Securing Investors and Structuring the Deal 321Basics of Negotiation
Every negotiation is about two things: the tangible aspects of the negotiation and the
intangibles. The tangiblesconcern the terms of the agreement. Prices, products, servic-
es, and delivery schedules are all tangibles, as are financial terms, covenants, guarantees,
and representations. In a labor negotiation the tangibles are wages, hours, benefits, and
working conditions.
More than the tangibles are at stake in most negotiations, however. Negotiators are
also concerned with intangibleslike the perception of winning and losing. As illustrat-
ed in Figure 8.3, the constituencies on each side of the negotiation want the negotiator
to get the best terms for its side—to win. Yet experienced negotiators realize that con-
cessions, compromise, and good-faith bargaining are the elements that lead to success.
From the viewpoint of the constituents, this awareness may look like weakness and
potential loss. Negotiators are concerned about saving face as well as about the terms of
the agreement.
Another intangible is the reputation of the negotiator. Negotiations are ubiquitous in
business, and entrepreneurs are always thinking ahead to the next negotiation. They
don’t want to be seen as too soft or too demanding. The next negotiation may be more
important than the current one. So sometimes negotiators are eying the future and seek-
ing a reputation as “tough” or “conciliatory” or “fair-minded.”
Understanding negotiations means recognizing what type of negotiation is being
conducted. There are two fundamental types: distributive and integrative. Distributive
negotiationsoccur when the object is a fixed amount of a benefit. Because the total is
fixed, one party loses whatever the other party gets. It is a zero-sum game. For example,
negotiating the price of an automobile with a dealer is usually an instance of distribu-
tive bargaining. The more the buyer pays, the less he or she can spend on other things.Entrepreneur’s
constituents:
Stakeholders in
the new venture
Entrepreneur
as negotiatorOpponent
as negotiatorThird parties:
Mediator
Arbitrator
Conciliator
ConsultantFIGURE 8.3 The Parties to a Possible Negotiation
Opponent’s
constituents and
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