View from the FishBowl: Advice to ‘up and comers’… work on negotiation skills…
I am often asked by entrepreneurs what skill set I feel is most important in the business world. The obvious ones like leadership, decision making and the art of delegation are all keys. However, I think that understanding the skills involved in negotiating can be quantified and acquired easier than some of the others and may be the key to most everything you do in the business world. I don’t claim …
About the Author: William Fisher, a partner at Treetop Ventures in Omaha, is a regular guest contributor to Silicon Prairie News. In his series, View from the FishBowl, Fisher calls on his experience as a business executive and technology investor to lend his advice to entrepreneurs in the Silicon Prairie.
Fisher has served as a director for several prominent public companies and private firms, and he currently serves on the boards of Prism Technologies, Lodo Software and FTNI. To read his full bio, including a listing of companies he has been involved with, visit treetopventures.com.
Contact Fisher at firstname.lastname@example.org.
Subscribe: View from the Fishbowl RSS. (Paste URL into your Google Reader.)
Photo by Howard Walfish via Flickr
I am often asked by entrepreneurs what skill set I feel is most important in the business world. The obvious ones like leadership, decision making and the art of delegation are all keys. However, I think that understanding the skills involved in negotiating can be quantified and acquired easier than some of the others and may be the key to most everything you do in the business world. I don’t claim to have extraordinary skill in the area; I am a student of the discipline and still learning. The other point I would like to make is that negotiation isn’t only about buying/selling/deals; the world of management requires you to be good at these skills. As a CEO, I learned that your good people never do something just because you tell them to (if they do, find someone else for their job). It is always a negotiation; it just needs to appear like it isn’t.
I think I will write a series of articles about negotiation and hope they will help you as you navigate the business world. Here are a few items that I will discuss in future articles.
- It is important to understand what you are negotiating for. (Seems somewhat obvious but not necessarily in this complex world; my article today will show a simple example of this).
- Do you want to be right or do you want to win? I sometimes call this one “do you want to be rich or famous”?
- It is important to not bid against yourself.
- Don’t let it get personal.
- Assuming you know what you want, do you know what the other guy wants?
- A key lesson is also important for a guy in high school…”How to date the pretty girl” is a successful negotiation tactic that can work.
- Never offer or counter without working through a logic tree of the options
- In this sport, a tie is not a win.
- It is ok not to win.
- Understand the element of time and use it to your advantage.
My first article in this series is about knowing what you are negotiating for. In the world of acquisitions, terms sheets, financing alternatives and complex technology, this is really important. Going into a negotiation where you don’t understand everything about the items to be negotiated is business suicide. However, I have seen this especially as it relates to VC term sheets. The key is to make sure that you have experience on your side even if you have to hire it.
Understand what you are negotiating for
I was 14 years old when I first went to work for a large grocery store in my hometown. This was ‘back in the day’ when minimum wage and work permits were not an agenda item. Jobs were hard to find and I was lucky to find someone to hire me bagging groceries and I appreciated it. I think I was continuously afraid of losing my job and the extra money so I did everything I could to keep busy. When the store wasn’t busy with customers, I swept and hauled out trash and did everything I could to make sure that the boss didn’t fire me. Eventually, the boss moved me out of the front end to the produce department. This was my first promotion and I loved the new job. I would trim lettuce, bag potatoes, arrange product, order new items and check in the items they arrived. I was in management!
It was early summer and my boss was gone from the store and I was busy working away shucking corn and trimming vegetables. From time to time, sellers of product from local farms showed up and we were always eager to get good, fresh product and I was authorized to purchase these items within limits.
On this day, an elderly gentleman showed up with a huge farm truck filled full of watermelon and straw. He wanted to sell us watermelons. Everyone loves fresh melons but they are perishable so you don’t want to buy too many. He insisted that my boss always bought “all” of this product and also that the boss always accepted his price. However, today I was in charge of watermelons and I let him know it. I also wanted to pay 50 cents per melon and his asking price was 75 cents. The game was on!
After going back and forth, he clearly realized he had met his match. He said he had never done this before but he was confident we would sell a lot of melons and would give me a special offer. He would leave the truck in front of the store and it was filled with 400 melons. He would let us sell from the truck and pay him 60 cents for every melon sold but we wouldn’t have to buy any of them up front. No loss from bad melons; we only paid for melons that were sold. Clearly, I had won! Sweet! I agreed.
I was swelling with pride when the boss showed up later that morning and inquired as to the truck. After telling him how I had out-negotiated the farmer, he just grinned and said… “Unload the truck and count the melons.” Perplexed, but always wanting to please, I got some of my co-workers and we did just that. The truck held 280 melons! (This is before POS systems where you could figure out how many of any item you had sold; our cash registers just totaled up the total amount). Before any melons were sold, I would have owed him for 120 melons! Yikes!
I was crushed! I was also sure I was going to be fired. We loaded the melons back on the truck and continued to sell from the truck. In a few days, the farmer returned. My boss had me count them again and we paid the farmer for the number we had actually sold. I was embarrassed and therefore I stayed away from the farmer and just counted the melons; however, I could see that both my boss and his very good friend the farmer were having quite the laugh near the front of the truck.
Great lesson; never told Grandma but always make sure I understand the game before playing.