One of the most common questions people ask in negotiation is, “How much should I ask/offer?” Everyone faces the same dilemma – charging too much/offering too little and losing the deal vs. or charging too little/offering too much and not getting the best deal. External standards can help point you in the right direction.
One of the most common questions people ask in negotiation is, “How much should I ask/offer?” Everyone faces the same dilemma – charging too much/offering too little and losing the deal vs. or charging too little/offering too much and not getting the best deal.
The most straightforward way out of this bind is to invoke external standards of fairness. These are neutral criteria that can be used to justify various possible outcomes. A wise negotiator does not simply conjure a term out of thin air, but rather considers why a particular term would be fair - is it consistent with comparable deals? Does it reflect the market practice for the deal in question? Can it be defended using independent benchmarks?
In some cases, the places to find these benchmarks are obvious. For used car valuations, Kelley’s Blue Book is a recognized independent standard. For real estate valuations, similar properties imply a range of fair prices.
In other situations – especially when unique products or services are involved – it can be more challenging to identify independent benchmarks. In these cases, it’s best to identify a series of different benchmarks – although no single one would alone suffice as an indicator of fairness, together they would establish a “fair range” within which the parties can negotiate.
