Negotiate as a Reluctant Seller to Squeeze the Negotiating Range

Imagine for a moment that you own a sailboat, and you're desperate to sell it. It was fun when you first got it, but now you hardly ever use it, and the maintenance and slip fees are eating you alive.

It's early Sunday morning, and you've given up a chance to play golf with your friends because you need to be down at the marina cleaning your boat. You're scrubbing away and cursing your stupidity for ever having bought the boat. Just as you're thinking "I'm going to give this turkey away to the next person who comes along," you look up and see an expensively dressed man with a young girl on his arm coming down the dock. He's wearing Gucci loafers, white slacks, and a blue Burberry's blazer topped off with a silk cravat. His young girlfriend is wearing high heels, a silk sheath dress, big sunglasses, and huge diamond earrings.

They stop at your boat and the man says, "That's a finelooking boat. By any chance is it for sale?" His girlfriend snuggles up to him and says, "Oh, let's buy it. We'll have so much fun."

You feel your heart start to burst with joy and your mind is singing "Thank you, Lord! Thank you, Lord!" Expressing that sentiment is not going to get you the best price for your boat, is it?

How are you going to get the best price? By playing Reluctant Seller.

You keep on scrubbing and say, "You're welcome to come aboard, although I hadn't thought of selling the boat."

You give them a tour of the boat, and at every step of the way you tell them how much you love the boat and how much fun you have sailing her.

Finally you tell them, "I can see how perfect this boat would be for you and how much fun you'd have with it, but I really don't think I could ever bear to part with it. However, just to be fair to you, what is the very best price you would
give me?"

Power Negotiators know that this Reluctant Seller technique squeezes the negotiating range before the negotiating even starts. If you've done a good job of building the other person's desire to own the boat, he will have formed a negotiating range in his mind.

He may be thinking "I'd be willing to go to $30,000, $25,000 would be a fair deal, and $20,000 would be a bargain." So, his negotiating range is from $20,000 to $30,000. Just by playing Reluctant Seller, you will have moved him up through that range. If you had appeared eager to sell, he may have offered you only $20,000.

By playing Reluctant Seller you may move him to the midpoint or even the high point of his negotiating range before the negotiations even start.

Do Better Negotiations with Bracketing

Whether you're negotiating for an increase in pay or trying to get the rock-bottom price for a new car, you'll do better if you use a technique that negotiators call Bracketing.

This means that your initial proposal should be an equal distance on the other side of your objective as their proposal.

Let me give you some simple examples:

1. You hope that your boss will give you a 10 percent increase in pay. You should ask him for 20 percent.
   
   
2. The car dealer is asking $25,000 for the car. You want to buy it for $22,000. You should make an opening offer of $19,000.

Of course it's not always true that you'll end up in the middle, but that is a good assumption to make if you don't have anything else on which to base your opening position. Assume that you'll end up in the middle, midway between the two opening negotiating positions. If you track that, I think that how often it happens will amaze you - in little things and in big things.

In Little Things
Your son comes to you and says he needs $20 for a fishing trip he's going to take this weekend. You say, "No way. I'm not going to give you $20. Do you realize that when I was your age I got 50 cents a week allowance and had to work for that? I'll give you $10 and not a penny more."

Your son says, "I can't do it for $10, Dad."

Now you have established the negotiating range. He's asking for $20. You're willing to pay $10. See how often you end up at $15.

In Big Things
In 1982, the Americans were negotiating the payoff of a huge international loan with the government of Mexico. They were about to default on an $82 billion loan. Their chief negotiator was Jesus Herzog, their finance minister. Treasury Secretary Donald Regan and Federal Reserve Board Chairman Paul Volker represented the American side.

In a creative solution, the Americans asked Mexico to contribute huge amounts of petroleum to their strategic petroleum reserve, which Herzog agreed to do. That didn't settle it all, however.

The Americans proposed to the Mexicans that they pay them a $100 million negotiating fee, which was a politically acceptable way to pay accrued interest. When President Lopez Portillo heard what the Americans were asking for, he went ballistic.

He said the equivalent of: “You tell Ronald Reagan to drop dead. We're not paying the United States a negotiating fee. Not one peso.” So now the Americans had the negotiating range established. They asked for $100 million. The Mexicans were offering zero.

Guess what they ended up paying? That's right - $50 million.

So often, in little things and in big things, we end up splitting the difference. With Bracketing, Power Negotiators are assured that if that happens, they still get what they want.

To Bracket, you must get the other side to state its position first.
If the other side can get you to state your position first, then it can Bracket you so that, if you end up splitting the difference as so often happens, it ends up getting what it wanted. That's an underlying principle of negotiating: Get the other person to state his or her position first. It may not be as bad as you fear, and it's the only way you can Bracket his or her proposal.

Key Phrase
To get the other person to state his or her position first: If the status quo is fine with you and there is no pressure on you to make a move, be bold enough to say to the other side, "You approached me. The way things are satisfies me. If you want to do this, you'll have to make a proposal to me."

Simple Negotiation Expression: You'll have to do better than that!

The Vise is a very effective negotiating gambit, and what it will do for you will amaze you.

The Vise gambit is the simple little expression:
"You'll have to do better than that."

Here's how Power Negotiators use it:
Let's say that you own a small steel company that sells steel products in bulk. You are calling on a fabricating plant where the buyer has listened to your proposal and your pricing structure. You ignored his insistence that he's happy with his present supplier, and you did a good job of building desire for your product.

Finally, the other person says to you, "I'm really happy with our present vendor, but I guess it wouldn't do any harm to have a backup supplier to keep them on their toes. I'll take one carload if you can get the price down to $1.22 per pound."

You respond with the Vise gambit by calmly saying, "I'm sorry, you'll have to do better than that."

An experienced negotiator will automatically respond with the countergambit, which is, "Exactly how much better than that do I have to do?" trying to pin you down to a specific. However, it will amaze you how often inexperienced negotiators will concede a big chunk of their negotiating range.

What's the next thing that you should do, once you've said, "You'll have to do better than that"? You guessed it. Be quiet! Don't say another word. The other side may just make a concession to you. Salespeople call this the silent close, and they all learn it during the first week that they are in the business. You make your proposal and then shut up. The other person may just say Yes, so it's foolish to say a word until you find out if he or she will or won't.

When Negotiating Think in Real Money Terms but Talk Funny Money

There are all kinds of ways of describing the price of something.

If you went to the Boeing Aircraft Company and asked them what it costs to fly a 747 coast to coast, they wouldn't tell you $52,000. They would tell you 11 cents per passenger mile.

Salespeople call that breaking it down to the ridiculous.

Haven't we all had a real estate salesperson say to us, "Do you realize you're talking 35 cents a day here? You're not going to let 35 cents a day stand between you and your dream home, are you?" It probably didn't occur to you that 35 cents a day over the 30-year life of a real estate mortgage is more than $7,000. Power Negotiators think in real money terms.

When that supplier tells you about a 5-cent increase on an item, it may not seem important enough to spend much time on until you start thinking of how many of those items you buy during a year. Then you find that there's enough money sitting on the table to make it well worth your while to do some Power Negotiating.

I once dated a woman who had very expensive taste. One day she took me to a linen store because she wanted us to buy a new set of sheets. They were beautiful sheets, but when I found out that they were $1,400, I was astonished and told the sales clerk that it was the kind of opulence that caused the peasants to storm the palace gates.

She calmly looked at me and said, "I don't think you understand. A fine set of sheets like this will last you at least five years, so you're really talking about only $280 a year."

Then she whipped out a pocket calculator and frantically started punching in numbers. "That's only $5.38 a week. That's not much for what is probably the finest set of sheets in the world."

I said, "That's ridiculous."

Without cracking a smile, she said, "I'm not through. With a fine set of sheets like this, you obviously would never sleep alone, so we're really talking only 38 cents per day, per person." Now that's really breaking it down to the ridiculous.

Here are some other examples of funny money:

• Interest rates expressed as a percentage rather than as a dollar amount
• The amount of the monthly payments being emphasized rather than the true cost of the item
• Cost per brick, tile, or square foot rather than the total cost of materials
• An hourly per person pay increase rather than an annual company cost increase
• Insurance premiums expressed as a monthly amount rather than as an annual cost
• The price of land expressed as a monthly payment

Businesses know that if you don’t have to pull real money out of your purse or pocket, you're inclined to spend more. It's why casinos the world over have you convert your real money to gaming chips. It's why restaurants are happy to let you use a credit card
although they have to pay a percentage to the credit card company.

When I worked for a department store chain, we were constantly pushing our clerks to sign up customers for one of our credit cards because we knew that credit card customers would spend more and also buy better quality merchandise than a cash customer. Our motivation wasn't entirely financial in pushing credit cards. We also knew that because credit card customers would buy better quality merchandise, it would satisfy them more, and they would be more pleased with their purchases.

So when you're negotiating, break the investment down to the ridiculous because it does sound like less money, but learn to think in real money terms. Don't let people use the Funny Money gambit on you.

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Utilizing Poor Negotiating Skills in Today's Tough Economic and Competitive Business Environment Means Businesses and Consumers Are Giving Away Thousands of Dollars … and People May Not Even Realize It!

Today's troubled economy and challenging business environment have created a critical need for all people to improve their negotiating skills. Nothing affects the bottom-line profitability of any size of business or personal outcomes more than developing good negotiating skills.

Negotiating is an essential life skill. We are negotiating every day in our personal and social lives, and especially in our business lives. Every time we communicate with another person, there is the potential to be negotiating.

We are negotiating all the time for new jobs, house purchases, rentals of apartments and condos, purchases of automobiles, appliances, furniture, and consumer electronics, mortgages, credit terms, determining what household chores to perform and what restaurants to patronize on a weekend – just to name a few.

Most people negotiate based on their instincts and that the majority of people have no formal education or training in the art, science, and sport of negotiating.

That's why everyone needs to purchase The Power Negotiator Toolkit. It is an essential resource for everyone, in all walks of life.

I'm not a big fan of books on the topic of negotiating. Books are not as effective at transferring skill as an audio learning program. Books usually only addresses various theoretical and academic concepts and principles. Most books covering the topic of negotiating are written on the basis that the other side will respond exactly the way we want them to during the negotiation; however, most of us know from our own personal experience that people do not respond exactly the way we want them to in a negotiation.

The Power Negotiator 9-CD Set will teach you not only what to say – but also how to say it. Our Power Negotiator Toolkit provides people with the most effective overall personal development solutions that will help them achieve the improved results and outcomes that they are looking for.

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Michael Sloopka's Press Regarding Potash Corporation Labour Dispute

Negotiating Expert Weighs In on Serious Potash Corporation Labour Dispute

Michael E. Sloopka, a Guelph, Ontario-based expert in negotiating and decision-making, says that the recent impasse in the discussions between Potash Corporation of Saskatchewan and United Steelworkers Union is very unfortunate and is a failure of the negotiating process and for those attempting to manage the process.

There are millions of dollars at stake for shareholders, management, and employees in this outcome. There are a complex series of issues at play in this negotiation – from the personality types involved in the negotiations, commodity prices, fertility management programs, crop yield capitalization, management stock option programs – to competitive Potash mines being developed in Russia.

There is no doubt that some shareholders and senior management have made millions of dollars from the performance of Potash Corporation’s stock price in recent years. Sloopka says that it is inevitable that employees want their “share” of this success; however, he warns that employees need to be careful about the idea of entitlement and expectations. Sloopka says that employees, like any investor, could have reaped the benefit of Potash’s stock price performance by investing in the company’s stock.

Sloopka says that the concept of “performance-based” incentives and bonuses for employees is a good strategy, and perhaps this approach makes more sense than the “commodity-based bonuses” that the Steelworkers and its members are pursuing. Sloopka says he hopes that the employees do not put themselves into a similar position to that of the North American autoworkers by achieving short-term gains in negotiations that are difficult to maintain and sustain in the long term.

Sloopka says he is seeing more and more parties becoming involved in impasses and deadlocks, because both sides do not have realistic opening negotiating positions in the early stage of negotiations. If both side’s opening negotiating positions are not realistic, reasonable, and attainable, Sloopka says that negotiations can break down quickly as a result of momentum not being attained from the expected “give and take” by both sides that is necessary for a mutually beneficial Win-Win outcome.

Sloopka says that getting to the “walk-away” stage in any negotiation and a having a “take-it-or-leave-it” attitude is the easy part – especially when both sides know that mediation and arbitration are potentially available to them. Gambits and countergambits such as “bracketing” and “spitting the difference” are common approaches used by mediators and arbitrators, which is why Sloopka is not fond of this result from a failed negotiation attempt.

Sloopka says that Potash’s competitor Agrium’s recent negotiation with the Egyptian government over a buyout of Agrium’s stake in a fertilizer manufacturing plant was a good example of a more collaborative approach to negotiating. It was clear that both sides could have taken a more aggressive stance on that situation; however, both sides realized that a Win-Win outcome was achievable with the right attitude, approach, and process.

Sloopka says that even if a negotiation is very complex and complicated, people need to utilize the proper process, methodology, strategies, and techniques in order to arrive at a satisfactory outcome. Sloopka encourages all his clients to understand that there are three stages to every negotiation: establishing opening positions (based on a maximum plausible position), gathering and exchanging relevant information with the other side, and, finally, reaching for compromise.

The current hard-line posturing by Potash and the Steelworkers Union is not conducive to arriving at a satisfactory outcome. Sloopka says that both parties should continue negotiating, consider changing negotiating team members, or bring in outside experts to help with the process – before it goes to mediation or arbitration – which, Sloopka says, ends up being a Win-Lose situation.

Investor's Daily Magazine - Sloopka Intervew

Dear Friends, Colleagues, and Clients:

Please see an article that recently appeared in the Investor's Daily Magazine and online edition. There are a some good tips in this article for business people and consumers.

Have a great week,

Michael E. Sloopka
The Negotiating Coach


Check Your Emotions In Vendor Negotiations

Yahoo! News and Investor’s Business Daily Magazine – August 8, 2008

By: Morey Stettner

As your company grows, you'll spend more time and money dealing with vendors and suppliers. Negotiate favorable terms by keeping your emotions in check.

"Once you reach a verbal agreement, beware of getting so excited that you overlook the details," warned Michael E. Sloopka, president of negotiatingcoach.com, a training and consulting firm in Reno, Nev. "It's not enough to say that you'll work things out later."

Sloopka advises entrepreneurs to address ambiguities and tie down loose ends before completing the negotiation. If you brush aside issues for later, you may dig yourself into a hole.

For example, define delivery dates with precision. Instead of verbally agreeing to "prompt delivery," clarify the time frame. If you want the vendor to commit to three-day delivery, do you prefer business days or calendar days?

Three Smart Steps

After you finalize terms with vendors, they might ask you to sign their contract. But the advantage goes to the party that drafts the agreement, Sloopka says, so beat them to the punch. It's better if you originate the contract. That way, you can protect your interests and ensure that you understand every clause.

From the outset, let vendors know that you will draft the supply agreement for them to sign. That eliminates surprises down the line and signals to them that you will be paying attention to detail. Whether shopping for raw materials or finished goods, begin the process by asking for a proposal from a supplier. Then use it as a starting point 15 haggle over the terms.

"When you've finished negotiating, draft a document based on what you've both agreed to," Sloopka said.

Because of similarities in most transactions, Sloopka suggests establishing a boilerplate vendor contract that your attorney reviews and approves. Then for each deal, tweak it on your own until it fits your legal requirements.

That saves you from paying lawyer fees each time.

Savvy Negotiation Ploys

During the dickering stage, look for chances to secure terms that give you maximum flexibility. For example, strive to work within wide parameters that fit your changing needs.

Rather than commit to purchasing 80,000 units of a vendor's product, for instance, propose a range of buying 60,000 to 80,000 for the same price. If your business hits a rough patch, you won't be forced to overbuy at a time when you want to scale back.

To wring concessions from vendors, use questions rather than statements.

Sloopka coaches entrepreneurs to begin with the words, "Under what circumstances ... "

Instead of declaring to a vendor, "You better not sell this to our competitors," it's wiser to ask, "Under what circumstances would you sell this to us exclusively?"

"Most people are too confrontational," Sloopka said. "If you start by arguing, it intensifies others' desire to prove they are right."

You can reach Michael E. Sloopka at michael@sloopka.com or call him directly at 1-888-581-6777, or visit his website at http://www.negotitingcoach.com