If you know what’s important to your buyer, you are in a great position to negotiate. Figuring out exactly what your buyer values most in a deal allows you to focus on their needs while still providing you tons of leverage to negotiate the terms you want.
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When Aaron Krause pitched his innovative, texture-changing sponge company, Scrub Daddy, on Shark Tank, three of the Sharks made offers, and immediately started trying to outbid each other. The bidding war that broke out among the Sharks gave Krause an amazing level of insight into just how desirable his company was, and a good negotiator can always turn that kind of insight into leverage.
The Sharks’ bidding war wasn’t the only negotiation tool in Krause’s belt. He had previously had great success selling Scrub Daddy sponges on the home shopping network QVC, and one of the Sharks, Lori Greiner, has a major reputation for investing in QVC products. Greiner’s status as the “Queen of QVC,” along with her aggressive bidding for Scrub Daddy, made it clear that she placed more value on the product than any of the other Sharks. Before it became obvious that Greiner was the best Shark for this deal, Krause exercised several well-known negotiation tactics that helped him secure more advantageous terms.
1. Never accept the first offer
Krause flatly refused Kevin O’Leary’s offer of $100,000 for 50% equity in Scrub Daddy. This was a powerful tactic because it showed that Krause wasn’t desperate to make a deal. Power negotiation expert Roger Dawson outlines the reasons for always rejecting first offers on his blog, but what it boils down to is that if you take the first offer, you aren’t negotiating. And if you aren’t negotiating, you should be.
2. Focus on the other side of the deal
Krause knew that Lori Greiner was “the queen of QVC,” and it came up before any offers were on the table. If he hadn’t known about Greiner’s special interest in his product, Krause might have been tempted to accept one of the many lucrative offers from other Sharks. Because Krause understood what Greiner was after, he was able to bide his time and allow the other Sharks to sweeten the pot repeatedly, eventually pushing Greiner to give Krause much better terms than she initially offered.
Negotiation expert Ed Brodow offers Ten Tips for Negotiation in 2014, and half of them are about focusing on the other person, listening to them, and knowing what they want.
“Do your homework…,” Brodow suggests, “The more information you have about the people with whom you are negotiating, the stronger you will be.”
3. Don’t be afraid to ask for what you want
Krause really proved his negotiation chops in the final moments of his spot on Shark Tank after rejecting deal after deal and watching the offers skyrocket. Lori Greiner laid down an ultimatum: $200,000 for 25%, if Krause accepted immediately. If not, Greiner would bow out. Even under intense pressure, Krause made the important negotiation decision to ask for what he wanted. He asked Greiner to lower her equity requirement to 20%, and she took the deal.
Hockey legend Wayne Gretzky famously said “You miss 100% of the shots you don’t take.” You will never get what you want without asking, so if you want to negotiate, you have to ask for what you want. No excuses.
Negotiation tactics can help you in almost any sales or business context. Knowing how to meet the other party’s needs while securing terms you are happy with is vital. That doesn’t mean you should use your knowledge to push your buyer or investor into a deal they aren’t comfortable with. Getting what you came for without being greedy fosters goodwill and will earn you not only the business, but the respect, of anyone you work with.
What do you think? Leave your favorite negotiation tactic in the comments section.
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