DEVELOPMENT

The Most Common Mistake During Negotiations

2.21.15 Negotiations

Story provided by Inc. – 

I’ve been doing a lot of negotiating these days, and I keep noticing mistakes people make. Even though their mistakes usually work to my benefit, I can’t help thinking how much better off they’d be if they learned some basic rules.

Their most common mistake is focusing on what they want when they should be devoting their attention to learning what the other side wants, and how badly. If you can do that without showing your hand, you wind up controlling the process. You can craft a deal that satisfies the other side while getting what’s most important to you.

A few years ago, I was desperate to rent extra storage space while we finished building a new warehouse for our customers’ boxes of storable goods. We were perilously close to running out of room. I was scared we’d soon have no place to put the boxes that were arriving by the day. A broker I contacted had a location that was perfect. He told me the landlord wanted $6.50 per square foot and a five-year lease. Although the money was more than I wanted to pay, the lease was a much bigger problem. We needed the additional space for only about six months. Nevertheless, I decided to focus on the price, partly because I thought I could get it down, but mainly to hide my vulnerability.

I told the broker that I wouldn’t pay a penny more than $4.75. He came back and said the landlord would not go lower than $5.80. He already had two other tenants paying that rate. In fact, $5.80 per square foot was a price I could easily afford and would readily accept, but I kept that information to myself. Instead I said, “Well, there are other issues. Maybe he and I should meet and talk.”

The initial meeting of the principals is crucial in any negotiation. Most people screw it up by thinking they already know the other side’s position, and so they don’t listen carefully to what their counterpart has to say. They immediately start arguing for what they want. I avoid that pitfall by following my first rule of face-to-face negotiations: No preconceptions. Regardless of what has happened before, I assume I know nothing about what the other side wants.

The landlord followed the typical pattern. As soon as we sat down together, he began talking about price. He went on and on explaining why he had to charge a minimum of $5.80 per square foot. Only at the end of his rant did he mention the length of the lease in an offhand way. But because I hadn’t raised the issue and he hadn’t forced me to reveal my true concern, he had no idea that the lease length was by far the most important factor to me.

I told him I could live with the price if he gave me flexibility on the lease. In other words, I was making a concession; now it was his turn. He agreed to let me opt out of the lease after seven months if I chose to, “but I want the $5.80.” We shook hands on it.

Although it was a fair deal, the landlord could have done better. He should have forced me to talk first. If he’d listened closely and asked questions, he would have soon realized the pressure I was under to find additional space. Once he knew that, he would have had the upper hand. When I insisted I needed a cancellation option, he could have said, “OK, but that changes everything. I’ll have to charge you a lot more.” As it was, he gave me a short-term lease for the same price that his long-term tenants were paying.

In the end, we were both satisfied. But I have to think that I came away a little happier than the landlord did.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s