My client was a straight-shooter who laid it all out there in our first meeting with the potential business partner. “I’m telling you the way it is,” he said, “and I’m not holding back, because that’s the way I am. If you like it, we can create a very profitable partnership and transform this industry. If you don’t, I’m very happy just walking away.”
Five months later, the deal closed and everyone was excited about moving forward. So how can you increase the likelihood of negotiating similarly good business partnerships?
1. Share critical information and interests liberally
My client’s open book approach was crucial in exploring whether the parties enjoyed mutual goals, interests and needs to justify working closely together. As important, our counterparts adopted a similarly liberal information sharing approach, which allowed both parties to check each other out before making a firm commitment.
During this due diligence, the parties analyzed the synergies in their businesses, markets, financials, technologies, and systems. But they also explored how their cultures, personalities, personnel and styles meshed. These latter issues are especially critical in partnership negotiations.
2. Take the initiative and negotiate future roles and rules
I’m often asked how detailed to get involving the partners’ roles and responsibilities. I usually recommend more detail rather than less. While you can’t deal with everything, addressing the ground rules governing the relationship often forces the parties to really uncover what’s important to each and how and under what circumstances they want to work together.
It’s also often advantageous to internally brainstorm potential roles and rules with your colleagues, outline the major points, and then share it with your potential partner as a working draft. Taking the initiative and presenting a first offer here will likely set your partner’s expectations and increase the likelihood they will perceive it as fair.
And present it as a draft, which should also include items you can concede. It’s important that your partner provides input into it and that you demonstrate some give-and-take in this process.
3. Justify your moves with independent standards
Also support your moves with objective standards like market value, precedent, tradition, costs, efficiency and expert opinions. Why? Because using such standards depersonalizes the negotiation, strengthens relationships, and grounds your moves with independent, credible justifications – not just what you believe is fair.
For instance, one issue in many partnerships involves the parties’ revenue split. How do you negotiate what everyone will perceive as fair? Find how others in your industry have addressed this (what the market says is fair). And talk to expert consultants in your field to see what they recommend. Instead of just proposing a certain split, explain why it makes sense given the parties’ time and money and intellectual contributions.
4. Focus on the relationship
Perhaps the most important touchstone is to focus on the long-term relationship. Consider how all your moves will impact the relationship.
In fact, use this negotiation as a trial run for the partnership itself. The way you interact and deal with your potential partner – and they way they deal with you – will signal how well your partnership will work.
(Originally printed here in The Arizona Republic)