Don’t Let Poor Negotiation Skills Doom Your Entrepreneurial Venture


by Samuel Dinnar and Lawrence Susskind, co-authors of “Entrepreneurial Negotiation: Understanding and Managing the Relationships that Determine Your Entrepreneurial Success

Eighty to ninety percent of all start-ups will fail. While there are many reasons for this, one of the biggest problems new ventures face is poor negotiation skills. The single biggest threat to entrepreneurial success is an inability to handle the negotiations that arise in the evolution of a start-up.  Founders must be able to prevent, detect, and respond to potential negotiation mistakes in each of their interactions.

Here are eight common mistakes that entrepreneurs are prone to make:

Mistake #1: Entrepreneurs Are Self-Centered.

Because entrepreneurs are deeply focused on their own interests when building a business, they often fail to recognize the needs and priorities of those with whom they have to interact. This focus on their own desires can blind entrepreneurs to clues that could lead to better outcomes for both sides, an important goal when building working relationships.

Mistake #2: Entrepreneurs Are Overly Optimistic and Overconfident.

Most entrepreneurs are supremely confident. They believe strongly that they will be successful (despite well-known statistics regarding failure rates). Because of this overconfidence, many fail to incorporate appropriate contingencies into the agreements they sign.

Mistake #3: Entrepreneurs Need to Win.

Now – the primary objective of many entrepreneurs is to win. They are often primarily concerned about besting their counterpart and thus treat negotiations as one-off interactions, disregarding the possibility that future deals might be even more valuable than whatever is on the table at present.

Mistake #4: Entrepreneurs Are Too Quick to Compromise.

Entrepreneurs are “doers.” They try to get things done while operating under incredible pressure. They feel compelled to decide quickly and “move on.” Instead of exploring additional options and finding even more advantageous trades, they settle for quick (and minimally acceptable) solutions.

Mistake #5: Entrepreneurs Work Alone.

When entrepreneurs let their independent spirit dominate the way they negotiate, they prepare alone (rather than consulting their stakeholders and advisors), misread unfamiliar signals, take unreasonable stands, or vent emotionally at inopportune times. They fail to recognize that negotiation is an organizational, not an individual, task.

Mistake #6: Entrepreneurs Haggle.

Many entrepreneurs get “tunnel vision,” assuming that the only thing they’re negotiating is price. This leads them to take a series of aggressive positions along this one dimension, forgetting to consider other factors that can create significant value.

Mistake #7: Entrepreneurs Rely Too Heavily on Their Intuition.

Many entrepreneurs rely on their instincts when a negotiation doesn’t go as planned. But when trusting their instincts, they are not as reflective on  what they are doing and why. So, they end up blaming the other side when things to wrong. Worse, these same problems keep occurring because they fail to learn the right things from their experiences.

Mistake #8: Entrepreneurs Deny Their Emotions.

Most entrepreneurs have a strong sense of what is fair. When they feel they are being mistreated, they fall prey to a slew of emotional mistakes, or cognitive biases, that allow ego to overrule logic. This can be especially problematic for entrepreneurs who tend to deny the relevance of emotions (and ego) in negotiation. While claiming “it is just business,” they can overvalue formal power, leverage, and control and undervalue the more subjective side of business negotiations.

 

Samuel Dinnar is a mediator, consultant, board member, and venture capital investor. He is an instructor at the Program on Negotiation at Harvard Law School and the Harvard Negotiation Institute. He is also a research associate with MIT’s Science Impact Collaborative. Dinnar is founder and president of Meedance, which provides negotiation, training, and dispute resolution services. 

Lawrence Susskind is Ford Professor of Urban and Environmental Planning at MIT and head of MIT’s Science Impact Collaborative. An expert mediator and negotiation trainer, he is co-founder of the Program on Negotiation at Harvard Law School where he currently serves as Vice Chair of Instruction. He is also Director of the MIT-Harvard Public Disputes Program, and designed and teaches the MIT course, Entrepreneurial Negotiation: The MIT Way. 

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