The MaRS cleantech practice recently hosted a negotiations workshop with Jim Thomas, experienced negotiator, attorney and author of Negotiate to Win. Over two days, Jim taught workshop attendees the fundamentals of negotiating, including how to ensure that both parties of a negotiation walk away feeling satisfied.

Jim kicked off the workshop by explaining the difference between persuasion and negotiation. Persuasion is used in the vast majority of discussions, often with great success. However, in some situations persuasion fails, not necessarily because the other party does not understand what you’re saying, but simply because they do not agree with your point—and that’s when negotiating begins. If you can’t “sell them with persuasion, buy them with concessions,” explained Jim.

Poker chips

Concessions

Concessions are essentially your bargaining chips. They are the pieces of your offer that you’re willing to concede if—and only if—the other side offers something in exchange. Jim believes that nothing is free in the world of negotiating and that acting as though things are free weakens your previous offers and overall position at the negotiation table.

Envelopes

According to Jim, before you get to your concessions or to the negotiating process at all, you need to do your homework—that is, you need to create your envelopes. For each issue that is on the table during a negotiation you need an initial (high) offer, a target offer and a bottom line. The bottom line should be a deal that is marginally better than walking away from the deal completely; it should represent conditions that are more desirable than not completing the agreement at all. Defining these values upfront will guide you through the negotiation process, help you to structure your concessions and ensure you don’t walk away with a deal that, in hindsight, simply will not work.

Starting with a high first offer gives you plenty of flexibility for concessions as you go down to your target and possibly your bottom line. Ideally, you’ll follow an exponential curve, making big moves at the beginning of the negotiation, then smaller ones as you approach your target. The negotiation either ends when both sides agree or when you’ve reached your bottom line. Remember, even a bottom-line offer is better than walking away from the table.

Contrary to popular belief, negotiating is more of a formulaic exercise than an art. Yes, practice makes perfect and the more you negotiate the more naturally it will come, but there isn’t any magic to negotiating.

Krunching

One of Jim’s critical rules for successful negotiations is to “krunch early and often.” Krunching is essentially making a non-committal comment that puts the ball back on the other side of the court. Comments such as “Let’s talk flexibility” or “You’ve got to do better than that” or “That’s not particularly attractive to us” transfer the pressure to the other side of the table, hopefully generating a concession.

Caucusing

Another piece of Jim’s advice is to caucus often. When working as a team, it’s important to take the time to hold a private conversation among your team members to discuss the proposed offer and your next moves. Although your envelope should clearly dictate your strategy, a few minutes of recap with your team can provide confidence and lead to more fruitful conversations when returning to the table. If you’re a team of one, don’t be afraid to take time to yourself to crunch the numbers and reflect on an offer.

Packaged deal

Another piece of advice gleaned from the workshop is the importance of settling negotiations as a package rather than as individual items. It’s fine to tentatively resolve individual issues and put them aside; however, you don’t know how future items will fall out and keeping all of the leverage you can is important.

The negotiations workshop offered participants a chance to develop skills and to learn hands-on from their mistakes. During the first exercise I felt as though I was in someone else’s skin, but by the end of Day 2 I negotiated a (pretend) venture capital deal and even managed to successfully krunch a few times. Now I’m looking forward to my next real-life haggling opportunity.

Feature photo credit: Poker 0308 4995 by Ross Elliott, used under CC BY 2.0 / resized

Jennifer Minelli

Jennifer manages the accelerating ventures program at MaRS, supporting high-growth ventures in the cleantech, health and information & communications technology (ICT) sectors.See more…