The Art of Negotiation

July 12, 2007 Posted by Tyler Cruz
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One of the things I take great pride in is negotiating a great price. It’s just something that has always come naturally to me. And it’s a skill that I use almost everyday, whether it be negotating prices with advertisers, buying or selling domains or sites, or purchasing services.

Here are some tips and suggestions I have to negotiate a good deal. I never advocate lying or bending the truth, and am personally very honest and upfront when doing business, so while you may get a better deal by saying you have other higher offers when in fact you don’t for example, it’s just something I don’t do for moral and ethical reasons, and something I’ve never had to do to negotiate a great price either.

I’ve broken down my tips into three categories: For Selling, For Buying, and For Buying & Selling. Let’s begin!

For Selling:

  • Hold your ground

This is definitely for selling only. The majority of the great sales I get is because I’m stubborn and won’t move much on my price. This works even better when somebody has approached you with a price, as you know they are extremely interested in purchasing your site, and they don’t know that you actually want to sell it. 

Buyers are always somewhat ‘forced’ to raise their offer, as they are playing a game with the clock. That is, they can’t just sit around and hope you’ll eventually accept their offer since you may sell it to a higher offer.

You have to be willing to miss out on an opporunity or two to get a good deal. Inevitiably, you will lose a few offers by holding your ground – that’s the risk you’re taking.  Sure, it won’t always work, but you don’t lose anything when it doesn’t, and will only benefit when it does. And you’ll be surprised just how much people are willing to pay for something. Just because you get a nice offer that you think is more than fair, doesn’t mean that they aren’t willing to pay a lot more for it.

About 6 weeks ago I had somebody offer me $50,000 for PFO. Now, I want at least half a million for it, but responded with 1 million. Several back and forth offers later, he had moved up to $150,000, but I stayed at my original 1-million counter offer (There’s no way I’m accepting $150,000 for PFO considering that’s only 18-months or so worth). It just goes to show that buyers obviously offer their lowest offer first, and will raise it if you hold your ground.

For Buying:

  • Ask for discounts

This may sound obvious, but the fact is that the majority of people don’t ask for discounts. Strangely enough, from my experience, most people will indeed give an added discount if you ask for it. It’s just one of those things that you’ll get if you ask. It doesn’t hurt to ask.

Remember that they want your business, so giving a 5-10% or greater discount to you is still usually preferable to losing your business. If you’re just buying a license to software or a basic service then asking for a discount is a bit out of line, but if you’re buying several licenses or ordering a more elaborate/custom service then it’s the perfect opportunity to ask for a discount.

Even I, as a publisher, give in to advertisers who ask for additional discounts. Sometimes I decline, but I want their business and I want to keep them happy and return, so I usually end up giving them an added discount. And all because they simply asked.

For Buying & Selling:

  • Have them make the first offer

I always try to get the other person to make the first offer, whether I’m buying or selling. This is something I always do, and deem it as extremely important. If you’re selling something without a fixed price, having somebody else make the first offer lets them make the mistake of bidding too high.

For example, a week ago I had somebody want to use some images I made for one of my forums. They were just some small images that members would use to help them post. After declining his request to use them for free, he offered to pay for them. I, of course, made him make me an offer, and he responded with $100. I would have given them to him for $20 – I just didn’t want to give them away for nothing since I had personally made the images. If I had made the first offer, while I would naturally ask for more than I would take for them, I wouldn’t have started as high as $100. I let him make the mistake of bidding too high.

The same goes when buying. By letting the seller make an offer first, you’re gaining valuable information as to the pricerange they are looking to get for it (this is why position in poker is so important – by having somebody else act before you, you are gaining information as to the strength of their hand since they must act first). And of course, they can make the mistake of asking too low for it. I’ve bought many domains dirt cheap because of this.

However, if you’ve contacted somebody who was not actively selling something and they want you to make the first offer, you need to do so, as it would be very rude to ‘force’ somebody who you approached to make the first price. And you should give a pretty decent offer, about 50-75% of the maximum you’re really willing to pay. It will show that you’re serious and if they really like the offer, they won’t haggle as much with the fear that you might get scared off and change your mind.

I’ve been in negotiations for the past 2-weeks with a very large network. Since I approached them, I made the first offer, and tactfully offered exactly half of the maximum that I was willing to pay for it.

  • Be Patient

I’m a very impatient person by nature – I hate waiting. But having the discipline to stay patient when conducting business can be extremely rewarding. Here’s a recent example:

I had contacted the owner of the domain HostingForums.org and offered around $200. He countered at around $350 or so, to which I haggled down to around $275. He had stated that $275 was his final offer, and I had told him that I was interested and liked the domain, but couldn’t see myself paying more than $225 for it. I was prepared to pay $275, but I knew that he wasn’t getting much action on the domain, and I didn’t want to pay “full price” for it, so I told him to contact me if he ever reconsiders.

About 10 days later he e-mailed me saying he’d let it go for $225. I had a very good idea that he wasn’t getting much action on it, and so by being patient and letting him think about the offer for a while, I was able to knock off another $50. I knew that I could always buy it at the “full price” later.

  • Choose a gameplan and stick with it

This may sound counter-intuitive when haggling, but I believe it to be beneficial if you stick to a general gameplan. For example, let’s say somebody approached you, offering $500 for your website. You weren’t selling the site, but are tired of the site and definitely open to offers. You would be ‘satisifed’ with $500, but very happy with $750 and extremely happy with $1000.

This is an example of what you should NOT do: Respond saying you want $1500 for it, hoping the buyer will counter with $1000 or so. Instead, the buyer says that is much too high and is intimidated by your number, and says sorry and walks away. Not wanting to lose the buyer, you tell him that you’ll let it go for $1,000. The buyer, however, will notice a huge weakness on your part. You just dropped your asking price by $500. So, he smells the weakness and offers $600, final offer. You may end up taking this and be pretty satisifed, but you could have probably milked him for more money if you had stuck with a gameplan. The mistake in this example is that the seller jumped around too much, not showing confidence, which the buyer took advantage of. Even though the biggest error was asking for far too much at $1500, the seller should have played the ‘waiting game’ once the buyer said it was too high; the buyer would either come back soon and counter offer at around $750, buy it at the full price later, or not come back at all.

So, choose a gameplan before the bartering and stick close to it, not ‘jumping’ around showing lack of confidence.
I hope some of my tips are of some use — here’s to happy negotiating!

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Posted: July 12th, 2007 under Articles  

6 Responses to “The Art of Negotiation”

  1. mftpg says:

    Great post Tyler, very detailed. Wanted to add one more thing especially for face-to-face (or phone) negotiations – silence!!

    People naturally dislike silences, especially of over 10 seconds… once you make your ‘final’ (low!) offer keep quiet and let them say the next thing… takes some practice but very effective as most people will try and fill that gap, often to your benefit.

    Cheers, Mark

  2. RabPaul says:

    An informative post with useful tips. Most people, regardless of whether they are buying online or offline don’t ask for discounts. A shame, because many shops will give you one. Saying ‘What kind of deal can you do for me’ works…

  3. Very informative article Tyler. Some good tips there. I like the one about making them make an offer first, gotta try that more often. I find that I always ask for a discount though, even if just as a joke (hey you never know!)

  4. DotDriven says:

    lol, the poker player in you helps give you an edge in a lot of things ;). Thanks for all the great tips!

    Asking for discounts seems like it would be obvious but to be honest, I haven’t thought of doing that before. Sure, if a seller is selling multiple items I will try to work in a bulk rate but never even thought about just straight out asking for a discount on a service or something. Good tip ;).

  5. David Wygant says:

    :) Funny thing is, a lot of these tips can be used when picking up women as well. It’s all about having the gift of gab fellas!

    Thanks for the piece Tyler.

    DW

  6. [...] to negotiate whether you are a buyer or a seller. Useful for site flippers and domainers. Article: The Art of Negotiation | TylerCruz.com: An Internet Entrepreneur’s Journey snippets [...]

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