Improve Your Negotiations With The 5 Golden Rules.   LEARN THEM

“We’re going to court,” she told me during a break in my negotiation seminar. “What else can we do? We really want to sell, and my brother-in-law’s `best offer’ for our share of the family business will only give us 10 percent of what it’s worth. Plus, the relationship is hicolumn. What have we got to lose?”

“Well, what’s your leverage?” I responded.

“We don’t have any,” she said.

Here’s what I then told her – and would advise you to do if you find yourself with seemingly little or no leverage.

First, analyze your overall leverage situation. A primary element of leverage relates to how much each side wants or needs a negotiated agreement.

The more you want or need an agreement, the less leverage you have. The less you want or need it, the more leverage you have.

Since this woman “really wanted to sell,” her leverage was less than if she didn’t care.

Let’s say I was selling my house, and as I was showing a couple my newly renovated kitchen, the wife told her husband she “loved the kitchen and the house.”

This couple’s leverage initially appears weak. After all, the wife indicated – within my earshot – how much she wanted my house. The more they want it, the weaker their leverage, right?

Right, except for one critical factor. We don’t yet know how much I need or want to sell. If I’m more desperate to sell than they are to buy, their leverage is pretty strong compared to mine.

In other words, leverage is a relative concept. It’s only strong or weak in comparison to the other side’s leverage.

Plus, the parties’ perception of the other side’s leverage also will impact the negotiation.

If I know this couple really wants my house, and they don’t know I’m more desperate to sell, my leverage is stronger than if they knew.

The lesson? Be strategic about what leverage information you disclose.

Another element of leverage involves the value of each side’s alternative if they don’t reach agreement.

The better your alternative, the stronger your leverage. The worse your alternative, the weaker your leverage.

Regarding the woman in my seminar, she and her husband had almost zero leverage because they didn’t have a good alternative to selling to her brother-in-law and it appeared her brother-in-law had a good alternative – he retained control of the business either way.

So what did I suggest she do after analyzing her overall leverage?

Improve it by soliciting other potential buyers. Create an auction-like competitive environment. Collect bids. And do this even though they ultimately wanted to keep it a family business.

Why? Because the likely reason they were only offered 10 cents on the dollar was because they had little leverage. They had no real alternatives.

By creating decent alternatives and improving their leverage, it increases the likelihood her brother-in-law will make them a serious offer.

I also suggested they try to change her brother-in-law’s perception of the value of his alternative.

If you can show your counterpart that his/her alternative is worse than what is on the table, you’ve improved your leverage.

This underscores another crucial element of leverage – it’s fluid and can be changed and affected throughout a negotiation.

So don’t accept a situation with little leverage. Take concrete steps to improve it.

Finally, carefully determine how to effectively communicate and exercise your leverage, especially if you’ve recently improved it. This alone can make or break a negotiation.

How? Communicate your leverage in a believable and credible fashion by offering details and explaining the rationale underlying newly feasible alternatives.

Be truthful, too. Don’t tell the other side you have a great alternative if you don’t. Too often, such lies become painfully obvious upon investigation.

If that happens, you’ve lost your credibility – a critical factor in all negotiations.

So the next time you find yourself short of leverage, don’t just accept it.

Do something about it. Otherwise, you might as well just sign on the dotted line.

Published April 27, 2001 The Business Journal

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