I have negotiated 50 deals in my business career and want to share my favorite tool for getting to an agreement – an Interests Table. If you want to learn more about negotiation basics, please see my blog here (https://learn.lessonsonpurpose.com/blog/negotiation).
This tool may be used in any negotiation, whether buying a car, completing a business deal, even navigating interpersonal relationship and parenting teenagers.
Interest Table Use:
- Preparation.
- Make sure your entire team is aligned on the preferred outcome. Spend as much time as necessary to clarify your position, your ideal outcomes, where you will give, and where you will walk away.
- Next, get in the other side’s head. Understanding the other party’s interests and points of view is an important key to deal success. Spend a few hours putting yourself in the other side’s shoes, thinking about what will be important to them. After all this prep work, you are ready to move on to the tool.
- Start with Interests. Most undertake negotiations to find something new – a relationship, new ownership, or creating a venture or product that does not yet exist. The tendency is to jump straight to deal terms and options – but the key is to first identify and align on interests. My practice is to facilitate jointly making a list, like the one below, and have each side share what they want from a deal. Things like timing, impacts on people, and profitability must be discussed, even if no one brings them up. As facilitator, I remain objective and encourage both sides to champion getting to ‘yes’ by openly shares their true motivations. Deals happen with clarity and alignment early.
Example Interests Sharing Exercise:
My side Other side
- Leverage my infrastructure – Expand points of distribution
- Deal done quickly – Deal done quickly
- Jobs for my team – New talent
- Long term value creation – Cash today
- Identify the shared interests. The next step is to circle the common, or shared interests. These tangibly demonstrate the value helping the other side achieve their goals. Here you leverage your pre-work when you predicted what the other side wanted; how close are their positions versus what you anticipated, is anything surprising? In our example above the top 3 interests are aligned: leveraging infrastructure, speed and talent. If there are few aligned interests, then there will not be a deal – and its time to walk away.
- Address the deal killers right away. Do not be shy asking, ‘what would kill this deal?’. This question surfaces real issues so they may be addressed head on. The alternative is finding it out in an obtuse manner later in the negotiations when each side has time and money invested. In our example, the other side wants cash now; if this is an issue on our side, then we would want to identify that quickly.
- Move to Options. With aligned interests and potential deal killers identified, the parties can then begin to discuss deal structures that are win/win. I lead a brainstorming session surfacing deal options, identifying many ideas, the only criteria being that ideas must meet the commonly shared interests. This is also the time to think big – to try to grow the pie, not slice it up.
- Time kills deals. Finally, I encourage you to document the shared interest quickly. Deals can evaporate quickly, so it is imperative to get the interests and options from paper to stakeholders email inboxes as soon as possible. The goal is to maintain momentum, avoid any re-trading, and keep the other side from moving on to other alternatives.
There is much more to getting a deal done as you negotiate price, structure, rights, exits, etc. – but I have found this process to be an effective and efficient way to move from a first meeting to a term sheet, and deal execution.