On Shark Tank, When Asking for a Different Price, Always Give a Reason
Here is a very simple and powerful negotiation tactic: whenever you are offering a different price (whether buying or selling), always justify your ask.
This simple truth is demonstrated in almost every Shark Tank episode.
Vengo Negotiation on Shark Tank:
In this example, the entrepreneurs counter back and forth with the Sharks over the percentage of equity they are going to give up in exchange for a venture debt deal:
Kevin opens the process by offering a loan for 6% of their company.
In response the entrepreneur (Bryan) first asks how Kevin calculated that 6%. Kevin makes a joke “I just asked for it!” which is funny, but the exchange also establishes some push-back in favor of Bryan.
Lori then enters the picture. Bryan suggests Lori and Kevin team up to lend the money and split the deal between the two of them.
In the course of the conversation, Bryan mentions the size of the industry and reminds them of successful deals he has done with big players in the space.
This all sets up his counter-offer to Kevin’s 6%.
In other words, Bryan didn’t just reflexively ask for less equity. He preceded it with several compelling reasons.
His counter-offer is a very low 1%.
Kevin and Lori, of course, don’t accept. They too give specific reasons for their upcoming counter-offer: 1% is too low for them to be motivated; “We work hard for our money” as Lori says. “It’s huge to get two sharks” Kevin states.
Bryan maintains his frame by saying “That’s my last counter.” But nevertheless the negotiation continues.
Kevin and Lori respond by offering 4% equity. Kevin tries to close it there by saying “It’s a done deal if you say yes.”
To justify his 4% ask, Kevin again mentions the business power of partnering with “Mr. Wonderful and Lori, the Queen of QVC. You become the it-kids… You come into the Shark Tank eco-sphere.”
Again, they are providing specific reasons for their ask.
They go back-and-forth one more time, over literally fractions of a percent, before agreeing to 3% equity.
Remember the opening positions were 6% (from Kevin) and 1% (from Bryan). They eventually just met in the middle at three.
Could they have just split the difference from the get-go? Probably not.
They had to have a dialogue that (a) got into specific reasons and justifications for each side’s ask, and (b) demonstrated confidence and conviction on both sides.
The Sharks needed to see that Bryan is a smart negotiator and businessman. And Bryan needed to see the full value that the Sharks would bring in exchange for greater equity.
The negotiation process is an educational process (like all sales).
Peoples Design Negotiation on Shark Tank:
And here is an example of an entrepreneur getting an offer, and countering without a reason.
The entrepreneur (Tyler) gets an offer from Lori: $75,000 for 33.3% equity.
(He originally wanted $75,000 for 25%.)
In response to Lori’s offer, Tyler asks if she “would consider a royalty.”
While Lori responds positively, and wants to hear his royalty idea, his gambit ultimately fails. He doesn’t offer any reasoning other than “it’s a valuable product and it will sell.”
As a result, Lori holds firm on the one-third equity.
Being a savvy negotiator, she mentions specific reasons to justify her ask: she will get Tyler’s product on QVC, she has a built-in audience, she and her team are going to need to work hard to get it into kitchen stores, etc.
Tyler decides to take the deal with no further negotiation.
Lori saw that Tyler had no real reasoning behind his counter-offer. And she saw that he was fundamentally a weak negotiator. She knew she could stand her ground, and she succeeded.