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Powered by an entrepreneurial engine, start-ups pursue rapid growth off the back of a product or service with a large potential customer base. While a start-up’s offering may be innovative, disruptive even, plans for growth could be derailed if inexperience at negotiation prevents them from, say, locking in those first crucial investors or clients. 

Here’s how your start-up can negotiate like a pro:

Know your bottom line

Before going into any negotiation, whether it is with a larger company who wants to buy-out your start-up or a potential customer wanting to cut a deal, have a price in mind that marks the point at which it isn’t financially worth making a deal and where you walk away from the table. Being straight with the other party from the outset is important: they have to respect the fact you know your business and what it takes to balance the books. Rolling over and giving in to a potential client’s price because you want the work, even if it causes you to be out of pocket, is amateurish.

Relationship building

The aim of any negotiation is to secure a win-win deal for both sides and so nurture a lasting business relationship, where the other party is confident in transacting with your business. When negotiating via telephone or digital communication, it is important to present a professional face to the other party  – and this extends to ensuring your online presence is slick (even if you operate out of a garage or small premise). The same applies to in-person meetings: look smart and professional, and arrange to meet in a suitable setting. Many hotels have conference rooms available for hire and this will set you up to negotiate in a professional manner. Ensure other staff involved in any form of communications with external clients are onboard with the corporate message and approach.

It is also equally important to know whom you are negotiating with prior to making your opening gambit. Research potential buyers by looking into their recent and relevant market activity, find out about their assets, and be someone who is informed when meeting the interested party. This will enable the other people to see you not as the new kid on the block, but someone who knows what they are talking about and who is not going to be taken advantage of in a business transaction.

Choose the right negotiation style

Remember that you know more about your product or service than the other party does, and it is your job to get across the features, functions and benefits of these in a succinct and professional fashion. Even if you do not have a sales background, the advantage is that you know what you are talking about when it comes to your start-up or innovation.

Choosing the right way to get this across is crucial, so initial presentations have to be succinct and clearly identify how your start-up can save the other party time and them money. Practise this with a colleague or another peer support person to make sure you get feedback about how you come across. The hard sell or consultative approach is not going to be sustainable when it comes to making a firm deal, so ensure you are able to exert influence in a respectful way.

Negotiating with investors

If you are meeting with potential investors then it is really important that you get the investment terms clear in your own mind before you start. Make a list of draft investment terms and review investment options so you come across as a pro.

Responding to discount enquiries

If the negotiation is around the other party getting a discount on the provision of your goods or services before they’ve even been tried your offering, then be ready to turn this around. The priority is to ensure your business is going to be the right one for them and if they have not had a chance to try it, then be clear on what it is you are offering for the price available.

Refocus their attention on the product or service to see if it is going to be the right one for their needs. Ensure you have clear and transparent information available for them in a number of formats (website, brochures, etc.) and offer to review a discounted price once they have trialled your product.

Getting the paperwork right

If you are getting near the end of negotiations with a larger company, it is always best to be prepared when it comes to the legal aspects of the contract. Avoid delays at the contractual stage by having a letter of intent ready to send across for the legal department to sign and return. Ensure you use a professional template and have it checked by your legal advisers before it goes out.

When it comes to business negotiations, regardless of what it is for, the goal for you as a start-up is to do everything you can to keep the process moving ahead smoothly, and show interested parties that you are a professional organisation they can confidently work with.


About the author

Barry Oxley is the Director of Lending Specialists, a mortgage broking business based in Melbourne, Australia. Having been involved in the finance industry since 1970, Barry is experienced in the art of business deals and negotiations, and it is those skills that have helped Lending Specialists to become the successful company it is today.

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Barry Oxley

Barry Oxley

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