One of the things I have learned the hard way over my years in business, and in advising others, is that it takes more than passion, creativity, and hard work to start and grow a business. A key skill that many of you don’t appreciate is the ability to effectively manage the negotiations that come with every business. The results are lost opportunity, poor contracts, or a failed business.
For example, one of the first decisions that most of you entrepreneurs face is how much equity to give to early investors, co-founders, and key new hires. These are tough and sensitive decisions, especially for technologists and introverts, who may prefer to let their innovations speak for them.
With that context, I was pleased to see a new book, “Entrepreneurial Negotiation,” by Samuel Dinnar and Lawrence Susskind, consultants and negotiation experts from Harvard and MIT. They reinforce my own view that negotiation is a critical skill for every business professional, and it can be learned and honed throughout your career.
The most successful business people, in my experience, are the ones who start early, and never stop learning better-negotiating skills. In particular, we all need to recognize and prevent negotiation mistakes before they occur. The most common mistakes their research has identified include the following:
- Focusing totally on your own interests (self-centered). If you don’t work to recognize and understand the needs and priorities of those with whom you have to negotiate, you will be blind to clues that could lead to better outcomes for both sides. Remember that every business, and every relationship, must be a win-win one, rather than a win-lose.
- Passion making you overly optimistic and overconfident. Your conviction that your innovation cannot fail will lead to contingencies not discussed or documented, or failing to consider the possibilities that agreements could break down or people might act unreliably. Negotiation is more about mitigating risk and uncertainty, rather than selling.
- Winning defined as reaching an agreement – now. Sometimes no agreement or a future agreement is the best alternative. You must always consider the lasting impact of an immediate action on reputation, trust, future negotiations, and long-term relationships. Don’t allow yourself to become desperate, and always be willing to walk away for cause.
- Accepting a quick compromise to get things done. Most of you are “doers,” who are multitasking under a heavy workload and measure success by how many things get done. You may have an aversion to conflict or be willing to declare victory by signing on to a compromise that you later regret. Don’t ever sacrifice base principles or integrity.
- Approaching negotiation as an individual sport. As a business owner, you survive by lean operations and value your independent spirit. Don’t confuse being responsible, in a heroic sense, with being an effective team leader. Perhaps coming up with the original idea required individual effort, but negotiation often requires utilizing the right expert.
- Negotiating as merely haggling over the price. Most business owners I know feel comfortable handling transactions with buyers, with the owner as the seller negotiating the price. More important for success are the complex transactions between partners, investors, and suppliers, where risk, long-term gain, and relationships are negotiated.
- Relying heavily on intuition versus prepared evidence. All negotiation involves some improvisation, but there is no substitute for advance preparation to support the best case, acceptable compromises, and walk-away triggers. It doesn’t help to blame the other side when negotiations don’t go as expected, and you only have gut instinct to fall back on.
- Allowing biases, emotion, and ego to overrule logic. This mistake causes you to hear and see only what you want, and to react inappropriately when things don’t go your way. By keeping your emotions in check, understanding the other person’s position, and using logical arguments, you will find negotiation to be much more satisfying and successful.
The first step in avoiding these mistakes is accepting the fact that negotiating is a way of life in business, not an occasional special event. By recognizing that you do it every day, you can get better and improve your confidence simply from the practice and learning from your mistakes.
When negotiating, always be pleasant and persistent but not demanding. Be professional at all times – do not get frustrated and angry if a negotiation does not proceed in your favor, and don’t be hesitant to enlist the help of internal and external subject experts as required. Negotiate your way to success, rather than wait for random luck to favor you.