Making A Deal

If you spend any time in business, you end up in a negotiation of some sort. It might begin even before you start at a job as you negotiate your salary. More likely, it happens as you work on a deal and document that deal with a contract. You might think that the deal is done when you shake hands but my experience has been that the deal is never really done, even once you’ve both signed that contract.

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To me, the contract is a reference point, something to which the parties can turn if there is a change in circumstances or confusion about expectations. As with any relationship, business deals tend to be fluid, but if the partners work in good faith, any problem is solvable. You should also remember that contracts generally last beyond the actual deal itself (check those clauses in the “survival” section).

Because agreements and partnerships are long-term, the negotiations have to be viewed in that long-term context as well. The odds are that success in the negotiation is not immediate. I have had a contract take longer to get done and signed than the term sheet that documents the general business points. It’s not because the former is done by lawyers and the latter generally by business people either. It really has more to do with the fact that others are getting involved. I’ve found that negotiating success is inversely proportionate to the number of people involved – two people can get something done that ten can’t, even though those ten can be helpful in surfacing new approaches when things bog down.

You need a couple of things to negotiate well. First, you need to know your bottom line – the boundaries you are unwilling or unable to move beyond no matter what the other side offers. You must be willing to walk away if those boundaries are crossed. You also have to be realistic about where to draw those boundaries and let the other side know when they’re asking you to cross them and why. It’s no place for dogma. If you don’t have a real reason and just want to “win,” you’ll lose.

Second, you need a vision of what the possible end result might be. You need to consider solutions with an open mind. Finally, you need to sit on the same side of the table as the person with whom you’re negotiating. I don’t mean physically. I mean you need to convey a positive message – if we work together, we might find some solution that addresses all of our concerns. We are partners in solving a problem.

I’ve had deals fall through during negotiation but they’re the exception. I’ve also had partners not live up to the contracts they signed for various reasons. That’s more common and generally because they weren’t thinking long-term when they signed the deal. What’s your experience been?

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Filed under Helpful Hints, Thinking Aloud

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