# The Art of the Deal: How Entrepreneurs Can Master High Stakes Negotiations

Alex Rivera · November 7, 2023

> The Art of the Deal: How Entrepreneurs Can Master High Stakes Negotiations. One of the most critical elements of any negotiation is having a clear sense...

## Know Your Walking Point

![blue and black city buildings photography, Tall skyscrapers in Calgary](https://images.unsplash.com/photo-1462899006636-339e08d1844e?crop=entropy&cs=tinysrgb&fit=max&fm=jpg&ixid=M3wxMjA3fDB8MXxzZWFyY2h8OXx8ZGVhbHxlbnwwfDB8fHwxNjk5MzU2MDk4fDI&ixlib=rb-4.0.3&q=80&w=1080)
blue and black city buildings photography, Tall skyscrapers in Calgary

![person using laptop,](https://images.unsplash.com/photo-1508780709619-79562169bc64?crop=entropy&cs=tinysrgb&fit=max&fm=jpg&ixid=M3wxMjA3fDB8MXxzZWFyY2h8MTN8fGRlYWx8ZW58MHwwfHx8MTY5OTM1NjA5OHwy&ixlib=rb-4.0.3&q=80&w=1080)
person using laptop,

![low angle photo of curtain wall building, Montreal offices](https://images.unsplash.com/photo-1462206092226-f46025ffe607?crop=entropy&cs=tinysrgb&fit=max&fm=jpg&ixid=M3wxMjA3fDB8MXxzZWFyY2h8MTZ8fGRlYWx8ZW58MHwwfHx8MTY5OTM1NjA5OHwy&ixlib=rb-4.0.3&q=80&w=1080)
low angle photo of curtain wall building, Montreal offices

One of the most critical elements of any negotiation is having a clear sense of your "walking point" - the point at which you're willing to walk away from the table without a deal. Understanding your walking point empowers you to negotiate from a position of strength rather than desperation. Savvy entrepreneurs appreciate that sometimes the best deal is no deal at all.

Your walking point should be determined before you even sit down at the table, based on careful calculation of the minimum terms you're willing to accept. While you'll usually want to keep some flexibility, your walking point provides an anchor that prevents you from getting swept away in the heat of negotiations and accepting an overly risky or unfavorable deal.

Renowned business writer Jim Camp advises determining your walking point by asking yourself: "If I were unable to make a deal here, how would it affect me emotionally, financially, professionally?" The point at which the downside of not reaching a deal exceeds the upside of agreeing to unfavorable terms is your walking point.

But even once you've defined your walking point, don't reveal it prematurely in negotiations or use it to make threats. Savvy counterparties may exploit knowledge of your walking point against you. For example, don't say "I'm willing to go as high as $50,000 on this acquisition, but not a penny more." This gives the other side incentive to stonewall negotiations until you capitulate.

Instead, if discussions reach your predetermined walking point without acceptable terms materializing, simply say: "I'm sorry, but this deal isn't going to work for me as structured. I don't think we'll be able to reach an agreement." Then stand firm in your resolve rather than bargaining against yourself by making further concessions. You worked hard to determine your walking point - trust in that effort.

Knowing your walking point also prepares you mentally for the possibility of no deal. Entrepreneurs who get emotionally invested in reaching an agreement at any cost often play poor hands in negotiations. They may agree to dangerous concessions that jeopardize their business just to avoid walking away empty-handed. Understand that sometimes no deal really is better than a bad deal that could destroy your venture down the road. Focus on your long-term vision rather than being short-sighted.

## Don't Reveal Your Position Too Early

![person pointing white paper on wall, 📸 @mariogogh](https://images.unsplash.com/photo-1529119368496-2dfda6ec2804?crop=entropy&cs=tinysrgb&fit=max&fm=jpg&ixid=M3wxMjA3fDB8MXxzZWFyY2h8MTZ8fG5lZ290aWF0aW9uJTIwfGVufDB8MHx8fDE2OTkzNTYyMjN8Mg&ixlib=rb-4.0.3&q=80&w=1080)
person pointing white paper on wall, 📸 @mariogogh

![woman writing on paper on table near lapop,](https://images.unsplash.com/photo-1551836022-8b2858c9c69b?crop=entropy&cs=tinysrgb&fit=max&fm=jpg&ixid=M3wxMjA3fDB8MXxzZWFyY2h8OHx8bmVnb3RpYXRpb24lMjB8ZW58MHwwfHx8MTY5OTM1NjIyM3wy&ixlib=rb-4.0.3&q=80&w=1080)
woman writing on paper on table near lapop,

![man using MacBook, Design meeting](https://images.unsplash.com/photo-1553877522-43269d4ea984?crop=entropy&cs=tinysrgb&fit=max&fm=jpg&ixid=M3wxMjA3fDB8MXxzZWFyY2h8M3x8bmVnb3RpYXRpb24lMjB8ZW58MHwwfHx8MTY5OTM1NjIyM3wy&ixlib=rb-4.0.3&q=80&w=1080)
man using MacBook, Design meeting

A common mistake entrepreneurs make is revealing their negotiating position too early before substantive discussions occur. Effective negotiators know the importance of holding their cards close to their chest in the initial stages of talks. Don’t readily reveal your goals, limits, or walking away point when negotiations commence. Doing so surrenders leverage by allowing the other party to anchor expectations around your disclosed position.

Samuel Culper, a business consultant who teaches negotiation strategies, warns entrepreneurs against dropping numbers first. “As soon as you provide a figure, your counterpart will latch onto it as the ‘fair’ number to work around,” Culper explains. Even if you name an aggressive price, your offer anchors perceptions.

Instead, Culper advises first gathering information about the other party’s expectations. Ask probing questions about the factors influencing their valuation and goals for the negotiation before disclosing your own position. This approach allows you to frame discussions strategically rather than falling victim to anchoring effects.

Sharing your own interests and limitations too freely upfront also enables counterparties to identify points of leverage to exploit against you. Savvy negotiators get you talking in order to discern where pressure points lie. Revealing early that you urgently need capital to meet payroll next week or have burning desire to settle fast hands over leverage on a silver platter.

Poker pro Annie Duke, who frequently lectures on negotiations, hammers this point home in training classes. Duke uses role playing exercises to demonstrate how people naively telegraph information about their priorities, allowing opponents to gain the upper hand. Entrepreneurs negotiating high stakes deals can’t afford such indiscretion.

Instead of exposing your full position immediately, focus initial discussions on learning about the other party’s interests and constraints. Ask thoughtful questions, gather data and defer disclosing your own interests until substantive proposals arise. This prevents you from getting anchored early or having your own words used against you. Delaying revealing your position also provides time to gauge how flexible and honest the counterparty is. Their responses to your probing help decipher if their offers will be fair and reasonable.

A smart negotiating approach is to start with wide brackets, then narrow in as you gather more intelligence. For example, you may begin acquisition discussions by suggesting a valuation range of $10 million to $15 million. The other side can’t easily anchor to a single number, giving you flexibility later to tighten your range. Based on new data, you might subsequently counter at $12 million to $14 million. This gradual disclosure prevents leaving money on the table.

## Link Concessions to Value

Model: @Austindistel

https://www.instagram.com/austindistel/

Photographer: @breeandstephen

https://www.instagram.com/breeandstephen/

This photo is free for public use. ❤️ If you do use this photo, Please credit in caption or metadata with link to "www.distel.com". '>

![depth of field photography of man playing chess,](https://images.unsplash.com/photo-1523875194681-bedd468c58bf?crop=entropy&cs=tinysrgb&fit=max&fm=jpg&ixid=M3wxMjA3fDB8MXxzZWFyY2h8MjB8fGRlYWx8ZW58MHwwfHx8MTY5OTM1NjQwM3wy&ixlib=rb-4.0.3&q=80&w=1080)
depth of field photography of man playing chess,

![person using laptop, what’s going on here](https://images.unsplash.com/photo-1516321318423-f06f85e504b3?crop=entropy&cs=tinysrgb&fit=max&fm=jpg&ixid=M3wxMjA3fDB8MXxzZWFyY2h8MTh8fGRlYWx8ZW58MHwwfHx8MTY5OTM1NjQwM3wy&ixlib=rb-4.0.3&q=80&w=1080)
person using laptop, what’s going on here

One of the most vital skills in negotiating effectively is the ability to link concessions to value. astute negotiators understand the importance of tying any compromises they make to tangible benefits gained rather than handing over unilateral concessions. You enhance outcomes by only bending on points that achieve proportional wins.

Granting concessions without commensurate gain squanders leverage in talks. Often an initial offer meets resistance not because its substance is unacceptable but simply that the counterparty wishes to win concessions through counterproposals. Savvy negotiators anticipate these rebuffs and are prepared to bargain through reciprocal exchange of value.

Entrepreneur Andrew Chen gives the example of an investor requesting pro rata rights to invest in future rounds as a condition of closing a round. Rather than blithely accepting this concession, Chen suggests asking what such a concession is worth to them in reduced valuation. Perhaps the investor will make equal compromise on valuation in return, finding equilibrium. Chen stresses, “Great negotiators link what they want to what they’re willing to give.”

Chen recommends quantifying proposed concessions in financial terms so like-kind value tradeoffs are transparent. If an acquirer demands lower purchase price, request they increase the percent of compensation as stock to capture upside. Counter reduced purchase price with higher earnout targets. Through equivalent exchange, move closer to acceptable middle ground.

Writer Sam Bocetta recounts how this dynamic enabled his successful exit of a cybersecurity startup. A buyer requested an expanded 18-month escrow holdback. Bocetta strategically linked accepting this condition to the buyer enhancing the terms of its revenue share guarantee. This value linkage allowed both parties to claim victory- Bocetta secured his needed liquidity while the buyer reduced acquisition risk.

Entrepreneurs often feel pressured to concede unilaterally to “get to yes.” But gratuitous concessions rarely yield deals on favorable terms. They signal desperation while failing to address underlying interests of the counterparty. Disciplined negotiators know that judicious reciprocity, not unilateral compromise, drives progress.

Consider the example of entrepreneur Sara Rosso negotiating the sale of her coffee startup to a large CPG company. The buyer insisted on a lower valuation due to the transaction being mostly cash. Rather than compromise on price alone, Rosso requested the buyer commit to maintaining her team and accelerating expansion plans post-acquisition. By linking a key concern to the concession, Rosso achieved her goals while also allowing the buyer to win.

## Focus on Interests Over Positions

![person holding black smartphone, Workteam](https://images.unsplash.com/photo-1544725121-be3bf52e2dc8?crop=entropy&cs=tinysrgb&fit=max&fm=jpg&ixid=M3wxMjA3fDB8MXxzZWFyY2h8N3x8ZGVhbHxlbnwwfDB8fHwxNjk5MzU2NDU2fDI&ixlib=rb-4.0.3&q=80&w=1080)
person holding black smartphone, Workteam

Model: @Austindistel

https://www.instagram.com/austindistel/

Photographer: @breeandstephen

https://www.instagram.com/breeandstephen/

This photo is free for public use. ❤️ If you do use this photo, Please credit in caption or metadata with link to "www.distel.com". '>

![Focus on Interests Over Positions — The Art of the Deal, photo 2](https://images.unsplash.com/39/lIZrwvbeRuuzqOoWJUEn_Photoaday_CSD%20%281%20of%201%29-5.jpg?crop=entropy&cs=tinysrgb&fit=max&fm=jpg&ixid=M3wxMjA3fDB8MXxzZWFyY2h8MTJ8fGRlYWx8ZW58MHwwfHx8MTY5OTM1NjQ1Nnwy&ixlib=rb-4.0.3&q=80&w=1080)
Focusing on interests rather than positions is a negotiation strategy that effective dealmakers employ to uncover value-creating trades. Savvy entrepreneurs go beyond surface bargaining over stated positions to understand motivations driving demands. This interest-based negotiation unlocks win-win agreements not attainable through positional jockeying.

Consider an entrepreneur seeking a $1 million investment at a $5 million valuation cap. The investor counters with an $800,000 investment at a $7 million cap. Digging deeper, the entrepreneur learns the investor needs a larger stake to hit their ownership targets. But the startup requires minimum funding to recruit engineers. An interest-based approach identifies the optimal solution - slightly increasing the investor’s stake by adding a follow-on option while securing needed capital. Revealing true interests enables creative problem solving.

Former FBI negotiator Chris Voss stresses “negotiating rationally requires getting behind positions to underlying motivations." Discussions should center on “why” not “what”. Entrepreneurs often assume investor demands like lower valuation mean they are overvaluing the business. But the motivation may be balancing required ownership. Startups want the highest valuation possible. But investors have portfolio construction constraints. Reconciling interests opens possibilities.

Voss also warns against reflexively disclosing your own interests, which hands leverage to counterparties. Let them reveal interests first. You can leverage knowledge of their motivations while keeping yours private. Voss advised hostage negotiators to say “that’s interesting, why is that important to you?” when demands were made. This coaxed hidden interests from the other side.

Personality differences also influence interest-based negotiating.iher Horowitz notes emotionally reactive entrepreneurs view proposals as personal affronts rather than business exchanges. This causes counterproductive friction. Dispassionate founders focus objectively on satisfying interests. Horowitz counsels emphasizing “intellectual curiosity over emotional conviction" in seeking fit.

## Build the Relationship First

![low angle photography curtain wall buildings, Geometric office](https://images.unsplash.com/photo-1462396240927-52058a6a84ec?crop=entropy&cs=tinysrgb&fit=max&fm=jpg&ixid=M3wxMjA3fDB8MXxzZWFyY2h8MTR8fHNreXNjcmFwZXJ8ZW58MHwwfHx8MTY5OTM1NjUyNXwy&ixlib=rb-4.0.3&q=80&w=1080)
low angle photography curtain wall buildings, Geometric office

![low-angle photo of high-rise building,](https://images.unsplash.com/photo-1490539339142-e097edaaf1b7?crop=entropy&cs=tinysrgb&fit=max&fm=jpg&ixid=M3wxMjA3fDB8MXxzZWFyY2h8MTh8fHNreXNjcmFwZXJ8ZW58MHwwfHx8MTY5OTM1NjUyNXwy&ixlib=rb-4.0.3&q=80&w=1080)
low-angle photo of high-rise building,

![Build the Relationship First — The Art of the Deal](https://images.unsplash.com/photo-1531714954364-7af1f61c9a10?crop=entropy&cs=tinysrgb&fit=max&fm=jpg&ixid=M3wxMjA3fDB8MXxzZWFyY2h8MTZ8fHNreXNjcmFwZXJ8ZW58MHwwfHx8MTY5OTM1NjUyNXwy&ixlib=rb-4.0.3&q=80&w=1080)
Building rapport and trust with the counterparty before substantive negotiations commence lays the foundation for cooperative discussions focused on mutual gains. While entrepreneurs eager to close deals may want to rush past pleasantries into business talk, taking time to connect as humans first pays dividends through enhanced alignment. Seasoned dealmakers devote effort towards relationship building in the early stages to support collaboration when contentious points inevitably arise later.

Esteemed negotiation professor William Ury advocates beginning negotiations by "stepping to their side" first before asserting your own interests. Listen sincerely to understand the other party's worldview and what problems they are facing. Express empathy regarding their constraints and motivations. This establishes you are partners, not adversaries in crafting solutions. Ury believes listening conveys that you value what they have to say rather than just wanting to persuade them. It builds the affinity essential for joint problem-solving.

Likewise, mutual disclosure of personal backgrounds, interests and values outside business builds trust by revealing commonalities. Sharing your entrepreneurial journey makes you more than a transactional counterparty. Find threads connecting you as people, not just commercially. Maybe you bonded with an investor over both attending the same university. Or the acquirer hiring you once struggled launching their own startup. Such shared experiences humanize negotiations and make compromise safer.

Deal machine Sheila Murphy recommends playing ice breakers during introductions to set a collaborative tone. Rather than diving right into business, get to know counterparts through light games. One exercise asks each side to share personal or professional achievements they feel proud of. This neutral starting point leads to exchanging life stories and learning what motivates individuals. Murphy finds this thaws tense situations, allowing teams to engage constructively when discussions intensify later.

Entrepreneur Ivanka Trump makes a practice of taking meals with negotiating counterparts before formal discussions. Whether breakfast, lunch or dinner, this quality time fosters mutual understanding more naturally than a conference room setting. Sharing meals allows pleasant, free-flowing conversations that build connections. Trump finds even grueling negotiations become more productive when foundations of trust have been laid through casual interactions upfront.

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