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50 Practical Negotiation Tactics

50 Practical Negotiation Tactics

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Published by: zambroata on Apr 18, 2011
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Your first demand in the negotiation process is the most important decision you

will make, so think this through well ahead of time. You are not likely to get more

than you request, so do not underestimate what you might be able to achieve.

However, your request must not be so low that the other party concludes that you

are not negotiating in good faith. Your demand should be high enough to give you

room to compromise, but not so high as to end the negotiations before they begin.

Be realistic, and then look at the demand from your opponent’s perspective. If you

consider the demand ridiculous, it is likely that your opponent will, as well.

Example 1

Carol has been unhappy with the house she and her husband bought six years ago.

She has had it on and off the market for the last five years, with no success. Each

time, her real estate agent told her that they were probably not going to get a buyer

because she is asking too much. Carol wants $160,000, and just refuses to reduce

it. Finally, one buyer shows some interest.

Buyer: We really like the house, but quite frankly, we think $160,000 is very

high. After all, six years ago you bought it for $60,000. The market hasn’t

gone up that much in six years.

Carol: Maybe not, but the house has increased in value. First, we’ve put a con-

siderable amount of money into a new air-conditioning system and in

redecorating. We also think that the neighborhood has improved over the

last few years.

Buyer: The air conditioning might have increased the value of the house, but the

redecorating is of little value. Anyone buying the house would want to

change wall colors or add new carpets. And I don’t see a lot of difference in

the neighborhood. It’s a good neighborhood, but certainly not exceptional

in any way. Surely there’s some flexibility in your asking price.

Carol: We really want to sell, but we simply can’t take less than $160,000.

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50 Practical Negotiation Tactics

Buyer: What if we offered you $100,000?

Carol: We really can’t take less than $160,000.

Buyer: Good luck!!

Conclusion

The buyer expected Carol to counter the $100,000 offer by coming down in price

at least a little. When Carol refused to budge, the buyer took it as a signal that

either Carol didn’t want to sell, or she has unreal expectations. In any event, Carol

drove off a potential buyer by setting an asking price that was just too high.

Example 2

The law firm of Bits & Bites was a Sioux City institution, enjoying a statewide

reputation for quality representation. Neither Edward Bits nor Edmund Bites, the

founders of the firm, were still alive. The firm now had over twenty-five law part-

ners who owned the firm and continued to benefit from the reputation and name

recognition of Bits & Bites. A new law partnership from a nearby city contacted

Bits & Bites and offered to “buy” the rights to the name to use in their law office

in their city. The partners are interested in selling the name, but they have no

idea what the value of their firm’s name might be in this nearby city. Inquiries

to other law firms were not very helpful because in almost all of the instances,

the transaction also included some degree of consolidation of the law firms

involved—not just the use of the firm’s name. The other law firm was prepared

to pay $100,000 immediately, and then $10,000 or 1% of profits (whichever

is less) over the next ten years in order to use the name. Here’s how the initial

negotiations went:

Partners:

Well, we are certainly interested in your request to “buy” our

firm name to use in your city. We’re curious, though, as to how

you think the name is going to benefit you.

Planning a Strategy

37

New law firm: We are establishing a partnership of ten lawyers—the top two

moneymaking attorneys in each of five local firms. In every

instance, one of these two attorneys carries the surname of the

firm they are leaving. So, it would be impossible to create a new

name out of the names of our key partners. And even though

you don’t have an office in our city, you have a very solid reputa-

tion there, because you are in the state capital and your firm has

handled a lot of high-profile political cases.

Partners:

We should assume, then, that you anticipate to build a

very profitable law firm, starting with the ten partners you

describe.

New law firm: Yes, we do. Using the Bits & Bites name can only enhance our

profitability. And we, of course, expect to pay for that.

Partners:

Well, we want $500,000 initially, and then 10% of your profits

each year for as long as you use the name. If at any time we feel

that you have “harmed” our name, we reserve the right to with-

draw our permission, but we get to keep all of the money we’ve

received up to that point.

New law firm: (surprised) Well, that is a very high number. We weren’t really

thinking about that amount of money. I guess this is just not

something we’ll be able to pursue.

Partners:

(concerned about loosing the opportunity) Wait, that’s just our

initial figure. What number were you thinking about?

New law firm: Well, I’m kind of embarrassed now, because we were not even

close to that number. To offer it now would be an insult. Let’s

just pretend this didn’t happen.

Partners:

We probably won’t be insulted. Give us some range.

New law firm: I really don’t feel comfortable doing that now. Thanks so much

for meeting with me.

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50 Practical Negotiation Tactics

Conclusion

Bits & Bites lost an opportunity here because their initial demand was so unreal-

istic with what the prospective firm thought the “naming rights” should cost. It

immediately dropped the idea, rather than negotiate. Both parties were probably

at a disadvantage, because there was no “objective” criteria available to help them

set a reasonable price. Either side could have asked for too much. In this situation,

Bits and Bites should have let the prospective firm make the first offer, since they

had initiated the contact. The price they were willing to pay would have indicated

what the naming rights were worth.

Planning a Strategy

39

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