Month: July 2017
My newest book, Startup Opportunities: Know When to Quit Your Day Job, is available via Kindle for $0.99 today. If you are a fan of my books, a friend, or just someone who is interested in startups, buy a copy today.
I was on the phone with an old friend last week. We were talking about a few things around a negotiation, and he said something profound.
“I just want things to be fair and reasonable.”
I loved this phrase. I learned this value from Len Fassler and Jerry Poch in 1993 when they acquired my first company. I had never bought, sold, or invested in anything up to that point. My partner Dave and I were clueless about selling our company, so it would have been easy to take advantage of us. When I reflect on the deal that Len and Jerry offered us, it was fair and reasonable. There wasn’t much of a negotiation as they knew what they were willing to pay for a business like ours. Instinctively, we knew their offer was fair and reasonable.
At the time, I struggled mightily with the offer, wanting to sell the company on Monday, Wednesday, and Friday. I didn’t want to sell on Tuesday, Thursday, or Saturday. On Sunday, I rested. Dave got very frustrated with me but hung in there. Len and Jerry didn’t change their price or the terms but said the offer was available for however long we wanted as long as our business performance didn’t change. Six months after they made the offer we accepted it.
When I reflect on this 25 years later, they were fair and reasonable. And it set the tone for all of my future deal activity, whether I an investor, a buyer, or a seller. While I’ve dealt with all styles of negotiators, complex multi-party negotiations, and circumstances around all aspects of deals, I’ve always tried to bring the concept of fair and reasonable to the table.
I don’t like the cliche “always leave some money on the table.” I don’t like approaching things as a win-lose or win-win, where the concept of win dominates. I don’t like the statement “that’s what the legal docs say” as that’s a similar cop-out to the phrase “that’s market.” I’m not a fan of histrionics, table pounding, demands, head fakes, lies, and hiding behind – well – anything.
But it doesn’t matter that I don’t like these things or am not a fan of people who lead with them in negotiations. I’ve accepted that everyone has their own style and approach, independent of how I’d like them to behave. Instead, I’d rather approach everything from a perspective of being fair and reasonable. If we can’t get to a deal, so be it. If the other party doesn’t think I’m being fair and reasonable, I’m happy to listen to their explanation why and reconsider my position.
One of the benefits of this approach, at least for me, is that I can make decisions very quickly. I don’t have to do a bunch of analysis. I don’t have to check with lawyers. I don’t have to worry about whether I’m making the right call. While I’ll obviously make some decisions that are wrong and end up with deals that don’t happen, I’ll always feel that I’ve been fair and reasonable.
I think that’s a fair and reasonable approach.
Fireside Chat On University Entrepreneurship at CU Boulder with Bill Aulet
I’ll be doing a fireside chat on university entrepreneurship at CU Boulder on 7/26 from 10:30 to noon with Bill Aulet, Managing Director of the Martin Trust Center for MIT Entrepreneurship. Register and join us.
In June, Amy and I had three friends die. One was a mentor of Amy’s from Wellesley, one was the father of a close friend, and one was the wife of a good friend of over 25 years.
Yesterday, while sitting at my desk between calls, I noticed an email from another friend titled Thank You For The Throne. The email said:
After spending many days visiting my mom in the hospital, I felt the need to thank you for your support of Boulder Community Hospital. I found it hilarious and appropriate that you were the sponsor of the bathroom. So, thanks for the throne and the humor during dark days. She is on the rebound after a brutal fight and back at home doing rehab. Hope you’re well.
I sat there trying to process that. I didn’t know the mom was in the hospital. The mom is a fixture in our community, a long-time friend, and an amazing woman. I responded with:
1. Thanks.
2. OH MY GOSH. WHAT HAPPENED TO XX? IS THERE ANYTHING WE CAN DO TO HELP?
I’m 51, and I have an extensive network. I know this is going to start happening more frequently. In The End, Entropy Always Wins was an effort last week for me to process this a little.
But the email yesterday was a shock. I’m still processing it. I’m thankful our friend is stable and out of the hospital. But it’s just another reminder that our experience on this planet is short and not under our control.
Over the years, I’ve been in many multi-party negotiations. I don’t know the maximum number of participants in a single negotiation, but I’m sure it’s greater than ten active negotiating parties in a transaction.
I don’t mean the number of entities participating in the transaction, but the actual number of active negotiating entities. The best way to figure this out is to count the number of different law firms involved in the transaction.
We shifted our behavior some years ago. Often, we lead deals. When we lead, we negotiate the terms. We work collaboratively with any other co-investors, but we’ll take the lead.
But, if we don’t lead, we follow. This can be tricky, as our instincts (or ego) can often get in the way since we are used to leading deals. Or, the lawyers can get confused about what our real goals and intentions are in the negotiation. We always have a few key things that we need, but these are almost always non-controversial. But they can get mixed up in the fog of a transaction, making the unimportant seem important, and the unemotional seem emotional.
I’ve grown to like the phrases “term setters” and “term accepters.” Simply put, if we lead we negotiate the terms. If we follow we accept the terms. The lawyer fees are much lower when you behave this way.