What are the basics of the art of negotiation?
Always leave money on the table.
In any complex negotiation, you are almost always going to need to interact with the other party after the negotiation is complete. So you need to make sure the other side is happy and gets a good deal.
Even “one-time” transactions often have tails.
You’d be surprised that even a transaction that seems to be a one-off can have a history of interactions after the negotiation. For instance, buying a car seems like a zero-sum interaction at first … but you want to maintain the goodwill of the seller in case there is some sort of a problem with the car.
Telegraph your core needs.
It is important for the other party to truly understand what you are optimizing for … so they can help you get there. If you try to conceal your true goals, it will be hard to understand the other party’s goals. Usually the two sides are not trying to optimize around the same metric (like price). Even very simple negotiations (like buying a cold soda on a hot day) can be multivariate.
The more both parties understand each other’s priorities, the better you can get to a win-win outcome.
Win-Lose rarely happens. Lose-Lose is (unfortunately) very common.
Usually when a negotiation goes south, it is lose-lose for everyone. Rarely is it that there is one winner and one loser. If someone loses, usually both parties lose.
If you are are getting lawyers involved (with implicit law suit threats), that is usually a sign you are headed down a lose-lose path.
Your goal is to get to a place where both parties win. And that they are both happy about the win afterwards.
An ultimate negotiation … selling your company.
If you are lucky enough to sell your company, there are a lot of things you can do in the negotiation to set it up for success. While I personally think you have a moral obligation to try to make sure your company is successful post-sale (even if you do not get any further financial gain), it is also in your long-term best financial interest. If you are known as someone that leaves money on the table when you negotiate, people are generally going to be more likely to want to work with you.
I soldin 2014 for $310 million. Today (in 2018) LiveRamp is worth over $2 billion (its value has increased about 7x in less than 4 years). Part of the rise in value is that it was an amazing asset to begin with. But part of the rise in value was due to the negotiation where we set up the company for success post-acquisition by ensuring we motivated the right people, kept the company independent, and more.
In fact, many times the acquiring company does not know what’s best for them. This is true for many negotiations. People may think that they should be optimizing for X but they should be optimizing for Y. The seller knows much more about the asset than the buyer … so you are going to need to help the buyer be successful post-sale.
How to leave money on the table: salaries, sales, and more.
Many people try to over-negotiate their salaries. My advice is to always leave money on the table. You usually can get more salary if you push for it, but the company you work for will start to have higher and higher expectations of you.
The higher your company’s expectations, the lower the chance you have of beating those expectations. If you crush expectations, your compensation will greatly increase. If you miss expectations (even by a little bit), the people around you will not have positive feelings about you (and that could significantly effect your future job prospects).
In life, you always want to beat expectations. That is another way of saying “leave money on the table.” Because it is MUCH easier to beat expectations if the expectations are lower to begin with. Good to start with a lower hurdle. You want people buying your service to feel really good about it a year later.
If you are a enterprise SaaS company, try to underprice your software. I know ALL the best SaaS gurus say the opposite … but optimizing on price (especially before a company hits $50MM ARR) can hurt customer satisfaction … and customer satisfaction is much more important for long-term shareholder value than higher dollars per customer.
Caveat Emptor is bad business.
If you are selling something, my advice is to make sure the buyer is ultimately going to be very happy with the product. The seller generally knows much more about the product than the buyer and it should not be the buyer’s responsibility to fully understand the product. The idea of Caveat Emptor (buyer beware) should be eliminated.
This is especially true if you are selling yourself. You have spent your whole life with yourself. The people buying your services maybe spent a few hours with you. You have a responsibility to make sure the buyer gets good value. That means you need to really understand the buyer’s needs and make sure you are delivering good value. Of course, that also means you have to be good at assessing your own strengths (which is for a future Quora post).
Summation: always leave money on the table.