General Negotiation Tips and Advice

Throughout the life of a business negotiation is a key skill for the founders and strategists working on it. Often, however, having no business experience, founders fall into traps put by the people they negotiate with (VCs, partners, etc.)

I'm wondering if you've had any bad experiences due to lack of negotiation skills and if you can somehow formulate those into tips or advise. What should we be aware of before starting negotiations? What types of information should we share and what should we keep secret? How do we protect our leverage? What do we do when people act illegally or immorally against us?

Please try to avoid talking about people skills (how to know what the other party thinks and what people they are like), and concentrate specifically on the negotiation part.

Negotiating is an art that is learned through experience. One of my mentors was however very generous and shared with me a framework to help structure the negotiation process to a certain degree to make them more efficient and search for the elusive win-win situation.

Essentially there are 5 components that I use whenever I begin a negotiation process:

1. Understanding my own motivations and interests in the negotiation process. Why am I taking the position I have taken and what are some of the key factors driving me to reach a conclusion. Similarly you should make some prior assumptions for the other parties as well and as the negotiations progress you can keep verifying your assumptions.
2. Focus on the problem or the end in mind. Many times the conversation goes off topic or is purposely taken off topic to distract attention from the core issue or delay the process and avoid any sort of commitment.
3. From the onset options should be developed as to how a mutually beneficial conclusion can be reached. This ensures that many possibilities are reviewed and all concerned parties are satisfied that the options are not one sided.
4. Both sides should have a keen sense of what alternatives are available to each side. The strength of your alternatives greatly determines your ability to maneuver and choose options that may be of greater benefit for you.
5. All options should be graded against some objective criterions that are co-developed by all the concerned individuals. This brings a greater degree of transparency to the negotiations and a much healthier discussion while evaluating them.

I wrote about this topic in some detail last year. 5 Steps to Better Negotiations.

There are a lot of questions within your question that has given me some ideas for future blog posts. Will let you know when I update my blog with them.

My biggest single piece of advice: You have to be able to comfortably walk away from the deal. If not, they have you. Ultimately you'll give in to anything because the deal is your best choice. If so, you can (at least ask for) anything because even if it sours the deal you're OK with that.

For further reading, http://venturehacks.com is my favorite blog / reference for term sheet tips and hacks.

A book which I consider gives good advice in the negotiating field is Getting to Yes.

I would say these are my best tips for negotiations - some suited better for smaller gatherings - one-to-one;

• Always make sure to have a vague entity or external party to consult with - it will keep tension of the negotiation - and that's a good thing for all. For example; a board of advisors you need to consult with - instead of you being perceived as the greedy, inflexible one etc - although you can tell your views but that you need to consult your board.
• Your hidden agenda and secret un-transparent business stuff. Well in my opinion - it can be a good thing to tell other parties that there is some research and development been done that you / your company has put allot of efforts in - and that there are policies/principles that you have to follow so you can't be fully transparent.
• Imagine wished outcome. Keeping end in mind. You should feel like a winner (even might not too displayed).
• Don't start too generous. Don't start off so you have to draw back. Research show that we feel worse about loosing something than gaining something.
• When you imagine wished outcome ALSO imagine that the other party (-ies) should feel like a winner as well. There's nearly always a way for that too.
• Do not make a too good deal for you in relation to other party. Seldom if never, argue too hard or become angry. If you are a mega winner - sometimes be a bit generous. Think rather 10% of 1 million than 100% of 10 thousand. Why not tell the other party about that's how you think - to inspire them to the same - that you both will try to avoid taking to much.
• Think win-win or no deal. Walking away from a deal can be a good thing - also if you make a win and the others a big lose. But most of all; constantly remind all parties for this aim - this will set the right vibe.
• Asking and listening. The one asking the questions is the one that leads and not the one doing the most talking - also magically the one that most people like (it's a good thing if the other party like you in a negotiation).
• Creating win-win is always related to money where and when. Asking who needs the resources when. Money can have different value in different times for the parties - to cease opportunities or avoid due dates etc.
• Settle with "good enough" sometimes and knowing that more opportunity will come down the road - a good relationship is often worth more than a better short term deal
• KISS. What? Yes,keep it simple stupid. Unless you have an eternal budget, a big pack of layers and are negotiating with a party that has the same resouces. Humans do error. The more complicated deal the more risk for not following trough - and processing legally is seldom worth it or good for your rumour. A deal should fit the length of a sheet - more if you have the budget for it and there's a must.
• Protect the downside. Some are unfortunately immoral. Don't do to big transactions without making sure you will get back agreed stuff in return. Build trust and if possible grow a deal; for example don't buy a years supply - buy a days supply first - see that it works then grow (unless there's some good references).
• Feelings of value is a construct and relative thing. If someone thinks a certain bag is an expensive original from Louis Vuitton most would you value it - if the same person thinks the EXACTLY same bag is a fake one (for example a gift from a friend), then the feelings of value most likely just isn't there - despite its' the same bag! snap. Things is a play - build the right stories - build that feelings of value as for a brand. Cherish feelings of value. Amen ;).

PS Feel free to improve my grammar/answer. :) DS

"Everything is Negotiable" by Gavin Kennedy is a good place to start:

http://www.amazon.com/Everything-Negotiable-Best-Deal-Every/dp/1847940013/