Thoughts on startups by investors that
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Mark Suster’s “Never Negotiate Piecemeal”

Posted by on June 5th, 2012

Nothing tells a truth better than a good story. Especially when it’s true. Read Mark Suster’s Never Negotiate Piecemeal. Here’s Why on his Both Sides of the Table blog for a good read and a good lesson.

He tells the story of his baptism by fire in startup-dom, a series of negotiations including office rent, sublet, getting people on board, getting the media to care, dealing with recruiters, dealing with the tech prima donnas, and (a favorite of many) “dealing with pesky VCs.” He summarizes:

As unpleasant as people find the thought of it – life is a negotiation. And no life is more of a constant negotiation than that of an entrepreneur. And most of us start with zero training. One of the big mistakes I used to make (and still sometimes do, frankly) was to negotiate piecemeal. I think it actually comes naturally to the uninitiated and it’s suboptimal.

Then he introduces Stuart Lander, who taught him a lesson. But before we get to the lesson, I just plain like this intro into his negotiation strategy:

Like a machismo first-time CEO I thought I should handle the negotiation myself. Their CEO was equally bravado and dumb. He openend with his first issue. I listened to why he didn’t agree to that particular term and what he preferred in stead. Like the problem solver I had been trained as in my software development days, I parsed his issue. I saw where he was coming from and from our side why our ask was what it was. I talked too much. I looked for middle ground. He talked too much. He haggled with me. We both felt good. And smart. We agreed a compromise. Then on to the next issue.

Stuart, however, had a better idea. Don’t negotiate point by point. Negotiate by line. He said (key thought here):

If you negotiate piecemeal you end up compromising on everything. That’s not very smart.

So he came up with this instead:

The problem with negotiating piecemeal as Stuart taught me is that you trade on every item. You don’t prioritize the issues which you really care about. If you don’t want to give a millimeter on one item you have a hard time doing that point-by-point. Done as a “package deal” you can say, “I gave in on these 5 issues that you asked for. On this issue I can’t give.” That’s much harder to pull off piecemeal.

I like that. It seems like good advice to me.

Written by Tim Berry

user Tim Berry

Tim is the founder of Palo Alto Software and bplans.com, the co-founder of Borland International, and the official business planning coach at Entrepreneur.com. He has been called the "Obi-wan Kenobe of business planning" and "The Father of Business Planning." He is a serial author of books and software on business planning.

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