Listen and understand the other party’s issues and point of view.
Some of the worst negotiators I have seen are the ones who do all the talking, seeming to want to control the conversation and expound endlessly on the merits of their position. The best negotiators tend to be the ones who truly listen to the other side, understand their key issues and hot buttons, and then formulate an appropriate response. Try to gain an understanding about what is important to the other side, what limitations they may have, and where they may have flexibility. Refrain from talking too much.
Step n°2 |
Being prepared entails a whole host of things you may need to do, such as:
Review and understand thoroughly the business of the other party by reviewing their website, their press releases, articles written about their company, and so forth. A thorough Google and LinkedIn search is advisable here.
Review the background of the person you are negotiating with by reviewing any bio on the company’s site, the person’s LinkedIn profile, and by doing a Web search
Review what similar deals have been completed by the other side, and the terms thereof. For public companies, some of their prior agreements may be filed with the SEC.
Understand the offerings and pricings from competitors of the party you are negotiating with.
Step n°3 |
Keep the negotiations professional and courteous.
This is also known as the “don’t be an asshole rule.” Nobody really wants to do business with a difficult or abusive personality. After all, even after the negotiations are concluded, you may want to do business with this person again, or the transaction may require ongoing involvement with the representative of the other side.
Establishing a good long-term relationship should be one of the goals in the negotiation. A collaborative, positive tone in negotiations is more likely to result in progress to a closing.
Step n°4 |
Understand the deal dynamics.
Understanding the deal dynamics is crucial in any negotiation. So be prepared to determine the following:
Who has the leverage in the negotiation? Who wants the deal more?
What timing constraints is the other side under?
What alternatives does the other side have?
Is the other side going to be getting a significant payment from you? If so, the leverage will tend to be on your side.
Step n°5 |
Always draft the first version of the agreement.
An absolutely fundamental principle of almost any negotiation is that you (or your lawyers) should prepare the first draft of the proposed contract. This lets you frame how the deal should be structured, implement key points that you want that haven’t been discussed, and gets momentum on your side. The other party will be reluctant to make extensive changes to your document (unless it is absurdly one sided), and therefore you will have already won part of the battle by starting off with your preferred terms. Having said that, you want to avoid starting the negotiations with an agreement that the other side will never agree to. Balance is key here.
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