Negotiating with all the right moves.

If your proposal is strong enough, you can get a deal without having to move on price at all. But most of the time, especially when you’re dealing with trained negotiators, you’ll have to move at least a bit. But the way you move, and the way you plan your moves, will make a huge difference, not just to the profit you make on this deal, but on all of your future deals.

Moving together: The most common way to get to a deal is to move, in ever-decreasing steps, from your opening position towards your counterpart, while encouraging them to move towards you. Your aim is to reach a deal at their “break point” (if they’re a buyer, that’s the most they would pay; if a seller, the least they would accept). You’ll never know their break point for sure, but you must make an assumption, plan decreasing moves to get there, and adjust your plan based on any signals you pick up along the way.

Moving apart: More common in M&A than in trading, moving apart is when you hook them in with an attractive initial offer, then add more demands over time. Your target is to stretch them, potentially beyond their break point, from the inside out. It can leave a bad taste, so isn’t good for relationships, but it’s widely used by buyers: entertain a higher than ideal cost price in early conversations, then push for reductions prior to listing and in each subsequent review. Open with an offer they can accept then read the signals as you repeatedly push down. Don’t give commitments until you’re well inside your own break point.

Moving around: Establish the “principle of reciprocity” - that means that if one part of the deal changes, something else must change to balance it out. “We can pay early, in return for greater discount”; “we can reduce cost if you’re happy to reduce the quality”. You need to anchor your counterpart to the fact that the initial proposal is a value-creating deal. If they sign, they will benefit. And you need to be absolutely on top of two things: how much each potential element costs to move, and which ones you can logically link together. It’s the best way to avoid giving expensive concessions, but you need to be on your game and on top of the numbers if you’re going to pull it off.

BOTTOM LINE: Every time you negotiate a deal you set a precedent. A good negotiator will observe how you move and infer not just where you’re heading, but exactly how much you can be pushed in the future.