps in current performance, any company can bring improvement to its bottom line."

8 Call in the experts
Trying to tackle a subject you don't understand is a recipe for disappointment. It could pay to hire a consultant who knows about the topic. "I recently wanted to review some telecoms contracts," recalls Shaw. "That's not something one buys every day. But there are people who do that all the time. So I got one. No matter how great a negotiator you are, if you don't know the terrain, you'll never be as good as an average negotiator who does. So don't be afraid to pay for good help."

9 Make conditional proposals
Move negotiations along by asking: If we did this, would you do that? This is a key skill for taking difficult talks forward, says Deane Hitchens-Orr, an associate at The Influence Business, which provides negotiation skills training. "Negotiations are about both parties making compromises," he adds. "It is imperative that we ask the other side to make a concession, not solely wait for them to respond to our own movement.

"If there is one behaviour that a negotiator should master, it's the ability to make conditional proposals, and to know that every time they, and the other party, make a move [they should understand], what that costs them in terms of concessions."

10 Keep lawyers under control
"Lawyers do a wonderful job of telling you about the things that might go wrong," says Shaw. "But the danger is that they have this terrible desire to prove to you, and themselves, that they are smarter than the other people's lawyers—and to get engaged in unnecessary point-scoring. If you have these kinds of lawyers, fire them."

Case study: don't take no for an answer

Who Daniel Woolman
Sector Manufacturing
Negotiating tip Don't be afraid to be bullish on price

When entrepreneur Daniel Woolman had a brilliant idea for an automatic device to disinfect wheelie bins, he was faced with a £150,000 problem. That was the sum a UK manufacturer wanted to make the tool used in the injection moulding of the plastic product.

Start-up businessman Woolman couldn't raise the cash. But his negotiating skills enabled him to find a maker that has done the work for just £25,000. Now his company, Binifresh, has signed up retailers, including Asda and John Lewis, and is on track this year for a £1.5m turnover.

Woolman decided to cut costs by sourcing the tool and manufacturing from China. But even there initial costs came in at £100,000. "I went out to China to negotiate," Woolman recalls.

He began negotiating with one manufacturer and came close to cutting a deal that would have it chop the price to £50,000 in return for a 10 per cent stake in Binifresh. "I worked over the figures and realised it was still too much," Woolman says. "I recognised that in negotiations when you don't have that kind of money, you really can't win."

But Woolman didn't give up. Instead, he searched for another manufacturer in "deepest, darkest China". He found a maker that would create the tool for £50,000 and spent three months negotiating. The final price: £25,000 with £5,000 upfront, another £10,000 when he'd seen the prototype of the tool and the remaining £10,000 as a royalty on products as they came off the production line.

"The secret of negotiating in China is to be bullish," says Woolman. "If they say they want £100,000, tell them you want it for £20,000 and don't be embarrassed. It seems a crazy thing to do, but it works."

But the real secrets of Woolman's negotiating success in the Far East—patience and doing his homework—are applicable globally. He exploited the fact that there were thousands of alternative suppliers of similar manufacturing services in China.

"They kept asking us why we were going to manufacturers' exhibitions in Shanghai and Hong Kong, and we used that to our advantage to make them think we were going elsewhere," he says.

Woolman also made sure that he knew the prices they were quoting were realistic by securing alternative quotes for specialist components from other manufacturers. "They didn't like that at all, and it helped when we were negotiating the price."

But when Woolman started to negotiate with major British retailers, he found the boot was on the other foot. "The process was much more formal. We'd get just half an hour to make our pitch. You only win them over with the product. You have to be affable but essentially they are looking at sales and they are sensitive to the retail price."