Negotiation skills are important when starting a business; you may need to negotiate a vendor price, license agreement, rental agreement (e.g., incubator space), business services (e.g., a lawyer or consultant), partnership agreement, employee contract, bank loan, or venture capital agreement. Negotiations involve give-and-take, often of equity in exchange for money but sometimes involve changes in ways of doing business or promises of future actions.
5 Best Negotiation Practices
- Prepare – Research the players and facts, analyze strengths and risks, and anticipate potential outcomes. Identify each party’s interests, goals, and most and least desired outcomes. Decide what relationship you want to build. Is there an alternative to a negotiated outcome?
- Exchange – Share options that could meet needs and other information.
- Bargain – Give and take. Solutions must satisfy everyone’s needs.
- Conclude – Reach an agreement if possible. Get it in writing.
- Execute – Implement the agreement that was made.
Source: Watershed Associates, Inc. Best Negotiation Practices. Copyright 1993–2022.
Women and Negotiations
Women are often strong negotiators when advocating for others, but some women back away from negotiating on their own behalf. They may lack essential skills and strategies, not understand their value or what is negotiable, or want to avoid backlash from someone who is not comfortable negotiating with an assertive woman. Successful negotiators need to be able to firmly and respectfully say no to an unacceptable offer; give a short, honest reason; and persuasively and confidently make a counteroffer.
Tips: How to Be Prepared for Negotiations
Be prepared in negotiations with the following:
- Understand who is at the negotiation table across from you. What do they care about most? If it is a group, do you have any champions among them who may support you in the discussions?
- Understand what’s in it for you and what’s in it for the other party.
- Connect with each person present by making eye contact and addressing the priorities of each one if possible.
- Build rapport and trust.
- Know the value of your product and other assets.
- Know your ideal outcome, including the details of what you want to have when the negotiation is complete. Decide what you are willing to let go of.
- If you are the weaker party, rather than a bottom line, have a best alternative in mind and turn down solutions that are worse.
- Know when to walk away. What is the lowest value or deal you are willing to accept? For example, know how much dilution of your business shares you are willing to accept.
- Know the best alternative course of action that you will take if negotiations fail and no agreement is reached.
- Be prepared with probing tactics—these may include just listening.
- If negotiating a product sale or licensing your knowledge, know the value of comparable products or services (“comps”).
Source: Ethel Rubin, PhD, Head, Lifescience Ventures, BioHealth Innovation, Inc., Entrepreneur In Residence, NIH SEED. NIA and NHLBI Entrepreneur Workshop Series: Licensing and Partnering Agreements.