Effective Agreements' Blog

Win Win Negotiation: Definitions and a Warning

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You may wish to review some earlier posts about negotiations like Effective Contract Negotiations – 11 Tips and Effective Agreements Have These Three Things in Common. There is also an article on my website that applies to the subject.

Win Win Negotiations

How do you define a win win negotiation? A question with several possible simplistic answers:

• Both side are happy with the contract when they are done

• Each side gets everything it set out to get in the final contract

• Both parties expect to enjoy an equal measure of success going forward.

For the Professional

I invite comments below on my view of these definitions: they are true, but they do not go far enough. The parties will not know if the negotiation was a win win for some time, because a win win means the parties receive a return on investment (ROI) during the term of the agreement that meets or exceeds the company's criteria based on the company's cost of capital. That makes things much harder:

• Measuring the ROI on a single contract is not something every company is set up to do; and

• The cost of capital is a hard number for some companies to get a handle on, and it is a moving target. If there has been no funding event and the company is not currently borrowing money from a bank, it can be very difficult to estimate.

Back to the Common Win Win Definitions 

OK, I was going to do a lighter, more fun to read blog post, and now I have dumped some pretty technical stuff on you.

In fact, the parties decide if the contract was a win win as soon as negotiations are concluded. What we are dealing with here is the perception that the contract is a win win. And, that takes us right back to the first three bullet points.

The Warning

My warning is for the start-up or early stage company dealing with a very large company to obtain distribution and/or direct sales, a win win may be impossible. The smaller company may very well have to accept lopsided terms to get the business. That is not to say they should refuse to proceed. As one client reminded me, one sale could pay for all of the expense in creating the relationship and for a lot of grief along the way.