Journey of a Serial Entrepreneur

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How to get from where you are to where you want to be

Objective Criterions

“Here’s the rule for bargains: ”Do other men, for they would do you.” That’s the true business precept.” Charles Dickens

Most of us have at some time, played the high-lowball game during negotiations. For example, a while ago I was attempting to buy a domain I wanted. The seller had a listed price of $500, I put in a lowball offer of a $100 dollars straight off the bat. The $100 I offered, had no actual basis and was nearer to the $200 or so I wanted to actually pay for the domain. The seller and I had a number of correspondences back and forth, and a deal was struck around $230. Did I get a good price? Was my reservation price, one that had a logic basis? Unfortunately I could not answer any of these questions.

It therefore got me thinking, that having objective criterions are necessary to ensure that both sides get an optimal deal. In the case of the above example, companies such as Sedo are able to calculate the true worth of a domain through several established criterions that include, estimate of the domain name’s value, list of recent comparable sales, search engine friendliness, branding potential, legal situation and even, possible buyers. This estimation establishes the true worth of a domain. If the had seller relied and gone with such a report from a trusted authority, stating the domain estimate at $500, I would have had very little room to negotiate a price which was substantially lower. We can therefore see, that by adding objective criterion’s to negotiations, we can optimize the value created on the whole.

It is therefore recommended, that whenever you enter into a negotiation, be it changing terms of payments with your supplier, a salary increase for your staff or the sale of your business to a private equity firm, do research regarding the metrics that can be used fairly, to add objectivity to the negotiations. It is important that the criterions proposed are acceptable to both sides. A key characteristic of skilled negotiators is, they are always prepared. They know their underlying interests, the options available,  available alternatives, and a list of objective criterions to reach an optimal agreement for both sides.

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