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If every opening in business is a sale (i.e. recruiting, fundraising, pitching), then every close is a negotiation (i.e. hiring, investment, signed deals). The biggest mistake I see most professionals make when negotiating is focusing on the wrong north star. Amateur negotiators care about winning and defeating the competition. Expert negotiators know “winning” is a fool's errand.

In negotiation, the goal is to first expand the pie to create maximum value and then capture as much as possible. So how do you do that?

Use my 3+3 approach.

The 3+3 has two components: (1) Substance and (2) Process. Substance - unsurprisingly - focuses on core elements in the negotiation (e.g. the price and the terms). Process focus on the "everything else." It's counterintuitive, but most deals are lost because the process drivers are managed too casually / lackadaisically.

The 3+3 has served me incredibly well - the cool part about it is it works in any high stakes situation - I have used it close M&A transactions, lock down strategic partnerships, secure Executive talent and squeeze my way into oversubscribed fundraising rounds. Here's how it works:

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Substantive

I. Define the outcome spectrum

Explicitly define 3 outcomes: (1) great, (2) acceptable and (3) bad. Then place all 3 outcomes on a spectrum. Ask yourself: What are the probabilities of each outcome? What variables drive these probabilities? How interconnected are the variables? It’s important at the outset to understand the boundary conditions from your perspective.

II. Expand the variable set

While you may have clarity on your variables, that’s only one side of the story. You need to understand the other party’s variables. Ask: What matters to them? Most negotiators fixate solely on price; terms and conditions are more important. Think about: time, leverage, brand, coordination, access, reputation, risk. Don’t assume your priorities match theirs.

III. Break the box

Negotiation is all about thinking outside the box. Most negotiators get stuck when they can’t get alignment on a term. In my experience, it’s possible to get aligned on virtually any term; it shouldn’t be the term you debate, it should be the conditions around the term. Use guardrails (contingencies, performance parameters, commitments) to assist in alignment. You can structure anything.

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Process

I. Build the relationship

Deals are negotiated by humans, not robots (at least for now). Trust is essential to getting a value-generating deal done. Early in the process, focus on finding common ground. What are your shared interests? Connections? Priorities? The sooner you see each other as teammates instead of adversaries, the higher the likelihood of maximum value creation.

II. Communicate appropriately

How do you like to communicate? Text, email, phone, in person? What about who you’re negotiating with? It sounds trivial, but communication style breaks most deals that otherwise should get done. At the outset of the discussion explicitly ask your counterpart how they would prefer to communicate throughout the process. Doing so will help you avoid snowballs turning into boulders.

III. Accelerate the velocity

Time kills all deals. Why? Because it increases the probability that factors unrelated to the negotiation (e.g. market conditions, shifting business priorities) take center stage. Keep the conversation on track—and move swiftly to avoid unnecessary roadblocks.

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Remember, negotiation is about creating value, not winning. Like we talked about last week, it's always better to get an individual slice of a watermelon than to eat an entire grape.

Until next week,

Romeen

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