No organisation escapes the round table meetings! It could be with a venture capital, with partners, with suppliers or even with employees. And what’s more, many of these meetings can be deals that are sealed for life. And hence, utmost care needs to be taken by the founders to prepare for such meetings. We bring to you seven negotiation tips that will help you with the deal making process.
1. Too many cooks spoil the broth
Startups are characterised with a small team of energizer bunnies where everyone is doing everything. However, I do not recommend this approach when the startup is say raising capital, courting a partner for any of its services, signing a lease or hiring top talent. The introduction of a single point of contact (SPOC) has several advantages. It shows that the there is strong leadership, trust, a quick pace of decision making and no division in the ranks. To balance interests internally, the organisation can have several checks and balances to make sure the SPOC does not over commit or bind the ranks in a manner not in line with the organizational goal.
2. Good cop – bad cop roles
Founders should watch out for the suave financier or the deal bringer entity. These people lend money and strike deals for a living. They are bound to be charming, polite and smooth. They will remain the good cops until the lawyers show up with the final understanding in print, this will serve to get ultimate interests confirmed and often the deal maker passes on the bad cop role to the lawyers. What the bad cops give you in writing could be very different from what you thought the deal was about. It would be a good practice and rule for the startup promoter to follow simple rules such as follow up every conversation with an email clearly stating as to what the understanding or discussion involved and invite his confirmation to your email. Be wary as to what the deal is about, why you want it, how badly you want it and in a disciplined manner rule out emotion from decision making.
3. Don’t play games
Have you often heard the saying that one has won the battle but not the war? Be very straightforward in your approach as to what you want from a deal. To work multiple angles such as emotion, projecting unnatural growth, linking several possibilities to show a jump start for your company and so on could give confusing messages to your deal partner. Usually good deal makers pick two or three main reasons for wanting to do a deal and if any of those crucial factors go beyond their control such as price or market they are willing to drop the deal and walk away very peacefully. To keep the deal partner engaged and interested, be clear with your objectives and how you plan to achieve them.
4. Compelling arguments
All wheelers and dealers love the thrill of the challenge within the framework of practicality and organizational goals. The idea that a piece of the company’s stock is being sought after by two other deal partners will urge them to continue to talk to you. This time frame of engagement gets crucial when the founder can continue to engage and disengage, hike and drop his demands, push and pull till a semblance of equilibrium is achieved. One rule though, back everything by facts, don’t over or under promise because the deal, in some cases, maybe for life.
5. Lawyers, anyone?
The traditional view subscribes to the fact that lawyers are people to be approached only if you have to go to court to defend or oppose a stance. I know this marketing is good for my clan; however, the presence of an attorney to consummate a deal can have several advantages. He/she could help you organise thoughts, think strategy serve as a buffer for competing interests and help with documentation in a very professional manner so the understanding is clear and interests are duly represented. The fact that they would have done this a dozen times more than the founder will add some value at the deal table. Also, once all the talking and the beer handshakes are over, to translate everything into legal documents enforceable in court of law is the real challenge. Do not ignore or compromise on this one.
6. Don’t get emotional, this is not your real baby
Founders must for their own sake, believe on incorporation, that the company is no longer their own. Classic old legal jurisprudence will tell us that members of a company may come and go but a company goes on forever. The deals that the founder tries to bring for the company must be judged on one ground alone – for the company. Parental protectiveness is always high in a startup company and investors love that passion as well but don’t get too emotional so much so that personal traits come in the way of deal making. Separate self from what is good for the company and ignore personality clashes.
7. Personal traits
All startup entrepreneurs despite juggling several balls must always be prepared when you enter a negotiation. Without diligence on the other deal partner, simply stating facts that are of your concern alone is a sure way to loose a negotiation. Great listening skills mean an empathetic negotiator. Use the opportunity to hear what the other partner is thinking, how their corporate sense dictates them to work and sometimes a misfit can be judged at the early stage, even before people at the table talk numbers. Further, ultimatums usually don’t work in negotiations and as long as you have a sound reason, you can shoot for the stars. Most importantly, if a deal hinges on certain ethical principles that you would otherwise not compromise on, do not do it. After this deal, it will be business as usual with other fish in the sea.
This article first appeared in Smart CEO and was authored by Aarthi Sivanandh.