In Startup Management

I have long thought that I didn’t much like negotiating, especially as part of a selling process.  A few weeks ago I discovered I was wrong – for reasons I hadn’t fully understood before.

A few weeks ago I was doing something a bit different – I was helping to sell a small business from within a larger organisation.  It was an established business with a stable operating model and revenue.  The board had a very clear view on what would constitute a successful sale, which had a number of different potential benefits:

  • Cash from the sale of the business and assets
  • Ongoing cash income from renting property to the business
  • Fewer distractions for the parent company
  • Retaining jobs within the business
  • A positive story to tell about the future of the business

The really interesting thing for me was that I enjoyed the negotiation.  The board had very clear position on what would constitute a successful sale, which I had helped to establish.  I knew what I could and couldn’t offer or accept – I wasn’t overly constrained by the board, but I knew where the limits were.

I enjoyed the negotiation, even though we ended up failing to come to a deal on what initially looked like a positive offer from our preferred bidders.  Shortly later, a new bidder arrived on the scene and I was once again involved in negotiations.  This time we sold the business successfully.

Having clear parameters for a negotiation led me to be much more comfortable in conducting it – and that I was doing the right things at each step.  I knew what the “BATNA” – “Best Alternative To Negotiated Agreement” looked like and that we were all comfortable with it.

This is when I realised – it’s not negotiating that I don’t enjoy.  It’s negotiating from a position of weakness.

Much of the time when I negotiate I am doing early stage business development on the part of high-tech startups I am working with.  I’m usually trying to make a B2B sale to a large company, selling a new product (or service) for the first time.  There is no established “market price” for the product, and very often the product is unproven.  We stand to gain several benefits from the sale.

  • Revenue from the sale – the obvious benefit
  • Experience of deploying the product with a real customer
  • Proof that the product works in a customer environment (hopefully as a case study)
  • Credibility with investors from having closed a sale
  • The probability of further sales to the same customer

Too often when negotiating sales with startups I am negotiating from a position of weakness.  Coming away without the a sale – or even the appearance of a probably sale sometime soon – isn’t seen as an option – the founders, investors and board all want the sale badly.  The product isn’t really ready, the value proposition isn’t proven, the customer is probably going to have costs for using the product that are far greater than the sale price.

It’s not fun when it happens that way – even when we actually get a good deal, I don’t enjoy the process. Knowing that I can’t say “no” because there is no BATNA makes the whole process harder.

So what’s my take-away from this?

Sometimes I may be able to strengthen the negotiating position, or establish a BATNA with stakeholders.

The rest of the time, I need to separate genuine “negotiation” from opportunistic sales attempts.  There’s nothing wrong with being opportunistic as long as everyone on the team knows that’s the situation.  Viewing it that way, perhaps I can feel more comfortable with it.

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