One thing we have learned over the years in negotiating deals is that the way you get to the agreement is as important as the outcome of the agreement. Many deals are struck where one (or sometimes both!) sides walk away feeling like they "lost." It is better to adhere to some fundamental rules for proposals that will help you avoid striking deals that leave you or the person with whom you are negotiating feeling like you "left money on the table."
1. Try Not to Make the First Offer
Let's imagine you are negotiating to purchase a used boat. Walking around the marina one day you see a boater cleaning his 24' sailboat, and you notice a "For Sale" sign on the deck. You alook the boat over and privately decide that it meets your needs. The seller asks you a seemingly inocuous question - "How much were you looking to spend?" Your response here is critical.
You know from research (because you prepared, of course) that this particular model is going for $12,000 on the used market locally. You know you have $12,000 saved for this purchase...so you respond "$10,500". Not a bad offer, right? You are aiming lower than your budget, and according to your research you are $1,500 below "market value."
To your dismay, the seller leaps over to the dock, grabs your hand, shakes it vigorously and says "You just bought yourself a boat!" You immediately try to backpedal...because the seller's quick response is leading you to believe that you have left money on the table.
The problem here is that you failed to consider the value of the boat from the seller's perspective.
Maybe he needs $8000 today to pay for a new home heating system. Or maybe he just bought the boat from a relative for $5000 and was really hoping to make $1000 profit. Or perhaps his wife just told him to get rid of the boat even if he had to pay someone to take it!
So your "well-conceived" $10500 offer was really not very well thought out after all. Now you have established an "anchor" (ironically enough) for the negotiation. It will be VERY difficult to move that number too far south from the original $10500, as now the seller knows your budget. This is the reason big ticket salespeople (cars, home remodeling, realtors) always ask "What's your budget?" right away. It helps them to know your budget so they can anchor your offer.
2. Do Not Accept FIrst Offers TOO Quickly
Now let's change the perspective and imagine that you are the seller. Instead of leaping across to the dock and "closing" so fast, you took a different, more thoughtful approach. First, you paused. Then you said something like "I'll have to consider that." And then you pointed out some of the finer features of your boat. And then you closed with "You drive a pretty hard bargain. I was thinking more along the lines of $11,500."
Now the buyer has a counter-offer that is still $500 below their budget (unknown to you) and you have asked for an additonal $1000. If the buyer accepts (or even uses the old "split the difference" gambit) - they are happy because they have bought a boat $500 less than their budget, and they go home believving that they "drove a hard bargain." You are happy because you unloaded your boat for more than you had hoped.
This is the classic WIN-win outcome where one side exceeds their expectations and the other side is reasonably satisfied.
In the next entry, I will cover more proposing techniques that will help you achieve WIN-win outcomes. In the meantime, please check out www.shapironegotiations.com for more information on successful negotiating!
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