Home > Guests > View from the FishBowl – Negotiation Series: Cardinal Rule … don’t bid against yourself!

View from the FishBowl – Negotiation Series: Cardinal Rule … don’t bid against yourself!

About the Author: William Fisher, a partner at Treetop Ventures in Omaha, is a regular guest contributor to Silicon Prairie News. In his series, View from the FishBowl, Fisher calls on his experience as a business executive and technology investor to lend his advice to entrepreneurs in the Silicon Prairie.

Fisher has served as a director for several prominent public companies and private firms, and he currently serves on the boards of Prism Technologies, Lodo Software and FTNI. To read his full bio, including a listing of companies he has been involved with, visit treetopventures.com.

Contact Fisher at fish@treetopventures.com.

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Negotiation Series: To read past posts in this series, see: “View from the FishBowl – Negotiation Series“. 

Photo by Nicu Buculei via Flickr

Per our friends at Webster, definition of cardinal…

cardinal – adjective, of basic importance : main, chief, primary <a cardinal principle>

In negotiating, I think one of the cardinal rules is to “never bid against yourself.” This may seem obvious but it is amazing how many times I see this play out where one side or the other violates it. It is as easy as it sounds; don’t bid against yourself. However, it is not always as easy to spot.

In the simple case, you bid $100 for something you want and the other party doesn’t respond. Assuming the worst and being impatient (human weakness), you send another email and offer $125. The other party thinks to himself … gosh, if my phone had been working, I was going to accept the $100. Yikes!

However, in complex cases, it isn’t always as clear. Negotiating with someone who isn’t authorized to commit for the other side is in essence bidding against yourself. Once you think you have agreed, he says he needs to get this to his boss and see if it is ok. It never is; boss wants another pound of flesh. In essence, you have told them what you will accept and bid against yourself.

Another example I see often in complex deals is the other side wants to “cherry pick” and get something resolved without moving on something that is important to you. The way you keep them from “creeping” on you is to make sure any agreement on a single item is conditioned on the premise that the other item gets worked to your satisfaction or your agreement is null and void. These caveats are important; keep track of each item and your position as it relates to these and the overall deal. Just say … I think we can get there on this one but let’s continue through the list and see where we end up overall.

How about this one? “If I offer you $125 for the item, will you take it?” There is a quick answer for this one: “Offer it and find out!” Be wary of the go-between who says that if you are willing to take this price (assumes it is lower than you are offering it at), they will work on the buyer and try to get that price for you. Once again, this is a bad puppy; you are bidding against yourself.

Finally, remember that conceding to your opponent without getting a concession is like bidding against yourself. You won’t always win in the back and forth bidding; but if you have to concede, get something for it.

“I will flip you for it.”

When I was the newly minted CEO of ACI (a local payment systems solution provider), we were involved in a contract dispute with a large processor. Prior to my getting the CEO title, we had been involved in an ugly litigation with a customer and I was sort of determined that I would keep this from happening on my watch. However, here it was happening.

We had been asked by the prospective customer to help them with their system; they had determined that they would not be able to process their payments in the next busy shopping season (Thanksgiving to Christmas) if they didn’t get a new system. Because these systems are complex, we didn’t feel we could implement one prior to the busy season so we agreed to help them “tune” their system to help them get through the busy season. We sent some of our best and they do what they do best; tuned the system. In fact, they tuned it so well that the customer then decided they could get by without a new system not only now and into the near term future (next 3-5 years). So, they had their lawyer tell us that although they had signed the contracts for the system, they were not going to proceed. They also proceeded to rattle chains with a variety of claims that the system wouldn’t do X, Y or Z and therefore they couldn’t use it (we knew the truth). I know this isn’t about negotiation nor bidding against yourself; bear with me.

After a few months of “sabre-rattling,” the lawyers on both sides were ready to fight (and bill us for the fun they were going to have). I decided to solve it and flew to a major airport near their location to meet one of their senior people who was empowered by their CEO to negotiate. I had already decided that if they didn’t want to use the system, that was fine and I would tear up the contract (nobody wants a customer who doesn’t want you). However, they also didn’t want to pay me full price for the experts we sent (which bill at a very high rate because they are that good). They felt they should pay standard consulting rates; I really didn’t think this was fair. (The difference was over $100,000; these systems are complex and our team spent plenty of time working on their problems).

At the airport, he explained how he was ready to sue us and he would win because of X, Y and Z. I listened patiently until he was done and then I said, “We both know why we are here … so let’s not dance around that. I am tearing the contract up (and did just that in front of him). However, you owe me for my experts and should pay.” He replied, “Thanks for understanding that we were right all along (oh boy) but I insist we only pay for standard charges.” I said, “We will spend more on lawyers than this is worth; I will flip you for it.” He was sort of stunned! He said, “What do you mean?” I said, “I will flip a coin and you call it and if it is heads, I get my premium price and if it is tails, you pay the lesser price.” He was quiet … and then said, “I am not sure I am authorized to do that.” (Boy, did I love that part.) With a determined look, I said, “Get someone here who is!” He looked at me and then said “OK.” We flipped; I won! Life is truly good.

I am positive he told his management team that he got me to tear up the contract and he decided to take the high road and pay our premium price. Good on him!

I have seen him a few times over the years at various industry events and he usually goes out of his way to avoid me.

I am pretty sure this one doesn’t fit into today’s lesson but my editor likes me to include personal experiences in my articles whenever I can. And, hey, it is about negotiation. That’s my story; sticking to it.

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