What are the successful strategies for negotiation that entrepreneurs could apply to their startup businesses?

Negotiation can be everything for startup founders. Virtually everything you do is going to involve some negotiation. Learning a few classic negotiation strategies, and some more advanced and current tactics and approaches can make all the difference in getting launched, staying alive, raising startup capital, and continuing to thrive. It will directly impact how you feel about all the time and energy you’ve invested when you exit and it’s over. 

Everything Is A Negotiation

From well before day one of your startup you will be negotiating. You may even still be negotiating around this venture a couple of years after your company is acquired by a larger one. 

Just some of the things you’ll be negotiating include:

  • Time off from your job or school to start working on your business idea
  • A time period and amount of money your family thinks you can commit to trying it
  • The help of advisors and coaches
  • Cofounder relationships
  • Business partnerships
  • Hiring team members
  • Office space
  • Equipment purchases, software, and financing
  • Distribution channels and ad buys
  • Fundraising terms with investors
  • Sales
  • M&A deals
  • Post-acquisition vesting and resting periods

The Foundation Of Every Successful Negotiation

Before any type of successful strategies for negotiation, it pays to do your homework. It’s worth knowing the terminology, what is normal for terms, and how the current climate is different. It’s also wise to do your homework on those you’ll be negotiating with too.

The more you know, the better you’ll be prepared to negotiate successfully. Failing to do this is going to be a blunder which will put you at a disadvantage before you even start. Research and get input from your fundraising coaches and M&A advisors.

13 Negotiation Strategies & Tactics To Know And Use

1) Empathy & Creating Win-Win Deals

It may not sound very tough, but developing empathy for those on the other side of the table is a powerful tool for getting deals done. It can serve you well too.

Even if you can crush your opponent and make them fold to your will in a negotiation, that can be a very short-lived ‘victory’. If it isn’t a win for everyone, then it can definitely come back to haunt you.

Look beyond simply what you can get the other party to agree to now. If they already aren’t really happy with the outcome, things can sour quickly. It can impact your organization and reputation.

2) Multiple Choice Offers

Rather than demanding a yes or no, or opening up a single offer to endless finer negotiations of the terms, consider a multiple choice offer upfront. Do you want deal A, B or C? It leaves less room for negotiating by the other side. It helps to speed things up, and direct others toward your preferred framework.

3) Focus On The Why

Harvard Business Review reminds us to focus on the why. This is one of the main key drivers behind the most successful strategies for negotiation. The base interest in the deal versus the what. Otherwise, you’ll get too tangled up in the details, and making it a battle, rather than really creating outcomes that solve the core challenge. 

4) Framing & Positioning

Everything is about storytelling in negotiations. This isn’t just limited to pitching and fundraising or branding and selling product either.

Use framing and positioning to create and demonstrate value. Use it to guide the thought process, rather than just leaving the perspective up to those you are negotiating with.

How do you want them to perceive you and this opportunity? How do you want them to perceive failing to come to an agreement with you? 

5) Take It Or Leave It

This is a common successful strategies for negotiation. It used to work well, and sometimes still can if presented correctly. It works if you have empathy and explain why this is the only deal you’ll take.

It doesn’t work when you try to act tough and better than the other party. That will only alienate them. Even more so in our new digital environment where shoppers can instantly compare and get insider insights on their phones, on the spot.

6) Limited Time Offers

Giving deadlines is a more subtle version of the takeaway tactic. It creates fear of missing out and urgency to accept your offer. If you only give them three days to sign before your offer expires, chances are high that you may create more conversions.

Just make sure your deadlines are reasonable for the scenario. 24 hours might be reasonable for buying a home. It may seem ridiculous and make you look like an amateur when it comes to fundraising and buying companies.

7) Give & Take

When entering negotiations remember that everyone wants to feel like they are winning something. The take it or leave it approach will work far less often than leaving room for concessions.

Know your musts, where you can give, and where you can’t. Start a little higher (or lower) than where you really want to be. Leave room for adjustments in the terms. This is where knowing those ones on the other side of the table will really give you a strategic advantage in creating the outcome you really want.

8) It’s A Process

Remember that most negotiations are a process. This can apply to everyday sales, recruiting important team members, trading equity for cash, and M&A deals.

Often these deals can take weeks and months. You don’t have to hammer out all the details on the first day. Often there are constant re-negotiations throughout this period. Relax and let it evolve. 

9) Start With Small Commitments

Begin with getting small yes commitments. That can even be follow up calls and meetings. It can be initial agreements to enter into due diligence and exclusive negotiations. 

10) Good Cop, Bad Cop

You’ll often have teams of negotiators on both sides. Include different personalities. Those who can drive real bargains, and those who have a softer touch.

11) Think Outside The Box 

Don’t believe anything is ‘standard’ when it comes down to the successful strategies for negotiation. Don’t get stuck in the status quo. The whole point of negotiating is that everything is negotiable. 

12) Reserve The Right To Shop Around

Always reserve the right to shop around, but recognize true value when it is on the table. Don’t be too cheap.

13) Ignore Them

I’ve interviewed multiple founders on the DealMakers podcast who dismissed early inbound acquisition offers. Those acquirers ultimately came back with two or three much larger offers. 

Remember that storytelling plays a key role in fundraising and you will need capital to scale things up. This is being able to capture the essence of the business in 15 to 20 slides. For a winning deck, take a look at the template created by Silicon Valley legend, Peter Thiel (see it here) that I recently covered. Thiel was the first angel investor in Facebook with a $500K check that turned into more than $1 billion in cash.

You can download the full pitch deck template by unlocking the pitch deck template that is being used by founders around the world to raise millions below.

 

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