I just read a book called: Never Split The Difference. It’s written by an International, FBI hostage negotiator. The author, Chris Voss, tells how he successfully negotiated with Islamic radicals and American bank robbers when people’s lives were at stake. From those gripping stories he draws simple, yet profound, lessons for negotiating everything from a pay raise to a million dollar contract with a multinational corporation.
Voss now works in the private sector teaching college courses and running a business consultancy called The Black Swan Group. He teaches easy steps for enhanced negotiation outcomes. The place where many fail, according to Voss, is when they allow their emotions to take over and sabotage their plans. To avoid this he teaches his students how to develop focused listening skills and measured responses that gain the trust and cooperation of the person on the other side of the deal.
One main principle comes from the book’s title. According to Voss, splitting the difference is for losers because it leaves too much money on the table.
Too little too often
Let me explain. The way it often goes in domaining is the buyer makes an opening bid around 10% of asking price. Right? That starts a back and forth process that, at best, creates a selling price in the middle. That would mean a sale price of $1,125 on an asking price of $2,500 with a $250 opening offer. However, too often domainers get less than the “split the difference” price and sell hand regged domains, for example, at around $500.
While there is no shame in acquiring a domain for $25 and selling it for $500 (20 times investment) there is an opportunity cost that over time undermines the domaining business model. We only sell a tiny percentage of our inventory annually. This means renewal fees significantly erode our profits. Therefore, to run a profitable domaining venture it’s imperative we have powerful negotiation skills so we can maximize every sale.
There’s gotta be a better way
Rather than splitting the difference, Voss recommends a negotiation process that looks something like this:
- You: $2,500
- Buyer: $250
- Seller: $2,000
- Buyer: $500
- Seller: $1750
- Buyer: $750
- Seller: $1625
- Buyer: $1,000
- Seller: 1,565
- Buyer: $1250
- Seller: $1535
- Buyer: $1400 “that’s my final offer”
- Seller: $1520 “and I’ll throw in the dot-net as a bonus”
- Buyer: “OK, Let’s do it”
Looking at the theoretical negotiation shown above we notice three things:
- One, the seller took their time and never rushed. This enabled them to maintain control of the negotiation.
- Two, each time the seller reduced their price they lowered it by half of the prior reduction ie $500, $250, $125, $65, and $30. Too often we make a large, emotion based reduction at the start of the negotiation and this immediately signals to the buyer that we are highly motivated. This piece of information empowers the buyer and he/she starts to control the negotiation. Voss’ method is to start with a modest reduction (say 20%). This measured and disciplined series of reductions sends an unspoken message to the buyer that we are rapidly approaching our absolute lowest price. Remember, actions speak louder than our words.
- Three, the seller got 36% more money than if they’d split the difference and three times the $500 amount they were too often receiving in prior sales.
Now, in order to effectively enact the above price reduction strategy you have to be willing to put aside our emotions and ruthlessly stick to your predefined negotiation plan. Most people can’t do that without further knowledge, training and practice. If you want to improve your negotiation skills I highly recommend Voss’ book and YouTube videos for further study and skill development.
Here are some sweet brandables for sale at NameJet this week: