Remember: if you can comfortably walk away from a deal at any point in time, you’re in a position of strength. There are many instances in which I’ve told a potential licensee “no”, only to have them continue to pursue me with a sweeter deal. This, however, is not the experience most first-time inventors have; they want a deal so badly, they don’t use any leverage to improve their position. Read the following tips to help gain perspective on the art of negotiation!
Submit your product idea to multiple companies. Do not keep all of your eggs in one basket. Don’t wait around for that one company to call you. I have never used an offer from one company as leverage against another, but my entire attitude and confidence changes when I know I have options. You will be more relaxed and less impatient to close a deal if you are talking to more than one company (if you are lucky enough to have two companies interested in your product!) Desperation is never attractive.
Do not seem too excited. Be calm. I know you’re probably dying on the inside, but be patient. Let time be your friend. I am a very impatient person, but I’ve learned that when I don’t get back to a company as quickly as they would like, I’m putting doubt on the table. They don’t know that they “have” me. It is important that you are never arrogant, though. A negotiation should ideally take place between two partners of equal value. Don’t hurry, and don’t let them see you sweat. If you pester your potential licensee with too many phone calls or e-mails, you are putting them in a position of power because they know you are needy.
Find a mentor or coach to help guide you through the process. They are likely to understand and help teach you that negotiating is like playing a chess game: it’s important to see not only the immediate move you’re going to make, but the repercussions of that move several turns later. One of my shortcomings has been a failure to do this. There are several deals I later regretted because I didn’t give them enough thought; I didn’t ask enough questions. What if this? What if that? Give yourself enough time to consider all possible scenarios.
Learn as much as you can about the company you’re working with. What are their strengths? What are their weaknesses? Understand their channels of distribution, their consumer base, and their sales figures (as best as you can!). This will help you make a powerful “first punch”. The first punch is the first figure you set on the table to a company. Always ask for a little higher than what you hope to ultimately receive. If the number you both settle upon is lower, they’ll feel like they’re getting a good deal – and everyone likes to feel like they’re getting a better deal. I often think I’m being assessed and sized up by the first number I throw on the table! Think of it as a sports game: what’s their defense? Offense? Craft a game plan accordingly.