Skills Entrepreneurs Lack: Part 2 – Negotiating

As Monty Python taught us in the Life of Brian, entrepreneurs really have no choice but to negotiate. You’ll negotiate how much equity to give your partners, your pre-money valuation, the salary of your first employee, the deal terms of a strategic sale, etc. But most people are terrible negotiators. Recognize yourself in any of the following?

  • The Robot – You state your position and keep repeating it until you get what you want or walk away
  • Mr. Nice Guy – People love negotiating with you, mostly because they always win
  • Type A – You win the negotiations but lose the relationship

Learning effective negotiating skills will allow you to create true win-win scenarios. The best book I’ve ever come across about negotiations is called Getting to Yes. It’s $10, will take you less than an afternoon to read and is considered the classic text on how to negotiate. There are few books that will do more to improve your skills. The Wikipedia entry has a great summary of the five key points (but please read the book):

  1. Don’t bargain over positions – Unless you’re buying a house, the traditional offer-counter offer style of negotiating doesn’t work.
  2. Separate people from the problem – Don’t let emotions and styles ruin your negotiation.
  3. Focus on interests – Figure out what people really want, there’s often overlap with what you want.
  4. Invent options for mutual gain – Make sure the other side wins as well.
  5. Insist on using objective criteria – De-personalize negotiations using facts and figures

If reading Getting to Yes makes you realize that negotiating is not the same as improvising, then it’ll be the best $10 you ever spent.