6 Keys to Negotiating with Investors

6 Keys to Negotiating with Investors

6 Keys to Negotiating With Investors

There is no magic recipe for successful negotiations with potential investors, says Enrique Quemada (YPO Madrid), president of ONEtoONE Corporate Finance Group, but six key points will help you negotiate like an expert to get closer to your goals. 1. Understand what you really want. Goals give you direction, but clear expectations will give you the strength to negotiate because you will have convinced yourself that you deserve it. As former United States President Lyndon Johnson said, "what convinces is conviction." 2. Failure to prepare yourself equals preparing yourself for failure. Preparation is 99 percent of success. Many negotiations fail due to the lack of preparation. It is essential that you discover during the process what the investment opportunity represents for the buyer. What are their economic motives? Why do they need your company? What do they intend to do with it? How much do they expect to gain? 3. Reach an agreement with the best alternative possible. A good agreement requires having a good BATNA (best alternative to negotiated agreement). If you lack alternatives, you lack bargaining power. The buyer will exploit this to obtain concessions from you. 4. Create the optimal conditions for a good negotiation before meeting with the other party at the negotiating table. Make sure the right people are in the room, with the correct expectations, at the most favorable moment for you, and that you have the best alternatives when there is no agreement. Keep an eye on the people involved and their personal interests. Determine who on the other side values the operation most, and get that person to participate actively in the negotiations. 5. Have a sincere interest in the objectives of the other party. This will assure that they also care about your objectives, and create the best mutually beneficial solution. Remember that by creating empathy you create a favorable climate for “grow the pie” thinking. Be tough on your demands but affectionate with the other party. Negotiating is a game of information, and information gives you power. You must seek to understand their needs rather than their wants. 6. Power is a relative concept. Remember that in a negotiation 50 percent is emotion. Check the real power of the other party; usually it is overestimated. Perceptions are crucial in negotiations, and it is essential to understand them well. Situational power is based on perceptions, not facts. Therefore, be aware of the signs you transmit. Remember that in a negotiation that affects you, if you are not at the negotiating table, you are probably on the menu.