Even with a great business idea, if you don’t get funding, your business will crash and burn before it has a chance to flourish.
So, it pays to improve your negotiation skills so you can seal deals that can get your business moving forward.
Experts in negotiation training say that the first step to getting the desired result in a negotiation is being fully prepared.
Get as much information as possible about the people on the other side of the table. Not only the funding companies but the firm’s partners and the individual decision-makers involved in pushing the funding through.
Dig deeper into their preferences, past deals, pressure points, and anything else that might point you toward securing a good deal.
Also, talk to advisory firms and other entrepreneurs who have successfully raised funds from investors. It could also be worth talking with entrepreneurs who failed to raise funds so you can avoid similar pitfalls.
You can negotiate everything
When your fundraising campaign hits the road, you are likely to come across investors with “standard terms” on their term sheets.
However, terms are not set in stone and you can focus on some terms that you feel are important and warrant wiggle room. So, before you take the plunge into discussing the term sheet, be clear about the terms that matter the most to you.
That said, there are some issues where you’d rather not rock the boat and be locked in disputes. Especially when the fundraising landscape is tight and investors are drowning in pitch decks. So, choose your battles wisely.
Consider getting a trained and experienced advisor to guide you.
Learn the art of storytelling
Investors receive a flood of pitch decks every day. It’s important to tell a powerful story if you want your pitch to stand out. Trained negotiators use their storytelling skills to answer the following questions:
Why should investors care?
Lay out how your business offers a solution. What is the existing problem? How does your product or service meet existing needs? Sprinkle your pitch with action, success, headwinds, excitement, and all the elements that make up a first-rate story.
Why should funders back you?
Convert the investor into a believer. Clearly articulate how you are better, faster, or cheaper to establish your competitive advantage. Also, outline your financial projections to make plain the return investors can expect for funding your business.
Practice your negotiation skills
Like any other skill, negotiation is learned. So, consider taking a negotiation training class with plenty of simulations and activities to shape your skills.
The more you train, practice, and sharpen your abilities, the higher your chances of landing a good deal.
Also, master several negotiation techniques so you can apply the best one to each situation. Some investors will come out at you with a hardline approach that you will need to navigate in order to reach your goal. Other situations will call for a softer approach where both sides look for a win-win outcome.
See beyond the money
You can reap more value by keeping an eye out for other parts of the deal besides the valuation and the dollar amount you will raise. For instance:
- How are the profits going to be split when the investor exits the business?
- How involved are the investors in the day-to-day running of the business?
- Will the investor offer expertise, access to markets, new technologies, or support your business in non-financial ways?
The non-monetary terms could affect how you run your company. Also, watch for terms that could impact your company’s chances of raising funds in future rounds.
By and large, use these negotiation training tips to help sharpen your negotiation skills and strike beneficial deals with investors.