I spend a lot of time negotiating. In my world, it ranks right up there with eating breakfast. Recently, over a virtual beer, I was asked “do I have a strategy?” At first blush that seemed like a dumb question, but upon closer consideration, I realized that most of us do not.
In most negotiations, we are reactive and reflexive. We think of ourselves as brilliantly capable of thinking on our feet, reading the offense, making the adjustment, but the truth is many times we get caught in a man-to-man defense, not in a zone and the other side beats us deep off a back-shoulder pass in the corner. (The NFL is here).
So instead of turning to Bill Belichick, I went to Jonathan Hughes and Danny Ertel, Vantage Partners, for a chalk talk on negotiation. They propose four key questions you should consider before entering the conference room. What business outcome do you seek, who cares about this outcome, who can do something to bring about this outcome and how can you engage with parties who share some of your interests.
Regarding outcome, I would suggest that it changes during the negotiation. I have just finished a tough one where the initial desired outcome for my client was “give me the money.” Over time, it became “just give me less money, and I never want to talk to you again”. This model is often the de facto outcome in a contentious marital divorce.
One of my clients got into a disagreement where the other side was ready to “wage World War III” and had enough money to fund that war and two more after that one. That is a dangerous adversary because his outcome was to burn my client to the ground, and there is nothing more dangerous than a guy who doesn’t care what he loses, as long as he wins. (Refer to Pyrrhus of Epirus). We opted for settle and walk away.
Another factor in thinking about outcomes is that they are in the future and somewhat opaque. You think you know how the story ends, but don’t bet on it. What I have seen is that often an unrelated event shows up out of nowhere and dramatically reshuffles the table. Didn’t see that coming.
Recently, I bumped into Litigation Louie again in the hallway. One of my clients finds that a competitor is “maybe” infringing, but for sure he is disparaging my guy with a potential customer. My client says let’s send the infamous “lawyer letter” to the infringer, but I suggest an alternate approach. I know the target company, and the best revenge is not a dish served cold, but rather is measured in revenue. I get the CEO of that company (turns out I used to be an angel investor in the company two iterations ago) to meet with my client, and he successfully sells her his software. Competitor out of the picture. No legal fees.
Hughes and Ertel talk about “positive leverage,” meaning what can your side “uniquely offer to make the other side desire a deal.” One of my clients has a brilliant idea and not enough dough to get even halfway home. He takes it as far as he can, and then finally calls up the biggest elephant in that jungle and says, “I will give you the idea and the work we have done to date. I would rather do that than see this project die.” And then lo and behold, the elephant says, “thank you and we will do it with you, and we will help fund, you are right, it is a really good idea.”
Play the long game. This is harder than it sounds. We have to go back to outcomes and a consideration of the “possibilities.” A client recently did a software licensing deal. On balance pretty good, but we didn’t crush it. We suspected (hoped) that they might come back and expand the scope of work once they saw our product in action. Bingo, we caught a break, and the second time at bat, my guy puts it in the right-field seats. Left a little on the table at the appetizer course but got the whole cow at dinner.
Rule No. 677: We were glad to pick up the check.
Neil Senturia, a serial entrepreneur who invests in early-stage technology companies, writes weekly about entrepreneurship in San Diego. Please email ideas to Neil at neil@blackbirdv.com.
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Do you have a strategy? Consider these 4 key questions - The San Diego Union-Tribune
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