There’s a famous quote from Carol Frohlinger that all negotiators should take stock of:
“Don’t bargain yourself down before you get to the table.”
It’s a lesson I was exposed to early on in my career when I was making my first foray into negotiation. At the time, I was accompanying a partner in a large accounting firm as we drove to see a client to negotiate the overruns on a recently completed audit assignment. The amount I had calculated was $72,000 which represented the extra work we had done to overcome client inefficiencies.
As we drove along, I asked the partner “What is the plan for the meeting.” The partner responded, “How much do they owe?”.
After she’d absorbed my answer, she then proceeded to have the following conversation with herself.
“Wow! $72k is a suspiciously round number why don’t we make it $69,758, that sounds like a number that we actually calculated.”
We drove on in silence for another kilometre.
“Just thinking... that is about a 17% increase on the agreed fee. So, they are sure to push back - let’s make it start with a 5 so $59,535.36 it is.”
At this stage I thought the matter was settled until we pulled into the car park and the partner spotted the CEO’s car in front of the building. She blinked and said, “That’s last year's model, he normally upgrades every year so things must be worse than we thought.”
After a long pause she finally settled on $49,757.
Then once inside, after some ritual pushback from the client we finally came to an agreement at $47,317....
On the return journey she remarked how well the negotiation had gone - we had been paid and the client was not too unhappy. However, I couldn’t help but wonder - where we would have ended up if we had started at $72k?
The lesson for all negotiators is that you need to be confident in your position and do not succumb to a crisis of confidence and negotiate with a phantom client before you meet the real one!
Happy negotiating!