Questions to Answer Before You Start Negotiating

Written by Sean Murphy. Posted in 2 Open for Business Stage, 3 Early Customer Stage, Rules of Thumb, Sales, skmurphy

Here  are some questions to ask yourself before you start negotiating a complex business relationship: for example a software license, SaaS subscription, or a reseller or OEM relationship. Entire books are written on negotiation, I am trying to highlight some questions that can get overlooked.

Objectives, Constraints, Estimate for Zone of Potential Agreement

  • What are our objectives and constraints on a negotiated solution?
  • What do we think these are for the other parties involved?
  • Is there a potential zone for agreement between our constraints and our estimates for the other party?

Constraints are typically non-negotiable.

Relative Costs and Advantages

  • What are our  the hard, soft, and opportunity costs associated with the arrangement.
  • What do we think these are for the other parties involved?
  • What are the “currencies” and relative expertise advantages we can exploit for mutual advantage?
    • people time,
    • calendar time,
    • intellectual property,
    • know-how,
    • reputation / social capital

Mentally put the deal “in your pocket.” Do you want to undo the transaction?

When To Walk Away And When To Say Yes Immediately

  • What is our best alternative to a negotiated agreement (BATNA)?
  • What is our best offer?
  • What are a range of “good offers” we should say yes to immediately?

These should provide a floor for exploring what is jointly possible.

Is This a Common Negotiation? Be Easy To Do Business With.

If this represents a category of negotiation (one you do many times) is there a nominal or expected outcome you can achieve with a minimum of negotiation? Your goal is to get to the agreement and not waste time: what do we need to know to be able put the best offer forward for the counterparty’s situation.

Avoid the common tendency to negotiate the best terms on the initial transaction when your real objective is an ongoing business relationship that creates a stream of shared value.

What If Yes Wasn’t Really a Yes

  • What’s the worst case for defection from a negotiated agreement?

This is often worse than BATNA because you lose time by thinking you have made an agreement the other side does not intend to honor. How can we create joint accountability mechanisms to raise the cost of defection (or at least give us early visibility into inaction that may signal a likely defection).

  • What if we cannot deliver on our commitments (or service level agreement).

Have at least one or two contingency plans for honoring your agreement.

Before You Start Negotiating

The reality is that the negotiation starts with your first contact with a potential customer or partner. How they here about you, how anyone on your team treats them, any actions your take even before you decide you want a deal have a bearing on the negotiation. Strategies like “every customer a reference” and “treat everyone with respect and courtesy” can as much to set the table for a negotiation as your website or datasheet or final proposal. Especially for startups the biggest uncertainty potential customers and partners are trying to assess is your ability to execute. Anything that undercuts the perception you won’t honor commitments or are difficult to do business with works against you.

Two Good Books

  1. 3D Negotiations by Lax and Sebenius is very useful in multi-stage negotiations where you are trying to assemble a coalition or penetrate a market. There is a good HBR article that summarizes the key points (and a longer pre-publication version with a rich set of references). We also did a Book Club for Business Impact webinar on 3D negotiations.
  2. Getting It Done: How to Lead When You’re Not in Charge by Fisher and Sharp is very helpful for situations that involve shared value creation or joint development.

Related Blog Posts

Schedule An Office Hours Session To Walk Around A Current Negotiation

Office Hours ButtonWe help clients negotiate complex multi-step multi-party agreements.  If you are contemplating or are in the midst of negotiating with a potential customer or partner schedule an office hours session and we can walk around what you can do to increase the value and likelihood of a deal. Our focus is the founders in B2B startup teams that are bootstrapping.

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