Since founding—and selling—my own company and serving as an advisor to many others since then, many business partners have asked me how I negotiate deals.
This is an important skill set for anyone trying to grow their business, sell a company or advance their career. Learning how to negotiate and structure deals will help you enter business relationships that make more money, open doors to doing business that excites you, and take your career to a new level.
I’ve been developing and refining these strategies for years. There are many layers to my learning process, but five fundamental strategies consistently stand out. These strategies have helped me close deals worth millions of dollars and have given me the opportunity to work on businesses which are positively changing the world.
1. Decide what you want and ask for double
It is all too easy to feel the pressure or desperation to get a deal done and agree to terms that aren’t worth your time. Instead, think about what a fair deal looks like from a position of strength. A technique I use is to look ahead five years and ask myself what deal I’ll be happy with after my solid work is finished. Five years from now, you don’t want to look back and say “I short changed myself”.
Earlier in my career I made a bad deal by not approaching a negotiation with a perspective of value. It was with the first blockchain company I advised and happened right before I started investing in companies. I agreed to $10,000 a month as compensation for six months for three hours a week of work. That might sound like a lot of money, but the reality is, I could have negotiated a deal 10-20x larger had I approached the negotiation from a position of perceived value.
2. Know your “walk away” number
Every deal is different, but most can be considered in terms of a dollar value. Before you start negotiating, decide the absolute minimum number you’re willing to accept. The combination of mental energy and experience you bring to a deal is, potentially, invaluable to the other party. While mental energy is among the most valuable resources you bring to any engagement, it is also one of the easiest resources to drain. Be conscious of that during negotiations. Determine the minimum price at which you’re prepared to invest your mental energy and be ready to walk away from anything less. There’s an opportunity cost to investing your thoughts in anything, so be clear that the deal will give you the return you want in exchange for your time and energy.
3. Sell on value versus an hourly rate
Many negotiations default to a discussion around hourly rates. You’ll come across a lot of negotiators who will try to box you into a situation where they pay you as a consultant on an hourly rate. While this is common, the most successful people in business negotiate terms based on the value they bring to the deal. Selling based on value is what allows some deal makers to stand their ground when price is being negotiated, and it is the only way to make high value deals. Consider this: some people make $100M a year. Do you think they achieved that by selling on their hourly rate? No. Most of those people built businesses that sold on value and paid people at their cost, thereby generating a large profit
4. Be empathetic to your counterparty
This lesson isn’t about empathizing with your counterpart’s desire to pay you less. It’s instead about empathizing with their needs and offering the value they require of you to make a fair deal for both parties. This part of a negotiation can be an opportunity for you to offer additional value or services to a client for free, which can help ease objections or concerns. For example, one benefit I’m able to offer business partners is my network. The expertise and connections of my network can help companies accelerate to higher levels in their businesses much faster than they could achieve otherwise.
5. Negotiating a deal well is the beginning of a long-term relationship
Ideally, closing a deal marks the beginning of a long-term relationship. Nurture the new relationship as you would any other relationship you value. Stay in regular communication, be clear on the objectives you’re pursuing, remain proactive, bring ideas, work hard and strive to exceed expectations. Similar to job seeking, the most interesting and lucrative deals typically aren’t public knowledge. They’ll come about based on referrals from your network. Those referrals only happen when you have a proven track record of delivering as a solid business partner.
These five strategies can be a gamechanger to negotiating better deals. Be sure to make time for preparation on each of these points before your negotiations. Finally, never lose sight of delivering on the promises you’ve made when the deal is done.
Find this article helpful? Watch this video where I share more information about negotiating deals worth millions. Learn more about my philosophies around doing great business on my YouTube channel and by following me on Twitter.
Jaron is the CEO of Influential Capital. Previously he founded Coinsetter, one of the first digital asset exchanges launched in 2012, and acquired Cavirtex, a leading exchange in Canada—both acquired by Kraken in 2016. Before entrepreneurial life, Jaron was in private equity and investment banking.