12 How to Become a Better Negotiator

$725,000 out of a hat! Instead, that number resulted from a profes-

sional appraiser’s valuation of their business and the amount that
the partners determined necessary to make the deal worthwhile to
them. ‘‘If we can’t get at least $725,000,’’ Janis told Oscar, ‘‘we
won’t have enough money to retire in the style we’d like. We’d be
better off keeping and running the business.’’ Naturally, they will
not disclose their reserve price to the other side.
Sellers aren’t the only ones who should know their reserve
price; buyers should also have one in mind as they enter a negotia-
tion. For example, if you are shopping for a house, you should have
a dollar amount above which you will not pay. That’s your walk-
away point.
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NEGOTIATING TIP: TRY TO LEARN THE OTHER SIDE’S
RESERVE PRICE WITHOUT REVEALING YOUR OWN.

If you can learn the other side’s reserve price—or approximate

it—you’ll know how hard you can push without forcing that per-
son to walk away.
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AREA OF AGREEMENT
The notion of a reserve price sets up the next negotiating tool: the
area of agreement, or the price range within which a deal is possi-
ble that will satisfy both parties. To understand this concept, let’s
return to the case of our business partners, Oscar and Janis. As
sellers, their reserve price is $725,000. Any offer less than that will
make them walk away. Now let’s suppose that George, a potential
buyer, comes along. He likes their little enterprise and would pay
up to $750,000 for it—no more. That’s George’s reserve price.
Figure 2–1 describes the area of agreement in this particular
case. Naturally, George will try to get the business for less than
$750,000, and Oscar and Janis will attempt to get more than their
$725,000 reserve price. However, there is room for negotiating a

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