There’s no secret formula for successful negotiations. However, the following steps can help founders get great deals for their startups
Negotiation skills are essential for a successful startup journey. Studies have shown that people who don’t learn the art of negotiation are 60 percent less successful than those who do. As a founder, you will probably seek funding to grow or start your business, and that’s where the role of negotiation comes into play.
Almost every startup founder has to battle talks with potential investors. Here are four steps every startup founder should follow when negotiating with investors:
Set your objectives
As a startup owner, you need to determine your business objectives and goals. Have a clear understanding of your desired outcome, bottom line and plan B. At the same time, do your homework on the internet. Ensure that you understand the investors’ end goals, biases, strengths and weaknesses. The startup founder and investor need to be on the same page to get a fair and mutually beneficial deal.
Assess your BATNA
Don’t forget to assess your BATNA before approaching an investor for negotiation. BATNA is a term coined by Roger Fisher and William Ury, members of the Harvard Negotiation Project and the authors of Getting to Yes. It simply stands for “Best Alternative to a Negotiated Agreement”. Your BATNA protects you if the negotiations fail to reach an agreement. Sometimes, your best alternatives are not appealing. But you still need to decide which one is the best among the possible options. Therefore, it is always advisable to prepare and understand your BATNA before you enter into a negotiation.
Trust plays a crucial role between an investor and a startup founder. Trust and honesty are the foundation of successful negotiation. A study conducted by the Indian School of Business(ISB) provides insights into the varying levels of trust of negotiators and their effects on negotiation outcomes. The study suggests that trust promotes greater information sharing without the fear of exploitation. Building trust further leads to value creation and better results for all negotiating parties. The study emphasizes the importance of trust in the negotiation process and accordingly encourages negotiators to prepare strategies to attain fruitful outcomes.
Control your emotions
Entrepreneurs must keep their emotions and ego at bay to move through the negotiation process constructively. The display of emotions can have both positive and negative effects on the negotiation deal. According to Andrew Wasynczuk, a senior lecturer of business administration for Harvard Business School, anger is one of the most destructive emotions during negotiation. “It tends to start rising on both sides, and inevitably there is a point where it erupts. People walk away and say there’s value on the table, but I don’t care,” says Wasynczuk.
Now that you know how to master the art of negotiation, it’s time to get the most out of your business negotiations.
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