How do I negotiate favorable terms for what I’m selling?

"Pricing, framing, having multiple buyers, smart tradeoffs and if necessary, strategic compromises."

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There are a number of variables that influence your negotiation success as a seller. This article will delve into some of the most critical variables and provide research based advice on how you can ensure you are negotiating the most favorable terms for yourself.

Options, Options, Options!

Set yourself up to have as many potential buyers as possible. To be a deal maker, and not a deal taker, ensure that you have multiple buyers that you can ultimately pick from. Increasing your options of buyers will increase your bargaining power. If you only have one interested buyer and you are ready to sell, then they can dictate terms in their favor and you won’t have much leverage. You don’t want to be compelled to agree or negotiate a lower price due to your lack of options. Here are two tips on how you can ensure you have multiple options to pick from.

Price Accordingly

The price you choose to sell your product or service can greatly increase or decrease the number of options you ultimately have. Aim too high and you don’t have enough inquiries, price too low and you undersell yourself. Research tells us that you almost always want to make the first offer in a negotiation- the first offer in this context would be your asking price. You should have that offer be ambitious enough, so that if you concede, you are still in the range of what your ideal walk away price is. There’s a tension that should guide how you price your offering. The higher the price the less inquiries likely, and therefore less options. Too low of an asking price and you contribute to you getting less once you and your buyer settle on that final number. Hence, find that magic number that will get you inquiries, but make sure that number doesn’t help contribute to an undervaluation of your offering.

Offer Real Value

If you’re in the process of building your product or service, ensure that what you’re offering is something people are actively seeking. You won’t have options to choose from if what you’re selling is not something people want, or desire to have. Additionally, differentiating your offering to make sure it’s as unique as possible can help you increase your power in the negotiation. If they can’t get what you’re offering elsewhere, you will have more leverage once it’s time to dictate terms. 

If what you’ve built is something that already catches the interest of people, then as you present your offer, highlight the positive features and pre-empt and address apparent skepticism a buyer might have. Emphasizing the desirable features of your offering will help you influence the value people attribute to it. Addressing skepticism and speaking on the least desirable features will allow you to pre-empt people’s concerns, and give you an opportunity to address those concerns. Doing this can influence people’s impression of how transparent and truthful you are, and can help garner additional interest and options for you.

Respond Strategically to Requests for Concessions.

How you respond to requests for concessions will depend on your alternative options. If your alternative option is not selling and you’re okay with that, then there’s no need to concede. If you are ready to sell and the current negotiation is the only negotiation you have with an interested buyer, then you might be more flexible. Assessing the opportunities and costs with your alternative options objectively will help you decide how flexible or not flexible to be in the negotiation. The challenge then becomes ensuring that if you are flexible, your flexibility does not come at a substantial cost to you. Instead, that flexibility helps you close a deal that you wouldn’t otherwise be able to close.

Look for Tradeoffs

There’s a fear that implying you are open to negotiating is metaphorically similar to opening a can of worms, and hence should be avoided all together. The problem with this approach is that it often comes at the cost of you missing out on opportunities. Also, that approach assumes that negotiating means compromising. That doesn’t necessarily have to be the case.

There are creative ways you can structure agreements, where instead of either the buyer or seller conceding, they find tradeoffs on issues that drive them towards agreement. Here are a couple of examples of how this can work.

  1. Breakdown the Different Parts of your Offering: A seller selling their manufacturing company drops their asking price by 25%, but keeps some of the equipment to sell to another buyer as the current buyer has no use for that equipment. This puts the business price in the budget range that the buyer is ready to spend, without the decrease in the asking price costing the seller money. Ask yourself, are there any components to my offering that the buyer is not interested in? Could removing those components from the sale decrease my cost and my asking price? And would doing so help drive me and the buyer towards agreement?
  2. Increase Order Size: A business that sells retail goods decreases the price of each product by 7% when the buyer doubles the order size. The decrease in price does not cost the seller money because the increased order size means less shipping and stocking costs per item. The tradeoff of lower price per item but double the order size results in the seller getting a sale with a healthy profit margin, and the buyer meeting the price point they want.
  3. Be Flexible with Payment Options: A distributor agrees to increase invoice due dates from a 30 day period to a 60 day period in return for the retailer agreeing to purchasing their inventory exclusively from that distributor. The tradeoff of additional time to pay allows the retailer increased time to sell the product and profit, while allowing the distributor to increase their order size.
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There are plenty of ways you can respond to requests for concessions, without necessarily having to give a big portion away. Being flexible can take the form of trading on issues that don’t matter to you, but matter more to the other person. Tradeoffs are a good negotiation strategy that can communicate flexibility, help drive the discussion towards agreements, and help both people explore and brainstorm whether they’re a fit for each other.

Compromise Carefully

You’ve traded off aspects that don’t matter to you, and they have responded positively. Still, there’s some they’d like for you to compromise on. If you’ve arrived at this crossroads in your negotiations, there are a couple of tips you should keep in mind to ensure that those compromises are fair, and will bring the conversation towards agreement.

If you do compromise, do not do so too quickly in the negotiation. Compromising immediately before a thorough discussion and back and forth has been established may undermine your credibility and communicate to your counterpart that you didn’t believe your initial ask was reasonable. If you do concede on price or on other aspects of your business, concessions are best when they’re done in installments. Research shows that the same concession broken up into two concessions (ie. $10,000 vs $8000 then $2,000), is more likely to be received positively.

Additionally, concessions should be labeled and communicated. Compromises should not come at a substantial cost to you, and be used to help you close a deal. To ensure that is more likely to happen, communicate to the other the fact that you compromised, and the costs associated with that compromise to you. Doing so will encourage the other to reciprocate, and guide the conversation closer towards agreement.

To negotiate favorable terms for what you’re selling, price and present your offering accordingly to ensure that you have multiple buyers. If and when the other bargains, look for tradeoffs first, and if necessary, compromise slowly and carefully.

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This post was originally written as part of a series of articles intended for buyers
and sellers on Flippa (the #1 marketplace to buy and sell online businesses).

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