Finding a set of rules that make sense to all parties involved is the difficult business of negotiation. Yet when each and every one of us has different desires and emotion, that process can become strenuous and even hostile if not kept under control. Just as Koslow says above, it is best to leave personalities at the door so that opportunities can be better discussed. But what does that look like in real life when negotiating business agreements? And how can we better equip ourselves for the discussion?
“During a negotiation, it would be wise not to take anything personally. If you leave personalities out of it, you will be able to see opportunities more objectively.” – Brian Koslow
Decide whether or not you actually need to negotiate
You don’t always have to negotiate things, and indeed, many investors decide early on that they will not. According to David Amis and Howard Stevenson from the book Winning Angels, choosing not to negotiate can save time and relationships by allowing the entrepreneur to simply get what they want. “By giving the entrepreneur their own proposed terms, it should be hard for them to regret it later” write the authors. And although some of this does come down to pleasing the entrepreneur and having a good relationship with him/her, another part of it includes your own personality type. Are you comfortable in conflict, or are you stronger in interpersonal relationship building? Depending on which side of the spectrum you lie, you may decide to either negotiate or pass and accept or reject an offer quickly.
Be strong, but always ethical and considerate of others
We have all have that mental image of a negotiator being a dominating figure who works to get his way. But what is the use of getting your way in a business deal, if it comes at the expense of someone else? If you end up shortchanging the entrepreneur in charge of executing the opportunity, who are you really stealing from if not from yourself? Being considerate of the needs of others during a deal can actually end up bringing you a higher upside than if you took more for yourself. It may seem counterintuitive at first, but the people on the front lines of day to day operation will be more motivated to do their best work when they have a sweeter deal to work with. In turn, that will result in more company growth and greater value of the shares that you own (even if your position isn’t as high as it would be otherwise).
Maintain long-term perspective within short-term decisions
It might be a one-time negotiation, but you’ll be in business with the people across the boardroom table for many years to come. Whether or not you will have a healthy professional relationship with them comes down, in part, to the way that you approach negotiations. Finally, since it is possible that your next big deal might come from either the same people, or friends of those people, always strive to see the bigger picture and the fact that you are investing largely in people.
David Amis-Howard Stevenson (2001). Winning angels: the seven fundamentals of early-stage investing. Pearson Education.