negotiator's framework negotiate to win
TRANSCRIPT
Negotiating to Win © Arvind Maharajan
Negotiator’s Framework Creating a framework to walk through negotiations
Negotiating to Win © Arvind Maharajan
What are we going to learn today?
When will a framework be successful?
Your research needs to be exhaustive and accurate
You need to be disciplined to adhere to the plan
What is a framework?
System of checks and balances
Gives you a direction to guide or lead
through the negotiation
Helps you evaluate offers and propose
counter offers
Negotiating to Win © Arvind Maharajan
Let us learn the framework through a case study
Negotiating to Win © Arvind Maharajan
Case Study: Harmony Hills
You are the Director of Summit Estate
Harmony Hills in Gurgaon
A 5 acre prime property Posted an ad for selling Harmony Hills You have received interest from two prospective buyers -Realty Developers -Prime Estate
Negotiating to Win © Arvind Maharajan
Case Study: Harmony Hills
Realty Developers
Builds High Rise Apartments
Fair Negotiators
Offer Rs.30 Crores ( 5 Mn USD) Offer Expires in one week
Fair offer by market standards
Prime Estate
Premier real estate company
Builds only premium end villas
Offer Not made any offer Offer CEO has called you tomorrow for discussions
Negotiating to Win © Arvind Maharajan
Case Study: Harmony Hills
Harmony Hills was bought by you 5 years back for 19 crores (3 MN USD)
You are confident that Realty Developers and Prime Estate know this fact
Land deals for villa projects are typically priced 20% more than the case for apartment projects
The offer from Realty Developers is at par with market but you think you can get 10% more
FACTS
Negotiating to Win © Arvind Maharajan
The Negotiation Framework
1 2 3 4 5 6
Assess your BATNA
Calculate your RV
Assess opponent’s BATNA
Calculate Opponent’s RV
Frame your ZOPA
Close the Deal
Negotiating to Win © Arvind Maharajan
The Negotiation Framework
Step 1: Assess your BATNA
BATNA: Best Alternative To a Negotiated Agreement
What will you do if this negotiation does not work out? What’s Plan B?
For your negotiation with Prime Estate, what’s your BATNA?
Make a deal with Realty Developers
1 2 3 4 5 6
Assess your BATNA
Calculate your RV
Assess opponent’s BATNA
Calculate Opponent’s RV
Frame your ZOPA
Close the Deal
Negotiating to Win © Arvind Maharajan
The Negotiation Framework
1 2 3 4 5 6
Assess your BATNA
Calculate your RV
Assess opponent’s BATNA
Calculate Opponent’s RV
Frame your ZOPA
Close the Deal
Step 2: Calculate your Reservation Value
Reservation Value: Your walkaway point in the current negotiation
What is the minimum that you need from this negotiation? Anything below is unacceptable
For your negotiation with Prime Estate, what’s your Reservation Value?
The offer from Realty Developers + 10% more which amounts to 33cr (5.5 MN USD)
A correct assessment of your BATNA is essential to know your Reservation Value
Negotiating to Win © Arvind Maharajan
The Negotiation Framework
1 2 3 4 5 6
Assess your BATNA
Calculate your RV
Assess opponent’s BATNA
Calculate Opponent’s RV
Frame your ZOPA
Close the Deal
Step 3: Assess the other party’s BATNA
What are the other options for your negotiating opponent
Involves a lot of research on your opponent and careful assessment of market conditions
For your negotiation with Prime Estate, what’s their BATNA?
To develop their villa project on another piece of land in Gurgaon
What are the similar land holdings in Gurgaon and what would be they selling at?
Negotiating to Win © Arvind Maharajan
The Negotiation Framework
1 2 3 4 5 6
Assess your BATNA
Calculate your RV
Assess opponent’s BATNA
Calculate Opponent’s RV
Frame your ZOPA
Close the Deal
Step 4: Calculate the other party’s Reservation Value
Your negotiating opponent’s walkaway point in the current negotiation
What is the maximum that they can give you from this negotiation? Anything beyond is unacceptable for them
For your negotiation with Prime Estate, what’s their Reservation Value?
The market price is 30 Cr (5MN USD) and they would think of maximum 10% appreciation i.e 33 Cr (5.5 MN USD)
Villa projects can get a premium of 20% more, i.e. 33 Cr + 20%
Reservation Value = 39.6 Cr (6.6 MN USD)
Negotiating to Win © Arvind Maharajan
The Negotiation Framework
1 2 3 4 5 6
Assess your BATNA
Calculate your RV
Assess opponent’s BATNA
Calculate Opponent’s RV
Frame your ZOPA
Close the Deal
Step 5: Frame ZOPA
ZOPA: Zone of Potential Agreement
Minimum Amount You
want
Max Amt. you think you can get
(Your RV) (Opponent’s RV)
33Cr to 39.6 Cr Your RV
33 Cr (5.5 MN USD)
Prime Estate RV 39.6 Cr
(6.6 MN USD)
ZOPA
Negotiating to Win © Arvind Maharajan
The Negotiation Framework
1 2 3 4 5 6
Assess your BATNA
Calculate your RV
Assess opponent’s BATNA
Calculate Opponent’s RV
Frame your ZOPA
Close the Deal
Step 6: Closing the deal:
Negotiate to get a deal within your ZOPA
Choose an opening strategy:
Most common is to start by aiming at the higher end of the ZOPA and then negotiate your way down
Negotiating to Win © Arvind Maharajan
RECAP : The Framework
1 2 3 4 5 6
Assess your BATNA
Calculate your RV
Assess opponent’s BATNA
Calculate Opponent’s RV
Frame your ZOPA
Close the Deal