Let's Make A Deal! 5 Tactics for Becoming a Better Negotiator — Part III

29 May, 2019

READ PART I

READ PART II

Many people think talented negotiators were born with innate skills. And although there is an element of truth to that, it’s also true that good negotiating skills can be learned. Negotiating skills can be improved through experience, which can be very expensive in an M&A context, through reading academic research on negotiation techniques and by learning best practices from negotiation experts.

For this 5-part series focused on improving negotiating skills, we interviewed 63 corporate executives to find out their perceptions of what skills make for a good negotiator and whether those perceptions match up with available research. Keep in mind that the conclusions we reached are what we consider best practices, not dogma. Every negotiation is unique, and the tactics outlined here will not apply to every business situation. But these best practices make for a good foundation.

PART III — HOW AGGRESSIVE SHOULD YOUR OFFER BE?

Question: You’ve decided to proactively make the first offer. How aggressive should your offer be?

  1. Keep it simple. Tell them what you want and expect that you’re going to get it — 2%
  2. Make an offer of 10% more than what you really want to allow for negotiations — 2%
  3. Provide a rational figure based on objective criteria that is obviously higher than what you be willing to settle for — 71%
  4. Make an offer that is super aggressive, but can’t quite be construed as crazy — 25%

Our poll reflected that most people know it’s best not to propose what you want on the first go-round and that it’s probably not enough to ask for only 10% more than what you want.

Most of those polled, 71 percent, think that proposing a rational figure based on objective criteria is the negotiating technique that would most effectively get you what you want. It sounds rational. After all, it’s got the word “rational” in the answer. But it’s wrong. The correct answer, according to academic research, is “Just this side of crazy.” “Just this side of crazy” is your opportunity to set an anchor. You want to set a price that is high, but not so high that it appears crazy or would compel the buyer to walk away. So it’s a fine balance. Think back to the research you did on the buyer’s best alternative to a negotiated agreement and suggest a price that is close to what you believe is their absolute limit. Be aggressive, but don’t be so aggressive that you can’t offer justification for what you’re proposing.

NEXT: PART IV — HOW DO YOU MAKE THE FIRST OFFER?