Power Negotiations ◾ 173
8.7.4 Power Negotiator’s TIR
“NO is the beginning of negotiations.”
Time is money. Few people are more aware of this than are entrepreneurs
seeking seed investments.
In negotiations, it simply means that the more time passes, the weaker
the entrepreneur’s bargaining position becomes. Moreover, investors know
this very well.
Power negotiators have three quills in their holster: (1) time, (2)
information, and (3) reward power. The entrepreneur must enter
negotiations with the full expectation that there will be areas of legitimate
differences, and these differences will take time to overcome. You must
make time your ally not your adversary.
The entrepreneur brings to the negotiating table a wealth of valuable
information. That information takes the form of market knowledge, technical
expertise, and competitive intelligence highly sought by potential investors.
This is a great source of bargaining power.
The entrepreneur can reward the investor with exceptional returns not
available elsewhere. Together these three sources of negotiator’s power can
bring about a mutually desired outcome, as shown in Figure8.12.
8.8 Managing Negotiation Conict
“If you are going through hell, keep on going.” —Winston Churchill
Negotiations involve conict among interdependent entities. Conict occurs
during negotiations over substantive issues. Conicts can be divided into
Negotiator’s TIR
Desired
Outcome
Time to
negotiate
Information
Reward
power
Figure 8.12 Negotiator’s TIR—Your sources of negotiating power.
174 ◾ The Guide to Entrepreneurship: How to Create Wealth for Your Company
three parts: substantive, emotional, and intergroup. Substantive conict is
seen when there is a fundamental disagreement over goals, while emotional
disagreements arise when there is anger, mistrust, fear, and resentment.
Intergroup conict occurs among members of competing teams, especially
when groups differ substantially in status, power, and inuence.
Conicts can be overcome with creative solutions and reconsideration
of previous positions. Conicts can be resolved by focusing on objectives
and mutual interests. Seek acceptable rather than optimal solutions while
ensuring mutual satisfaction.
For example, the parties may have a major conict over the price of
something. The conict over price threatens to derail the entire agreement.
However, price does not need to be a precise number of dollars. Price can
have a range, depending on when it is paid, meeting milestones, achieving
new specications, estimated market penetration, etc. Thus, price can have a
“settlement range” as shown in Figure8.13.
The important point is this: Facts are past-oriented; negotiations are
future-oriented. Future-oriented settlements can be altered as new informa-
tion arrives. Ranges can be very useful in overcoming conicts when they
arise.
8.9 Secrets of Power Presentations
“You must be more than a mere messenger.”
You will be better believed if your negotiation counterpart considers you
an expert and one that can be trusted. Your technical expertise will bring
e Settlement Range Concept
Acceptable Price ($)
Entrepreneur’s
minimum
Investor’s
maximum
Possible settlement range
Figure 8.13 The settlement range—Settlement ranges can be used to overcome
negotiating conicts.
Power Negotiations ◾ 175
you credibility. Your credibility will be based on your intimate knowledge
of products, markets, regulations, and future industry directions. Emphasize
your experience, accomplishments, and the special qualications of your
team members.
Chester L. Karras,
22
author of The Negotiating Game and Give and Take,
famously states, “In business as in life—you don’t get what you deserve,
you get what you negotiate.” He also admonishes, “Perception is reality.”
Moreover, everything that happens during negotiations is more perception
than reality.
As the chief negotiator for your company, you will create reality by
remembering the following truism: The most memorable presentations
have three sections: a beginning, middle, and an end. Therefore, follow this
dictum: “Tell them what you are going to tell them; tell them and then tell
them what you have told them.”
◾ Disclose a “roadmap” or “plan” of your presentation before launching
into your discussion—“Tell them what you are going to tell them.”
◾ Clearly express the need at the beginning—“This is the market pain.”
◾ It is more effective to present both sides of an issue up front.
◾ When discussing advantages/disadvantages of an issue, unveil your
position last.
◾ Listeners will remember the beginning and end of a presentation more
than the middle.
◾ Listeners will remember the end better than the beginning.
◾ Listener will only remember bits and pieces of the middle—“Everything
they said is in a fog,” “I cannot remember precisely how it was said.”
◾ Repetition leads to better memorization and acceptance.
◾ Conclusions should be clearly stated—“This is how we intend to solve
this market pain.”
◾ Summarize your ndings—“Tell them what you just told them.”
8.10 Secrets of Closing the Deal
“If you can’t get a meal, get a sandwich.”
Entrepreneurs need to understand that most concessions will occur at the
deadline. Alternatively, using Pareto’s Law, 80% of the concessions will
occur during the last 20% of negotiation time. The crucial question for the
176 ◾ The Guide to Entrepreneurship: How to Create Wealth for Your Company
entrepreneur is do you have the “staying power” necessary to wait for a fair
outcome?
Herb Cohen, author of the bestseller You Can Negotiate Anything, states
that “the more energy is expended in a goal, the more desirable that goal
becomes” (for both parties).
23
The following summarizes important closing criteria:
◾ It will take twice as long as you expected to close the deal.
◾ It will cost you twice as much as you expected to close the deal.
◾ Agree on common issues rst, and then move on to the more
difcult ones.
◾ Focus your counterpart on your innovation (differentiation, positioning).
◾ Present proposals on a rational basis, using statistics and facts.
◾ Do not allow the negotiations to be reduced to a single issue (these
are zero-sum).
◾ Bring down the curtain slowly by slowing your concessions as time passes.
◾ Provide as many options, choices, and approaches as possible.
◾ In negotiations, style supersedes substance (players count more than
the play).
24
Figure8.14 visually presents the negotiation process as a funnel. The top
of the funnel casts a wide net to the business world called information
sharing, where the entrepreneur looks at many potential investors and
exchanges information with all comers. Once an investor shows interest
in reaching a deal, the negotiations move to the problem census phase,
where deal limits become better dened by both parties.
If the parties are still interested, the most difcult phase starts, which is
labeled problem solving. Problem solving or conict resolution allows the
parties to proceed or ends in an impasse, stalemate, or deadlock. This phase
is the most sensitive part of any negotiation, requiring the most skill and
sensitivity by both parties. The majority of your time, effort, and energy will
be spent here.
If technical/market problems can be overcome, the parties can move
to the stem of the funnel. It is at this deal terms phase when the
experts (i.e., accountants, lawyers, nancial advisors) come into play. The
entrepreneur should be particularly concerned with the counterpart’s law-
yers. Lawyers are the world’s worst deal-killers. By concentrating on their
client’s interests, lawyers overlook the principle that business negotiations
Power Negotiations ◾ 177
are based on mutual compromise. Lawyers seem more interested in
PRINCIPAL than in PRINCIPLE.
It is almost axiomatic that counterparts will come up with some last-
minute demands, just when their negotiating advantage is at its greatest.
It is the proverbial “Oh, by the way….” Your counterpart asks for last-min-
ute concessions. It occurs precisely at your point of maximal negotiation
vulnerability. More entrepreneurs have lost control of their startups at this
point than at any other point during negotiations.
8.11 The Ten Amendments of Negotiations
You have the right to:
1. Negotiate with decision makers only.
2. Be backed by your own experts.
3. Ask for more time.
4. Concede slowly and ask for a return concession.
5. Ask for clarication.
6. Look intimidated.
e Negotiation Funnel
Information Sharing
Problem Census
Problem Solving
Goals &
limits
Deal Terms
Close
Market
dynamics
Last-Minute Concessions
Impasse, stalemate,
deadlock
Legal,
regulatory
Financial,
governance
Figure 8.14 The negotiation funnel—Closing the deal in visual form.
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