Wait until the end of the period. “Car dealers are prone to give you the best price near the end of the month, when their transactions are assessed. And corporate salespeople work on a quarterly basis and are most vulnerable as the quarter comes to a close.”
Perceived unfairness will kill a deal. “In a TV interview, former Iranian nuclear negotiator Seyed Hossein Mousavian hit the nail on the head. “The nuclear issue today for Iranians is not nuclear,” he said, “it’s defending their integrity [as an] independent identity against the pressure of the rest.” You may not trust Iran, but its moves are pretty clear evidence that rejecting perceived unfairness, even at a substantial cost, is a powerful motivation. “
Let them offer first, but be ready. “By letting them anchor you also might get lucky: I’ve experienced many negotiations when the other party’s first offer was higher than the closing figure I had in mind. If I’d gone first they would have agreed and I would have left with either the winner’s curse or buyer’s remorse, those gut-wrenching feelings that you’ve overpaid or undersold. That said, you’ve got to be careful when you let the other guy anchor. You have to prepare yourself to withstand the first offer. If the other guy’s a pro, a shark, he’s going to go for an extreme anchor on order to bend your reality. Then, when they come back with a merely absurd offer it will seem reasonable after they mark it down from a crazy $600.”
Offering a range. “Understand, if you offer a range (and it’s a good idea to do so) expect them to come in at the low end.”
Give the illusion of control. “From the ashes of Dos Palmas, then, we learned a lesson that would forever change how the FBI negotiated kidnappings. We learned that negotiation was coaxing not overcoming; co-opting, not defeating. Most important, we learned that successful negotiation involved getting your counterpart to do the work for you and suggest your solution himself. It involved giving him the illusion of control while you, in fact, were the one defining the conversation.”
Be broad. “When you go into a store, instead of telling the salesclerk what you “need,” you can describe what you’re looking for and ask suggestions. “
Listen to everything. Body language and tone of voice — not words — are our most powerful assessment tools. That’s why I’ll often fly great distances to meet someone face-to-face, even when I can say much of what needs to be said over the phone.
Extreme anchoring. Experienced negotiators often lead with a ridiculous offer, an extreme anchor. And if you’re not prepared to handle it, you’ll lose your moorings and immediately go to your maximum. It’s human nature. Like the great ear-biting pugilist Mike Tyson once said, “Everybody has a plan until they get punched in the mouth.”
So how can the above be helpful when negotiating with your VC? If you’re going to throw out a valuation, use a range but expect the VC to anchor himself for the bottom of the range. As such, the valuation you’re happy with needs to be at the bottom of the range. If you let the VC throw out the first valuation, that’s great, but be prepared for them to set a very low anchor. Don’t be offended — it’s just negotiation. Reduce the size of counteroffers each time so the other party thinks they’re squeezing you, and use specific numbers that have real math behind them. Round numbers get dismissed while specific numbers with backing are appreciated.
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