Negotiation skills are essential 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 agreements. Negotiations involve give-and-take. For example, you may need to give more equity in your business to an investor to get as much money from the investor as you need.
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.
Source: Watershed Associates, Inc. Best Negotiation Practices. Copyright 1993–2022.
Women and Negotiations
Women are often strong negotiators when advocating for others, but some back away from negotiating on their own behalf. They may encounter individuals who are not comfortable with an assertive woman. Learning negotiation strategies and skills is essential to counteract bias. For example, know your business value and what is a reasonable cost for what you would gain. In response to an unacceptable offer, successful negotiators need to be able to:
- Firmly and respectfully say no.
- Give a short, honest reason for your response.
- Persuasively and confidently make a counteroffer.
Tips: How to Be Prepared for Negotiations
Be prepared in negotiations with the following:
- Understand what is negotiable.
- 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 worse solutions.
- 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.
