Negotiator's framework negotiate to win

Negotiating to Win © Arvind Maharajan

Negotiator’s Framework Creating a framework to walk through negotiations


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


Let us learn the framework through a case study


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



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



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


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 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



Frame your ZOPA

Close the Deal



1 2 3 4 5 6

Assess your BATNA

Calculate your 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



1 2 3 4 5 6

Assess your BATNA

Calculate your 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?



1 2 3 4 5 6

Assess your BATNA

Calculate your 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)



1 2 3 4 5 6

Assess your BATNA

Calculate your 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



1 2 3 4 5 6

Assess your BATNA

Calculate your 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


RECAP : The Framework

1 2 3 4 5 6

Assess your BATNA

Calculate your RV



Frame your ZOPA

Close the Deal

Business

Negotiator's framework negotiate to win