Negotiating When You Have No Cards

“You are anxious to get customers and even more anxious to complete an investment.” 

Of course you need customers, vendors, employees and vendors. What entrepreneur doesn’t? But you need to change your perspective in order to increase your chances of securing these important relationships. Instead of negotiating from a position of weakness, you must come to the table with tools and insights that put you more in the driver’s seat. Think about the following:

• Negotiate from a Position of Strength. Don’t allow any customer, investor, employee or vendor to hold your size or stage against you. Put differently, even though you really want (or need) a relationship, always negotiate from a position of strength. How do you do this when you have little leverage? It will require your entrepreneurial creativity to create leverage when little exists. Easier said than done. You’ve got to bring all of your creative juices to give yourself the influence and edge to negotiate with strength. You may not realize you already have this strength or won’t discover it until you refuse to negotiate from a position of weakness, regardless of the circumstances. Here are a few tips to help you negotiate from the right place:
• Influence Points. You often don’t need to have leverage to create other influence points. On your own, you may be a small company that no one knows about. What if you tied your business to another influence point? For example, what if you are a customer of Valley Bank and you want to offer your solution to the bank. You might reach out to your relationship manager and express your desire to offer your solution to the bank. Your business with the bank will give you an improved chance with the opportunity.
• Align to Your Target’s Competitors. Sometimes companies create relationships because of the value. Other times companies take action to prevent or preempt your relationship with one of their competitors. Communicate that you will be offering your solution not only to them, but that you believe that other similar companies (that they happen to compete with) would benefit from your solution.
• Competitive Process. Whether it is a vendor or an investor, hold a competitive bid process. When you have narrowed your selections down to few (or one), or if you are left with one selection, this need not be shared with these parties. Parties vying for your business should understand that they are competing with others.
• Attitude. Sometimes your attitude, body language, and tone can be compelling enough to create leverage. Shift your passion for your vision into a natural confidence. Communicate that the success of your business is not a matter of “if” but “when”. Regardless of your stage, always negotiate from a position of strength. Pay attention to the principle of least interest even if your interest is greater and always behave like you want a relationship, not that you need a relationship.
• Never Let Anyone Be the Only Source. There will be times during your company in which you will only have one source for a solution. This most often comes up with vendors and investors but may also apply to customers and employees. Ideally, you should always have several sources for a solution. In early stages, this is not always possible. When it is not possible, the party that is your only solution should not know that they are your only source. In a perfect world, these relationships would appreciate that this venture is your vision and would never take advantage of the fact that they are the only source. Unfortunately, you must accept that some resources will leverage this knowledge to your disadvantage.

This is hard. In early stages, you want to create relationships with companies that will ride the wave with you. Companies that will see your vision and take a flier on it. Unfortunately, more often than not, companies understandably protect their self-interest. This is not to say that all constituents will do that. If you are fortunate enough to find constituents that share your common vision and are willing to invest in it, so be it. Until that happens, however, you must not expose your vulnerability. While the preferred solution will always be to have a back-up plan, you never should communicate that a potential relationship is your single source. Individuals and companies who understand that they are in a competitive environment are likely to perform better and provide better terms.

There is a certain reality to an early stage business. You don’t have a lot of dollars. You can’t make large commitments. You don’t know your volume. You can’t promise the future. Even so, you still have to find a way to negotiate favorable relationships with the company. If you keep your perspective aligned to negotiating from a position from strength, and can use some of the techniques described here, you can strike a good deal even if you are offering ice to Eskimos.