How did your last negotiation go? Did the landlord ask for an increase in rent that felt unjust? Did a vendor raise prices at a bad time? How about an employee who said they needed two weeks of vacation in the middle of busy season?
As a small business owner, you probably negotiate several times a month in various capacities. Surely, during this pandemic, it would be helpful if the need arose to be able to negotiate with creditors, banks, suppliers and investors.
But, did anyone ever teach you any strategies for negotiating? If not, this blog post is for you. It will get you started with a relatively simple method for practicing the basics of bare-knuckle bargaining with a tough haggler.
The method is called Ackerman Bargaining and it comes from the book ‘Never Split the Difference’ by Chris Voss. Voss called it Ackerman Bargaining because he learned it from a former CIA type named Mike Ackerman.
Voss, a former FBI agent, and Ackerman, both used this method while negotiating ransom demands with kidnappers. But, Voss notes in his book that the system should work in any situation, business or otherwise.
In essence, the Ackerman model employs an offer-counteroffer method that helps you walk away with a larger slice of the pie without having to ‘split the difference,’ as Voss warns against doing in the title of his book.
Here’s how you implement it:
1. Set your target price (your goal). This should be the upper limit of what you’re willing to pay before walking away from the deal.
2. Set your first offer at 65 percent of your target price. This number will set what Voss calls an “extreme anchor” for opening the negotiations. Your counterpart will likely reject this first offer and possibly laugh or be shocked at your brazenness in even suggesting such a number. But, Voss notes, it will play into your hand because it will trigger a flight-or-flight response in your counterpart, limiting their cognitive abilities and pushing them into rash action.
3. Calculate three raises of decreasing increments (to 85, 95 and 100 percent). Have these amounts ready as you progress through the negotiations but don’t offer them too soon. At the very least, wait until the other side has given you a counteroffer.
4. To induce those counteroffers, use lots of empathy and different ways of saying “No” to get the other side to throw out a number before you increase your offer. By empathy, Voss means putting yourself in your counterpart’s shoes and understanding their position. If it’s a landlord, try to express sympathy for their desire to raise the rent but acknowledge the problems they might have if you leave and the space goes empty for a few months. That’s the problem you’ll help the landlord avoid by coming to an agreement.
5. When calculating the final amount, use precise, nonround numbers, like $3,769 rather than $3,800. This gives the number credibility and weight. It feels like a final number that’s been calculated based on what you can pay and it gives the opposing side the feeling that there’s no additional offer coming.
6. On your final number, throw in a nonmonetary item (that they probably don’t want) to show you’re at your limit. Sometimes, offering to serve as a reference can be a nice touch to add when trying to finish the deal.
Use this system to help save money on your operations, on your inventory and property costs and on your interest payments. This should be especially welcome during a pandemic when conserving cash is so important. Who can’t use a little extra cash these days?
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