Stuart R. Gallant, MD, PhD
When I bought my first car, just as I was about to sign the paperwork. The dealership brought in “the closer.” A closer is a person who you have not met before. You may have spent a substantial amount of time with your counterpart—in my case, it was the salesman who showed me various models and took me on a test drive of the model I wanted. The idea of using a closer is that, without an emotional connection, the closer can be hard nosed driving the final bargain.
As I sat across the desk from the closer, she made it clear that even though the antitheft system was an integral part of the car, it had not been included in the price I was quoted. So, I actually need to pay more.
Fortunately, I had an ace up my sleeve. When I was talking with the salesman, I said to him, “Would you write down the number I need to put on the check?” So, I had the price that he had promised me. I looked the closer in the eye and said, “That’s not the price I was quoted. You need to talk with your salesman.”
In short, I prepared for the closing during the negotiation. I had also researched the price ahead of time. It was such an oddly specific number, that the salesman had said, “Where did you get this number?” He knew that I had found his true bottom line.
In today’s post, we discuss tips for closing a deal.
Two Types of Negotiations
Broadly speaking, there are two types of negotiations—those in which relationship is important and those in which it is not. The California car dealership I described above was an example of the first type of negotiation—they did not really care if I walked away from the negotiation feeling a little burned. Since I was not going to purchase another car for five to ten years, any repeat business I might bring them was long away.
An example of the second type of negotiation is salary negotiation. The employee wants the most she can get out of the negotiation, but she will also have to work with her supervisor in the coming months and years. Ideally, the employee preserves the relationship with the supervisor by presenting reasonable salary expectations. A summary of the tactics and processes appropriate for the two different situations is:
In both types of negotiations, your side should have gamed out the negotiation in advance. The difference is that the two disparate goals (outcome maximization versus relationship preservation) lead to different tactics and processes.
Time and Timing
One important aspect of the process is time and timing:
- Will there be rounds of negotiation?
- How soon will responses be expected?
- When can a final result be expected?
Whether deadlines are real (for example, a specific time when a product is required) or artificial (for example, a deadline to conclude a due diligence process), they create a sense of urgency that can allow hard decisions to be made more easily. Consider time and timing as important details of the negotiation to be agreed on in advance. An example of time working in favor of an agreement is Day 12 of the Camp David Peace Accords negotiation—so much had already been invested in the negotiation that it was impossible for each side to walk away, but at the same time, it was impossible to keep so many national leaders in one place indefinitely—decisions had to be made quickly.
Keep Your Eye on the Ball
In a long negotiation, it is possible to become lost in the negotiation process. Asking “why are we here” and “what are we trying to achieve” can help when the goal becomes obscure. Consider the case of the negotiation to end White minority rule in South Africa. For the African National Congress, the goal was always eventual majority rule. So, in 1992, when the question of a 5-year government of national unity came up, it was easier for the ANC to say yes to less than they wanted because they saw that they would eventually reach the goal of majority rule. In that case, agreement on a government of national unity along with amnesty for political crimes was critical to closing that round of negotiations.
Bring in the CEOs
The negotiation team has often done all that it could to bring two sides together, but they cannot quite bring the deal to a close. Chief Executives often have a better sense of what their companies can tolerate versus what it cannot. CEOs may be able to make concessions and claim critical outcomes in a way that lower-level negotiations cannot.
Agree on the Big Picture
Business deals often start with a term sheet—a bullet point listing of material terms and conditions to an agreement. The advantage is that a term sheet fixes the major features of a deal, but it leaves the final terms to be negotiated subsequently.
Announce a Settlement
This is a high stakes strategy, but sometimes the glare of publicity is what is required to close a deal. Announcing a settlement combines several of the above strategies at once. Usually, there is an agreement on the big picture—this allows the parties to have confidence that a deal can be done. At the same time, an announcement of a settlement creates an artificial deadline. It will rapidly become clear that the deal has not been inked if the remaining negotiations drag on, and rivals may have time to swoop in and sabotage the deal once the true status of talks becomes clear.
Look at the Details
Yes, it’s important to think about the big picture, but details are also important. You may be tired from negotiating each term, but you still have to read the final agreement and make sure there are no surprises. And, you need to be ready to stand your ground if the other party tries to insert a last-minute claim.
Disclaimer: DiscussingTermsTM provides commentary on topics related to negotiation. The content on this website does not constitute strategic, legal, or financial advice. Consult an appropriately skilled professional, such as a corporate board member, lawyer, or investment counselor, prior to undertaking any action related to the topics discussed on DiscussingTerms.com.
