Many of us do this in everyday life without even thinking about it. Whether it’s buying a car, house or negotiating a software contract, effective negotiation is a very good way to improve and protect your bottom line. Negotiating effectively can make or break a startup company that is strapped for cash.

Most people tend to focus solely on price when negotiating a deal. Price is a very key point but payment terms are often overlooked in favor of price, which can be detrimental to a startup. Instead of haggling over a few dollars or cents, your startup will likely benefit by negotiating for lengthened payment terms. One example would be an established company whose account executive is compensated based off of the revenue generated from the sale. If you understand this going into the negotiation you can be flexible on your price if he or she is willing to extend the payment terms out to 180 days. Extending payment terms allows a startup to free up scarce cash.

Throughout much of my career I have used the following steps to help me prepare and keep myself in check during negotiations.

Key’s to an Effective Negotiation:

  1. Be Prepared - Preparation is the key to any negotiation. Be sure that you fully understand the terms and key points of the deal.
  2. Check your emotions at the door - This is not a winner take all activity. The ability to negotiate with a clear head will put you at an advantage over a person who is negotiating on emotion.
  3. Understand your Bargaining Points - Certain points are must haves, others can be used as levers in the negotiation. Your flexible points might be key for the party you are negotiating with and will help you strike a deal faster.
  4. Identify the negotiating levers - The fundamental rule of negotiation is leverage. Knowing what drives you and the party that you are negotiating with is key. Being able to decipher which party has the leverage in the negotiation can really speed up the process.
  5. Be able to walk away - Sometimes the best deals are the ones that don’t get done. If you are not comfortable with the deal, you must be prepared to walk away. Occasionally walking away from the deal can shift leverage back in your favor and bring you closer to your end goal.

If you keep these key steps in your negotiating arsenal, you will be suited for battle at the bargaining table. Keep in mind that it’s the battle that drives so many of us to succeed in the startup world. Keep fighting the good fight and never forget that cash is the lifeblood of each and every startup.

      del.icio.us   SphereIt   Reddit   Furl