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.”
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.
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.
I'm no negotations expert, but I'm surprised there's nothing mentioned about reverse psychology.
http://www.youtube.com/embed/9ZzODy30EBo
Good stuff. Thanks bankerella! +1
Most useful column you've written so far. +1
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.
thanks b, i'm starting my own notebook entitled "things I learned from Bankerella"
Surprised by how much of this I didn't already know. Great advice!
This is MUCH MORE of a quality post than your last. Thank you!
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.
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
Awesome post. Somehow this post reminds me of How Lee Ka-shing (richest person in Hong Kong) does business: For a service, he tells his sons that even though the fair price might be $1 and they can get away with $0.95, they should always pay $1.05. For a product, they should always strive for $.90
One that I will state explicitly that is implied in some of these: strive for win/win situations (even though it sounds really cheesy), especially if you have ongoing business relationships . I'll give you a simple example to illustrate the point.
Example: Let's say you are purchasing an Asset Management firm. Your goal is to pay as little as possible and increase revenue significantly once they are acquired. The asset manager's goal is to get as much money as possible. A solution is to back-end load the payments based on certain revenue hurdles. Now, incentives are aligned and if you pay more as the acquirer, it's only because you got more benefits. The asset manager can make more money as well. Having aligned incentives is always a good thing. Additionally, as the acquirer, if you learn that the asset manager is uninterested in doing back end loaded deals, you can safely assume their prospects are worse than originally thought (asymmetric information advantage on their part).
This is highly effective and underutilized. This allows you to see what they really care about on two offers that you are indifferent between.
Always, always, always know when you will walk away and do everything you can to build up your alternatives in case you can not come to an agreement. Your strength is massively increased if you have multiple people involved on the other side (more buyers if you are selling or vice versa). This is what usually determines how good of a deal you will get. If you're only talking to one potential buyer for your product, don't expect a good deal, no matter how well you do the other things. This should be fairly obvious.
Anyway, nice post.
This is excellent. Consider it added to the notebook.
This is what Fisher & Ury refers to as BATNA (Best Alternative to a negotiated agreement).
Very interesting. I've always appreciated the power of a pregnant pause
I really enjoyed you learning for negotiation and for sure will recommended it to some of my colleagues. The tips are really very provoking and tied the material back to reality. I liked the thought as how to get avoided by getting stuck to any issue.
Bankerella - How many guys did you slay back in b-school?
There's no way to understand that number without a performance benchmark, so I'm going to give you my SFP instead. My final ratio (and bear in mind that this is a ratio) of summer offers to full time offers to sexual partners was 5:3:1.
Benchmarking's actually the trouble here. The ideal performance metric for males doesn't apply to females. Back of the envelope, I'd say the average MBA chick is working with a 3:2:3, so I look a little heavy on the S metric and a little light on the P compared to the mean. Clearly a conservative/dorky tactic from that standpoint.
However, I would argue that, unlike males, females can't shore up any weakness on the left hand side of the ratio with outperformance on the right hand side. From that standpoint, I feel pretty good about where my numbers ended up. And though, unlike some, I'm not in favor of adding some pansy-ass "quality" multiplier to the P value, I can say with a reasonable amount of confidence that if I did, I would be delivering outperformance on both fronts.
Any questions?
I've met very few female bankers willing to outperform on two ... fronts. Good for you for being so liberated
Dear, I am not a hopelessly romantic type, but I think it must be tedious to date a woman who calculates too much. Anyways, I still enjoy reading your post.
Dear, there are so many reasons why you are not dating me. This is not (by any means) one of the more important ones. (For instance, you're... what, Chinese? Purportedly female/hetero?) Glad you enjoyed, though.
Does this confirm OP is not chinese as previously surmised?
"There's no way to understand that number without a performance benchmark, so I'm going to give you my SFP instead. My final ratio (and bear in mind that this is a ratio) of summer offers to full time offers to sexual partners was 5:3:1.
Benchmarking's actually the trouble here. The ideal performance metric for males doesn't apply to females. Back of the envelope, I'd say the average MBA chick is working with a 3:2:3, so I look a little heavy on the S metric and a little light on the P compared to the mean. Clearly a conservative/dorky tactic from that standpoint.
However, I would argue that, unlike males, females can't shore up any weakness on the left hand side of the ratio with outperformance on the right hand side. From that standpoint, I feel pretty good about where my numbers ended up. And though, unlike some, I'm not in favor of adding some pansy-ass "quality" multiplier to the P value, I can say with a reasonable amount of confidence that if I did, I would be delivering outperformance on both fronts."
Surprising, you come off as super sexual and promiscuous in your posts, but it seems like your track record says otherwise. I'm going to assume you had under 10 summer offers (very reasonable estimate), which means you only had 1 or 2 sexual partners in your 2 years of b-school. In that case, it must've been some wild animal sex you were having.
Also, were you at the WSO Conference?
Don't be embarrassed, but there are a ton of fallacies at work here. Here are three of them:
1) The presumption that my personal behavior mirrors my advice to others (which presumes that I'm not a hypocrite, so thanks for that vote of confidence) 2) The apparent cultural truism that a woman, once promiscuous/fallen/whatever, won't choose or won't achieve anything different (and thus our steady girlfriends, wives, and mothers are by definition clean and decent) 3) The fallacy (which I often encourage in you guys) of assuming that other people are like you by default (e.g., in a similar stage of life, similar views and values, etc.) What, you think I'm still working 120-hour weeks, still figuring my shit out, still on the market?
Now here's an interesting pair of questions:
1) How much energy have people spent on here speculating about my race, face, body, status, alma mater? Way too much. 2) How much energy have people spent speculating about whether I'm single? Zero. It's just an assumption.
And here's the real kicker: what if some women who seem respectable were actually like me? Imagine if you thought you were dating a nice marriageable girl, but in her past she had actually behaved like... something else?
Scary, right? The very idea gives me chills. Good thing it's so easy to tell the difference!
Well... Going off the extremely vague and limited information you're giving us, I had to make at least some assumptions. It's funny, because you actually made some presumptions as well (which may or may not be true), but don't worry, I won't call you out.
Listen, we can go on and on answering each other in riddles, which is fine, or you can just answer the following: a) are you hot? b) what age range are you in? c) are you DTF? or do you just pretend to be?
Since you don't want to post any pics, this would be the least you could do, right? Right
Oddly enough, I've wondered why so many people thought you were single. I caught a previous post by you and from the tone and context if definitely implied (or so I interpreted) that you weren't single and that you were either in a serious relationship of some sort. Maybe everyone missed that or didn't catch that thread. Unfortunately, I don't recall what thread it actually was.
Regards
Today is such a wonderful day. Several posts make me laugh...lol
Apologize for my English, bankerella, but I am straight, and if I can choose, I would prefer to date SirTradesaLot rather than you, thanks~ :)
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