5 Foolproof Negotiation Tactics to Make Investors Agree with Valuations

 

Many startups are in a phase where they have no solid ground on the financial front. But it can be a serious challenge to get investors on board with their dream business and get a solid standing. The pitching of your company’s evaluation needs more than just an ambitious PowerPoint presentation. There are various ways of turning your investor’s “maybe” into a “definitely,” and they are through some tried and tested negotiation tactics. To make your business survive against the hurdles of valuation, here are some things you can do.

 

 

1. Offer them a Robust Business Strategy

It is as simple as it sounds. All you need to do is promote your business’s exit value to your investor. Convey the profitability of investing in your company that has an attractive ROI waiting for them. Doing so can help the investors have a clear understanding of their benefit and also show them that you have thought about returning their hard-earned money. To add the “we got it, do not worry” into the mix, assure them with a logical roadmap of your business model to resolve any potential future uncertainty and minimize their perception of risk. 

Here are some ways to develop a robust business strategy:

1. Really understand your market-Doing this will give your potential investors piece of mind. They will know that you’ve done the necessary legwork and can adapt if necessary.
2. Mitigate Risk-Show your investors that you’ve considered the risks and have found possible solutions that will protect the business (and them) if things go wrong.
3. Demonstrate different strategies-Show your investors that you also have an operational, sales, and marketing strategy within your plan.

2. Add More Credibility to Your Pitch

Think about how you would apply for a dream job. You gather all your achievements and good words you’ve earned and bring them to HR. Try the same tactic to negotiate with your business investors. Increase your credibility by emphasizing your background in the field, functional expertise, years of research, any awards you’ve won as a business or even participated and been close to winning, etc. By doing so, you are adding favorable traction to your brand’s credibility. 

 

3. Prepare to Counter your Competition’s Numbers with Logic

It can help keep in mind that every minute there is a new company opening its doors to new investors. One of them might be your potential competitor. Hence, be ready to answer all questions of comparison from investors eyeing another business with the same credibility.

In the face of comparison, use points to validate steps towards filling the gaps that your competition has left open. Make your negotiation all about creating a more deserving persona over your competitors. Your personality, competency as a leader, expertise, incredible passion, personal story behind the business, everything that makes up your USP, it’s time to showcase. It helps to filter the answer through a counter-question of “but don’t they have the same?” Try selecting the responses where the answer to this question is a “No”. 

 

4. Clear the “What Ifs”

When purchasing something, our first question is, “what if…” We tend to ask how long a product can last since we are investing so heavily into it. Similarly, an investor will have the same inquiries about your business plan. What if you are not able to establish yourself in the market? If there is an online security breach? What if there is a batch of flawed products already shipped to buyers?

Your responses help them see your confidence in handling difficult business situations that are inevitable to arrive. 

 

5. Turn to a Third Party Before Finalization 

When negotiating with an investor during the evaluation process, you have to have trusted partners on your side. Hence, before accepting the final investment offer, ask your board members, mentors, and others about the decision. This one step can help you take a step back and let another person weigh in the final offer being made. 

 

The Takeaway

The takeaway here is that the powers of negotiation can turn a confident no, into a joyous yes in no time. This is a fact, and there are hundreds of success stories out there to prove it. All you have to do is stay prepared to handle negative feedback and use them as a jumping-off point to negotiate through to get the right valuation. Try out these tips with the next investor you are eyeing for your startup.

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