I’m enjoying the new series of Dragon’s Den on BBC Two, and as usual it gets me thinking about the behaviours people use in the Den to handle the 5 Alpha Males (I’m sure Deborah Meaden won’t mind the description) in the room.
I have noticed over years of watching this series that there are 3 consistent negotiation errors that people make once they have been made an offer by the Dragons. They are basic, and I find myself frustrated every time, because they are so easy to fix. They result in people giving away far more of their business than they need to, and also set up the relationship with their investor on completely the wrong foot.
So here, for any of you contemplating a visit into the Den, or for anyone faced with a tough negotiation in which the other party has more resources than you do and needs you less than you need them, are my 3 tools for building your negotiation power:
1. Listen and watch for clues.
When the Dragon makes his or her offer, they usually seek to give less favourable terms than the business owner has offered. Sometimes this is because they genuinely feel that the terms are not commercially acceptable (usually because there is too much risk or because they think the business has been over-valued) but sometimes they do this just to see if they can get away with it. Even experienced negotiators like Dragons give away clues without realising it, and they are fairly easy to spot. Here are the most frequently used:
- Woolly language. “I’m having a bit of a problem seeing how you have assessed your market opportunity, so I’d find it difficult to agree your valuation.” Often this vagueness is a sign that they are not clear in their own mind and are just testing your response. Respond assertively and clearly and you will gain the upper hand.
- Non-specific offers. “I’d be looking for around 40% share of the business.” This is a clue that the number is negotiable. Never offer the full figure when they let one of these words slip in.
- Body language clues. When they make their offer and look away or down, it’s often a sign that they don’t mean it. A slight shrug of the shoulders or a weak smile when they make the offer is also a clue that they don’t really mean it. Watch them like mad for every clue, and if you don’t believe what they’re saying, test it with an open question such as “How negotiable is that?”
2. Have a BANANA in your pocket.
If a negotiator thinks you haven’t got a BANANA (an alternative to doing a deal that day with them on those terms), they will push you beyond the deal that you are comfortable to do. The price of things that people are desperate for tends to go up. So, plan yourself a mental BANANA before you go into the Den. It means that when they offer you unacceptable terms, you can allow yourself to walk away. This means you are in a position to say “I can’t accept your 0ffer”, and guess what, if you do that, their offer will often (not always) improve. I see people wielding their BANANA on occasion in the Den, but not nearly often enough.
- Funding from another source
- The ability to do without the funding
- Plenty of time in which to go and research alternatives (try not to go into the Den when everything hangs on your getting the money)
Here’s a short video on the subject of BANANAs.
3. Use the Deal Juggler
It’s rare that I see people being creative in the Den. Maybe not surprising, as it is such a pressurised (deliberately so as it makes for great viewing) environment. The Deal Juggler is a great tool for breaking deadlocks and finding Win/Win outcomes. When the offer is on the table and neither party wants to move, use it to create options:
- Make the deal smaller. “What share would you want if we went for half the money?”
- Make it bigger. “What would the terms be if we included the other product we have developed?”
- Reframe it. “How about we give you the extra 10% share, but you give us it back when you have recovered your investment?”
- Turn it upside down. “Instead of you taking a share of our company, why don’t you give us a share of your company and you take ours over?”
The good news is that all of these techniques are learnt, and at some point in their lives the Dragons were also taught them. They may have used them more often than you, but that doesn’t mean they are any better at using them than you. You’ll find that the Dragons respond well to people being assertive with them, and in fact they want to to do business with people who know how to use power appropriately and are not going to just do what they’re told.
I hope these work for you, and you get better results from using them. This has been a free negotiation class, but I would be looking for err, oooh, let’s say around 10% of the proceeds, if that’s OK with you?