Today we were negotiating share prices with the investors, and I learned a lot of things. It was a tough experience with great long-term benefits.
We had 130 as the goal price for our stocks, but we made the mistake of proposing 130 as the initial price. We didn’t realize until too late that the agreed price will be a middle point between the proposed prices of the two parties in the negotiation, and the seller will always try to push the price higher while the buyer will try to push the price lower.
First of all, we shouldn’t have stated our proposed price during the presentation – we need to keep the proposed price flexible across the different investors to ensure that each investor pays the maximal price that they’re capable of – and different investors have different payment capacities.
Second, we should have proposed a price that’s at least twice as high as the goal price. This would ensure that the “middle point” between the proposed prices from both sides will favor our side by being more expensive, and this would even give us a good chance of excelling the goal price.
Third, we should have divided ourselves so that the best negotiator among us does all the negotiating single-handedly while the other three group members are stationed to observe the negotiations of each investor – one group member per investor. This would enable us to use each investors’ negotiation history as an argument to say “you gave them this deal, so we should match it or else it won’t be fair”.