One of the keys to successfully negotiating any deal is letting the other side go first. It gives you a parameter to work from and provides insight as to what the other side is thinking. Letting them go first gives you the upper hand so you can negotiate better. But how exactly do you get the other side to go first? You can’t just say, “Go first. I said so.”There needs to be a strategy. Consider the following next time you are stuck in this situation.
- Defer to the other side’s expertise: Say something like, “You’ve done more deals of this type than we have. What
are going terms in similar deals? What’s fair?”
- Turn discussions into offers: Once you start talking, the other side is likely to give enough information to suggest an offer even if they don’t make one formally. Probe their thoughts, fleshing out more and more details. Then paraphrase what they’ve said as an offer.
- Force a counteroffer bid: If it appears there’s nowhere to go in the negotiations, ask the other side where they want to go. “You say the list price is too steep. What price could you afford?”
- Make a tangential first offer: Offer something important the other side wants in exchange for something more important to you. “We know your company wants to ship fast while the produce is fresh. We can take delivery immediately, if the per pound is right.”
- Set a range without making a first offer: Use exploratory conversation to learn what the other side expects. “Say, I’ve heard houses in this neighborhood sell for as little as $200,000.” There’s no risk. It’s just what you’ve “heard”. See what kind of response you get. It should give you a price range of their first offer.
Still don’t think it’s important to let the other side go first? Read this story told by Dean Jernigan, Chairman of Storage USA. It
is highlighted in the book “The Power of NICE” by Ron Shapiro, Mark Jankowski, and Jim Dale.
A piece of property was for sale on the Mississippi River. Its original purchase price was $3 million. The property had sat, unused and undeveloped, for years. One day, a potential buyer from a Los Angeles entertainment company asked for a meeting. The property owner’s lawyer was sent to negotiate the deal with explicit instructions. “Let them make the first offer but take nothing less than $4 million.” The prospective buyer started the meeting with a simple statement. “We are not going to negotiate. Our offer is $20 million and if you are not willing to accept it, we are prepared to walk.” It turned out, the entertainment company was betting on a future legalized gambling boom to increase land values and, therefore, thought $20
million was a “fair” price. Of course, so did the property owner’s lawyer who only had one regret. He hadn’t handled the case on a contingency basis.
