“I sent them the settlement agreement weeks ago,” this real estate executive told me.” I haven’t heard anything since. Everyone agreed to the terms, including them paying us $300,000. Now they won’t call me back. What is the problem?”
“Tell me how the negotiation ended,” I responded.
“Well, we first reached agreement. Then, since we had an arbitration date closely approaching, we canceled that date. We didn’t set a new date since that would have required a deposit of several hundred dollars.”
“There’s your problem,” I said. “There’s no incentive for your counterpart to promptly sign the agreement. In fact, they benefit by delaying. You, thus, need an effective deadline to wrap this up and get your money. Set a new arbitration date, make the deposit, and see how fast they execute the agreement. Take back control of the process.”
The Negotiation Close – what you do as the negotiation nears completion – is crucial.
Done right, you’ll walk away with a signed agreement. Done wrong, and the deal may unnecessarily blow up.
So how can you become an effective closer?
There are two critical closing stages, each of which requires special negotiation tactics.
The Initial Close
How and when should you make what will likely be your final offer?
You generally know you’re approaching the end of a significant negotiation when a true deadline exists and/or the parties become increasingly rigid in their offer and concession rhetoric and behavior.
Parties’ offers and concessions often take place here in relatively quick succession, leading many times to a progressively tenser atmosphere.
It’s especially critical at this closing stage to:
• Appear patient.
• Confirm you have a comprehensive knowledge of the other side’s interests and issues, especially those that might prevent a final agreement.
• Re-evaluate your overall leverage.
• Understand that ego issues often become entangled here and prepare to make a low-cost final concession so your counterpart will walk away fully satisfied.
• Create an appropriate sense of urgency regarding the completion of the negotiation so that you maintain some control over the closing process.
Several years ago, a friend made a proposal to a large company to provide it with a significant-sized service contract.
At that point, they had been negotiating for more than a year. My friend knew it was nearing the end, however, as the company wanted to allocate substantial funds to the proposed contract from that year’s budget – and it was mid-November.
So what did he do before he made his last offer?
He reviewed his file to make sure he had a thorough understanding of any possible last minute roadblocks.
He then re-evaluated his leverage by looking at the parties’ mutual need for an agreement and exploring his best alternative to an agreement with them – and the company’s best alternative to an agreement with him.
He then discussed the specific elements of a “preliminary” proposal with his counterpart over the phone and made sure he offered a low-cost, face-saving concession to his counterpart. He did this so his counterpart could say the company got a great deal.
My friend then sent over a formal written proposal, which included a set time within which to respond. He lastly restrained himself from following up too quickly.
This paid off.
The Final Close
My friend’s tactics, however, did not immediately pay off. Why? Because – like the real estate executive above – he failed to adequately control the post-oral commitment stage: The Final Close. He thus had some nail-biting time.
Here are the keys to this stage.
• First, confirm any oral commitments in writing as soon as they have been made, perhaps by e-mail or fax.
• Second, get a ready-to-be-signed written agreement over to them ASAP that includes a reasonable deadline for his/her signature and some incentive to sign it by the deadline.
These days, significant deals also should be reduced to enforceable written contracts. And you (or your lawyer) should draft them. You can then ensure they accurately reflect your agreements.
It’s also likely you will think, in the drafting process, of issues you did not originally negotiate. If you’re doing the writing, you will have first crack at them. This is a significant advantage at this late stage in the negotiation.
• Finally, don’t adversely affect your leverage, such as setting aside an arbitration date, until you have a signed, sealed and delivered deal. Done deals can unravel in a hurry if you aren’t careful.
There are few feelings worse in business than failing to close a closeable deal. Don’t let it happen to you.
Published October 26, 2001 The Business Journal