Several years ago, a friend lamented that he was not very good at negotiating on behalf of his professional-services business. He felt that clients were better at “bluffing” and other negotiating techniques than he was, so he often was paid less than he should have been. I told him the single most important thing he needed to know if he wanted to negotiate successfully:
You have to be willing to walk away.
If you determine your minimum requirements (pay, performance requirements, schedule, etc.), then the only way you will feel that a deal is fair is if the minimum requirements are met. If the other party won’t meet your minimum requirements, then you need to say “no, thank you” and “good-bye”. If, instead, you grovel or beg, the other party will tighten the screws and make you whimper even more.
My friend understood right away. Bluffing is irrelevant; making sure your own needs are met is what matters.
This principle recently came up in a conversation with the CEO of a client, which provides security-related open-source software and had received an acquisition offer from a huge Internet company. When the CEO told the co-founder CTO the minimum bid the CEO would accept, the CTO said, incredulously, “You would walk away from __________?!”
The CEO said “yes”. He understood that there is no need to sell a valuable asset for less than it really is worth. (Since then, the client also has turned down term sheets from two VCs because the terms were inadequate. The longer the company waits, the greater its value and the value of the founders’ investment.)
Of course, there is much more to negotiating successfully: One should always aim for more than the bare minimum. But the willingness to walk away is the foundation on which successful negotiations are built.
Check out all posts about negotiation.
Dana H. Shultz, Attorney at Law +1 510-547-0545 dana [at] danashultz [dot] com
This blog does not provide legal advice and does not create an attorney-client relationship. If you need legal advice, please contact a lawyer directly.