The 3 Worst Negotiation Mistakes Young Entrepreneurs Make, And How To Avoid Them
When you’re an entrepreneur, almost everything is a negotiation. You negotiate with everyone from clients to partners and even employees sometimes. Negotiation is a fundamental part of the entrepreneurial experience. Unfortunately, many entrepreneurs fall victim to mistakes that make them incredibly poor negotiators.
Over my past five years as the CEO of BodeTree, I’ve not only witnessed these mistakes play out; I’ve made a number of them myself. Fortunately, it’s never too late to identify these mistakes and change direction. Here are the top three reasons you’re failing as a negotiator, and how to overcome them.
Nothing can derail a negotiation more quickly than greed. If one party pushes for too much or is too aggressive, the relationships between those involved grows sour, and the negotiation can go south. I’m a firm believer that there’s no such thing as “not personal, strictly business.” All business is personal, and emotions run high. It’s only natural for people to overestimate the value of their product, position, or contribution in a negotiation. It takes a special skill to recognize greedy behavior and stop it before it gets out of control.
This style of negotiation can be difficult to master, because no matter how hard you try, emotions inevitably influence your actions. The temptation to squeeze a partner for a better deal, or emerge “victorious” in the negotiation can be strong, and it takes a solid sense of self-awareness and humility to resist.
You don’t understand the type of negotiation you’re conducting.
There are two types of negotiations that leaders encounter on a frequent basis. The first is what I describe as the asset negotiation, which is generally a one-time event resulting in clear winners and losers. A good example of this type of negotiation is the sale of an asset like a piece of equipment. In this situation, the seller wants to maximize the price paid at all costs and doesn’t really care about the long-term implications of the deal. After all, once the deal is done you generally won’t have to work with the buyer again. The negotiators are incentivized to view the situation as a zero-sum game where someone wins and someone loses, which naturally leads to a more aggressive exchange.
The second type of negotiation—when both parties involved have to maintain a working relationship long after the negotiation ends—is more complex and thus, involves a more sophisticated approach. It’s important to remember that intangibles, such as trust, respect and admiration have tremendous value in business and must be factored into the negotiation strategy and defended at all costs.
You gamble with things you can’t afford to lose
When you play hardball with another party, you must always recognize that they can simply walk away. This can be tricky when it comes to strategic relationships, because there’s often significant cost and pain associated with a potential dissolution. However, there is a point in most negotiations where the pain of dissolution is preferable to an inequitable outcome. If a relationship is truly central to your success as an organization, you must temper your desire to play hardball or risk losing everything.
When it comes to negotiation, entrepreneurs are often their own worst enemies. Ego-driven mistakes take their toll and make the process more painful than it has to be. Remember that successful negotiations require three things. First, there is simply no room for greedy behavior in successful negotiations. Second, both parties must recognize the nature of the the negotiation itself—if you have to work together going forward, the negotiation cannot be a zero-sum game. And finally, maintaining perspective on what you are and aren’t willing to part with in the negotiation is invaluable. All too often people get too comfortable in a relationship and overplay their hand in negotiations. When this happens, they run the risk of losing everything, and that is the worst outcome of all.