6 Free Financial Modeling Lessons...and More.

Enter your e-mail below to get our new Free Modeling Tutorials ($200+ Value).

< previous | next >

What b-school taught me about negotiations
 

bankerella's picture
IB
(King Kong, 1,869
 
Points)
 on 8/6/12 at 2:30pm
negotiation1.jpg

Here's where that $250k notebook starts to earn its keep.

  • Set standards up front: “No swearing, no walking out.” Write it down on the whiteboard so you can point to it if you need to.
  • Small talk is big talk.
  • Start with low-priority issues or compatible issues to build rapport.
  • Never say the first number if you don’t know the bargaining range.
  • Never make the first offer. If forced, make an absurd offer, then apologize for not knowing what’s realistic. Ask what would be more realistic. Or, “I see. You obviously had a number in mind; what is it?”
  • As seller: “You’ve looked around; don’t you know what you want to spend?”
  • As buyer: "Assuming I'm not the only person in the world who wants to buy this from you... what have other people offered you for it?" "Hmm, what I hear you saying is that I'm the only one interested in buying."
  • Don’t make the other party’s arguments for them. Never negotiate against yourself.
  • Never make two offers or say two numbers in a row. Once you move, wait until they move to move again.
  • Find issues that are low-priority for one party and high-priority for the other. Trade them.
  • Bundle issues -- negotiations (rather than emotional conflicts) are times when you want to talk about groups of issues at once, in which you trade things until the bundle is agreeable to both parties.
  • Make a pair of bundled offers at once. “Here’s a choice: either A+B, or C+D. Which one of these packages is better for you?”
  • To avoid getting stuck: “Let’s work on other things and come back to this issue later.”
  • Use threats very sparingly. At the negotiation table, the whisper of a threat sounds like thunder.
  • Nothing is settled until everything is settled. “We’re agreed on this, but we may come back.”
  • Search for post-settlement settlement. “This will be our agreement unless we can find one that works better for both of us.”
See my other WSO blog posts
Tags:

Comments

WallStreetOasis.com's picture

Never say the first number if

EN
(Human, 12,074
 
Points)
 on 8/6/12 at 2:58pm

Never say the first number if you don’t know the bargaining range.

This is true, but if you do know the range, or are able to estimate it, I think putting forward the first offer is actually a huge advantage that many people are afraid to take.

Anchoring is huge in negotiations, and if the other person also has a set # in mind, then going significantly lower / higher right off the bat should not make them just walk out (unless it is truly insane)...and could lead to a great deal for you more often than not.

WSO Conference 2013

Private Certified User Chat

SirTradesaLot's picture

WallStreetOasis.com: Never

 
Points)
 on 8/6/12 at 3:02pm
WallStreetOasis.com:

Never say the first number if you don’t know the bargaining range.

This is true, but if you do know the range, or are able to estimate it, I think putting forward the first offer is actually a huge advantage that many people are afraid to take.

Anchoring is huge in negotiations, and if the other person also has a set # in mind, then going significantly lower / higher right off the bat should not make them just walk out (unless it is truly insane)...and could lead to a great deal for you more often than not.

You are correct sir.

Turbo leverage for capital explosion -- BD Capital

My WSO Blog

Going Concern's picture

I'm no negotations expert,

(King Kong, 1,713
 
Points)
 on 8/6/12 at 3:09pm

I'm no negotations expert, but I'm surprised there's nothing mentioned about reverse psychology.

In headaches and in worry
Vaguely life leaks away
And Time will have his fancy
Tomorrow or today.

BTbanker's picture

Going Concern: I'm no

IB
 
Points)
 on 8/6/12 at 3:21pm
Going Concern:

I'm no negotations expert, but I'm surprised there's nothing mentioned about reverse psychology.

"A man generally has two reasons for doing anything. One that sounds good, and the real one." - J.P. Morgan

cheme-ib's picture

Good stuff. Thanks

CO
 
Points)
 on 8/6/12 at 3:39pm

Good stuff. Thanks bankerella! +1

"So who lost the hundy?"

happypantsmcgee's picture

Most useful column you've

O
(Almost Human, 9,621
 
Points)
 on 8/6/12 at 3:41pm

Most useful column you've written so far. +1

If I had asked people what they wanted, they would have said faster horses - Henry Ford

bankerella's picture

Ron Paul: Ok I'm looking to

IB
(King Kong, 1,869
 
Points)
 on 8/6/12 at 3:45pm
Ron Paul:

Ok I'm looking to "party" tonight so let's negotiate. How much do you charge per hour?

Hi, Ron. Why would you want to pay for a female banker's time in order to party? That's like buying a Ducati and using it as a towel rack. (In other words: I think you're doin' it wrong, kid.)

If you and I were to agree on a day rate, it would probably be such that you'd want me using my time to solve your corporate finance or strategy issues. After all, what do you think I'm better at: something I do sometimes, or something I do every single day and have invested my life and career in?

Here's some advice at no charge: You probably can't afford a day rate that'd make it worthwhile for me to call in sick. But if you can, go find a good-sized P&L with some 6-figure problems that need solving. Bring it to me and I'll find you some solutions. Then take the money you earn off that and go hire one of the world's top girls-for-hire. I'm sure some of the dudes on this site could point you in the right direction.

See my other WSO blog posts

AndyLouis's picture

thanks b, i'm starting my own

 
Points)
 on 8/6/12 at 3:46pm

thanks b, i'm starting my own notebook entitled "things I learned from Bankerella"

WSO's COO (Chief Operating Orangutan) | My story | Connect with me on Linkedin.

2013 WSO Conference

See_ya's picture

Surprised by how much of this

O
 
Points)
 on 8/6/12 at 3:55pm

Surprised by how much of this I didn't already know. Great advice!

Knowledge Kick's picture

This is MUCH MORE of a

 
Points)
 on 8/6/12 at 4:03pm

This is MUCH MORE of a quality post than your last. Thank you!

http://DollarDrip.com Username: Knowledge Kick

brandon st randy's picture

WallStreetOasis.com: Never

PE
(Gorilla, 706
 
Points)
 on 8/6/12 at 5:05pm
WallStreetOasis.com:

Never say the first number if you don’t know the bargaining range.

This is true, but if you do know the range, or are able to estimate it, I think putting forward the first offer is actually a huge advantage that many people are afraid to take.

Anchoring is huge in negotiations, and if the other person also has a set # in mind, then going significantly lower / higher right off the bat should not make them just walk out (unless it is truly insane)...and could lead to a great deal for you more often than not.

Agreed. incidentally I believe Bankerella's post omitted the single most important point about effective negotiation, namely when negotiating with a sophisticated counterpart, you need to do your homework before hand. Before sitting down with your interlocutor, you need to have a pretty good idea of the bargaining range. After all, this serves as the basis of the entire discussion.

...well, he's no use to us if Detroit is his idea of a small town!

Frieds's picture

First off, +1. This is

AM
(Neanderthal, 2,530
 
Points)
 on 8/6/12 at 5:35pm

First off, +1. This is fantastic content... then again, I feel like I read this before somewhere and a good deal of it disagrees with that. I'll have to dig up the book, but there is a wonderfully quick read on the basics of negotiation. When I find it, I'll link here.

There are two very important things you forgot. First is that though is there is a subtly in negotiation to get the other side of the table to blindly agree with you without them realizing it or questioning your logic behind an idea. Second, there is a very good value in recapping everything. I know it sounds inane, but pausing and making sure you fully understand what they want by saying what they are looking for in your own words is a huge tool to have in your back pocket and makes everything come across in a clearer fashion.

bankerella's picture

brandon st randy: Agreed.

IB
(King Kong, 1,869
 
Points)
 on 8/6/12 at 5:40pm
brandon st randy:

Agreed. incidentally I believe Bankerella's post omitted the single most important point about effective negotiation, namely when negotiating with a sophisticated counterpart, you need to do your homework before hand. Before sitting down with your interlocutor, you need to have a pretty good idea of the bargaining range. After all, this serves as the basis of the entire discussion.

Extremely good point; also one of the professor's main points. It's not in my notebook because I'm an obsessive over-preparer and don't need/want a reminder to do what I already do too much of. But yeah, it's mandatory.

These particular bullets were helpful to me because, as I go further in my career, I see more situations where research won't get you enough confidence on the bargaining range. It's one thing to buy a car, a cake, or a couple years of somebody's labor right out of college; it's another thing to buy a piece of intellectual property, an unproven technology, a unique type of influence, a one-of-a-kind product with no revenues yet, a group of unknown customers with unknown spending habits, and so forth.

Let's say you're a buyer. As you get deeper into your career, you'll see the products you're buying get harder to value because there's less information out there on how much money you (or the seller, or anybody else) can make off them in the future. On the other hand, you'll also see money (and things that are denoted as valuable on balance sheets) making up a smaller and smaller part of the purchase price you pay. The value of everything is nebulous; the answer to every question is "It depends."

But the deal still needs to get done, and for that to happen, someone's got to reveal a preference, a piece of information, a forecast. I've seen good hard data that in these situations, the bargaining range swings widely based on who shows their hand first. So eventually you develop the tools you need to shape the discussion during this early stage before the bargaining range is defined.

See my other WSO blog posts

Working9-5's picture

A great post. Should have

ST
(Gorilla, 613
 
Points)
 on 8/6/12 at 7:05pm

A great post. Should have taken a negotiation class from OP before running for public office. Man, I will sweep the floor in committee hearings from now on.

+1 for post

CNBC sucks

"This financial crisis is worse than a divorce. I've lost all my money, but the wife is still here." - Client after getting blown up

ST Monkey's picture

bankerella: Ron Paul: Ok

ST
(Orangutan, 314
 
Points)
 on 8/6/12 at 7:54pm
bankerella:
Ron Paul:

Ok I'm looking to "party" tonight so let's negotiate. How much do you charge per hour?

Hi, Ron. Why would you want to pay for a female banker's time in order to party? That's like buying a Ducati and using it as a towel rack. (In other words: I think you're doin' it wrong, kid.)

If you and I were to agree on a day rate, it would probably be such that you'd want me using my time to solve your corporate finance or strategy issues. After all, what do you think I'm better at: something I do sometimes, or something I do every single day and have invested my life and career in?

Here's some advice at no charge: You probably can't afford a day rate that'd make it worthwhile for me to call in sick. But if you can, go find a good-sized P&L with some 6-figure problems that need solving. Bring it to me and I'll find you some solutions. Then take the money you earn off that and go hire one of the world's top girls-for-hire. I'm sure some of the dudes on this site could point you in the right direction.

This might be silly, but I think I just fell in love with you.

GS's picture

bankerella: Extremely good

ST
 
Points)
 on 8/6/12 at 8:28pm
bankerella's picture

GS: 2. You clearly don't work

IB
(King Kong, 1,869
 
Points)
 on 8/6/12 at 8:55pm

See my other WSO blog posts

kamster's picture

Awesome post. Somehow this

ST
 
Points)
 on 8/6/12 at 9:04pm
SirTradesaLot's picture

bankerella: Funny, I never

 
Points)
 on 8/6/12 at 9:07pm

Turbo leverage for capital explosion -- BD Capital

My WSO Blog

GS's picture

bankerella: Funny, I never

ST
 
Points)
 on 8/6/12 at 9:13pm
bankerella's picture

GS: bankerella: Funny, I

IB
(King Kong, 1,869
 
Points)
 on 8/6/12 at 9:40pm

See my other WSO blog posts

GS's picture

bankerella: GS: 2. You

ST
 
Points)
 on 8/6/12 at 9:40pm
bankerella's picture

GS: I'll also add that it's

IB
(King Kong, 1,869
 
Points)
 on 8/6/12 at 9:52pm

See my other WSO blog posts

GS's picture

bankerella: GS: I'll also

ST
 
Points)
 on 8/6/12 at 10:13pm
SirTradesaLot's picture

One that I will state

 
Points)
 on 8/6/12 at 10:38pm

Turbo leverage for capital explosion -- BD Capital

My WSO Blog

bankerella's picture

GS: bankerella: GS: I'll

IB
(King Kong, 1,869
 
Points)
 on 8/6/12 at 11:47pm

See my other WSO blog posts

bankerella's picture

SirTradesaLot: One that I

IB
(King Kong, 1,869
 
Points)
 on 8/6/12 at 11:48pm

See my other WSO blog posts

brandon st randy's picture

SirTradesaLot: Always,

PE
(Gorilla, 706
 
Points)
 on 8/6/12 at 11:56pm

...well, he's no use to us if Detroit is his idea of a small town!

13235314's picture

bankerella: Here's where that

IB
 
Points)
 on 8/7/12 at 2:12am
berniehittner's picture

I really enjoyed you learning

 
Points)
 on 8/7/12 at 9:09am
Mirando's picture

Bankerella - How many guys

 
Points)
 on 8/7/12 at 2:59pm
bankerella's picture

Mirando: Bankerella - How

IB
(King Kong, 1,869
 
Points)
 on 8/7/12 at 5:08pm

See my other WSO blog posts

huanleshalemei's picture

Dear, I am not a hopelessly

(Gorilla, 519
 
Points)
 on 8/7/12 at 5:45pm

The Auto Show

bankerella's picture

huanleshalemei: Dear, I am

IB
(King Kong, 1,869
 
Points)
 on 8/7/12 at 5:53pm

See my other WSO blog posts

SirTradesaLot's picture

bankerella: Dear, there are

 
Points)
 on 8/7/12 at 6:56pm

Turbo leverage for capital explosion -- BD Capital

My WSO Blog

bankerella's picture

SirTradesaLot: bankerella:

IB
(King Kong, 1,869
 
Points)
 on 8/7/12 at 7:23pm

See my other WSO blog posts

SirTradesaLot's picture

bankerella: SirTradesaLot:

 
Points)
 on 8/7/12 at 7:30pm

Turbo leverage for capital explosion -- BD Capital

My WSO Blog

bankerella's picture

SirTradesaLot: You said there

IB
(King Kong, 1,869
 
Points)
 on 8/7/12 at 7:43pm

See my other WSO blog posts

Going Concern's picture

Does this confirm OP is not

(King Kong, 1,713
 
Points)
 on 8/7/12 at 7:45pm

In headaches and in worry
Vaguely life leaks away
And Time will have his fancy
Tomorrow or today.

Mirando's picture

"There's no way to understand

 
Points)
 on 8/7/12 at 7:53pm
SirTradesaLot's picture

bankerella: SirTradesaLot:

 
Points)
 on 8/7/12 at 7:57pm

Turbo leverage for capital explosion -- BD Capital

My WSO Blog

huanleshalemei's picture

Today is such a wonderful

(Gorilla, 519
 
Points)
 on 8/7/12 at 8:17pm

The Auto Show

bankerella's picture

Mirando: Surprising, you come

IB
(King Kong, 1,869
 
Points)
 on 8/7/12 at 8:40pm

See my other WSO blog posts

SirTradesaLot's picture

bankerella: Mirando: Surpri

 
Points)
 on 8/7/12 at 9:01pm

Turbo leverage for capital explosion -- BD Capital

My WSO Blog

Mirando's picture

bankerella: Mirando: Surpri

 
Points)
 on 8/7/12 at 9:10pm
fnajam12's picture

reminds of Stuard Diamond's

(Chimp, 1
 
Points)
 on 8/8/12 at 3:32am
GS's picture

bankerella: I would be

ST
 
Points)
 on 8/8/12 at 7:01am
GS's picture

bankerella: GS: bankerell

ST
 
Points)
 on 8/8/12 at 7:03am
SirTradesaLot's picture

huanleshalemei: Today is such

 
Points)
 on 8/8/12 at 11:32am

Turbo leverage for capital explosion -- BD Capital

My WSO Blog

cphbravo96's picture

bankerella: ...2) How much

PE
 
Points)
 on 8/8/12 at 12:34pm

"The trouble with our liberal friends is not that they're ignorant, it's just that they know so much that isn't so."
- Ronald Reagan

6 Free Financial Modeling Lessons...Straight to Your Inbox.

Confirm your name and e-mail below to get our best tips

Monkey Stats
Account information
We respect your Name and E-mail privacy. By joining you accept our terms of service.