Chapter 5
Prepare…or Else

Preparation: The Aerobics of Negotiation

The first phase of any negotiation is the preparation phase. It is the most important phase and sometimes the most neglected. You can't control the other side, outside events, and often not even your own position—but the one thing you can control is your preparation. If you are not prepared for a negotiation, you might as well not show up. You have given the other side an undue, unearned advantage.

Preparation is like exercise. Sure, it's good for you, but while you're “stair-mastering,” ab-crunching, and treadmilling, you feel tired, bored, and, afterward, sore. It's only months later when you're running through an airport for a plane and you don't get winded that you appreciate all that sweat.

Don't expect a thrill from preparation while you're gathering background information, checking sources, networking, referencing, fact checking, and strategizing. Do expect to be exhilarated when you sit down at the table and get few surprises from the other side. The more you know about them, their expectations, aspirations, limits (time, money, resources), their perceptions of you, the deal, and its ramifications, the better position you are in to make the deal you want. Preparation is power.

Successful negotiators are prepared negotiators. Preparation is an exercise in patience and persistence that pays off. Remember, most people see negotiation as a finite incident. The opposite is true. Negotiation is a process, not an event. The process begins with preparation. Use it or lose it.

How Prepared Are You for Your Negotiations?

*How Prepared Are You for Negotiations?*
In my preparation, I…	Circle One
Try to learn real interests of the other side.	Always	Sometimes	Never
Look for precedents for either side.	Always	Sometimes	Never
Understand both sides' alternatives.	Always	Sometimes	Never
Consider impact of deadlines.	Always	Sometimes	Never
Determine my strengths.	Always	Sometimes	Never
Consider strengths and weaknesses of the other side.	Always	Sometimes	Never
Establish the highest goal I can achieve.	Always	Sometimes	Never
Determine my walkaway point.	Always	Sometimes	Never
Assemble a team to assist me.	Always	Sometimes	Never
Assess the other side's negotiators.	Always	Sometimes	Never
Commit my strategy to writing.	Always	Sometimes	Never

If six or more of your answers were “Always,” you have good preparation habits, which this chapter will hone further. (If all of your answers were “Always,” c'mon!)

If five or more of your answers were “Sometimes” or “Never,” this chapter will immediately improve your next negotiation.

If three or more of your answers were “Never,” read this chapter as fast as possible.

The following exercise demonstrates the impact of preparation.

The Numbers and Letters Game

Part 1—Numbers

Don't look at the numbers below yet. When you do, you'll see a graphic of scattered numbers. Pick up a pencil. Ask someone to time you or time yourself. From the moment you look at the graphic, you have 30 seconds to connect as many numbers in order as you can. Okay, start now!

The Numbers and Letters Game Continued…

Part 2—Letters

Don't look at the letters that follow yet. When you do, you'll see letters of the alphabet. Do not pick up your pencil. Ask your timer to give you 60 seconds to study the placement of the letters. Then, pick up the pencil. Have the timer give you another 30 seconds to connect as many letters, in order, as you can. Ready? Go!

What impact did the 60 seconds of preparation time have on your results with the letters (versus your results without prep time with the numbers)? More importantly, what impact did that 60 seconds of preparation have on your level of confidence in doing the exercise?

Most people experience a much higher confidence level after they have prepared for the letter exercise. They are able to map out where they want to go, establish a system to use, and work through the exercise mentally before putting pen to paper. This preparation increases their confidence level, which, in turn, increases their performance level.

How Do the Numbers and Letters Exercises Relate to Daily Negotiation?

How do you feel when you're unprepared (or less prepared than you should be) for a negotiation? Scared? Overpowered? Defensive? Anxious? Angry? How do you feel when you're totally prepared? Confident? Like a winner? Strong? Calm? What are some possible negative results of being unprepared? Embarrassment? Confusion? A bad deal?

The way you feel about your preparation is an important factor. In the previous exercise, some people do reasonably well with no preparation time. But the vast majority do measurably better when they've had time to prepare. That means two things: (1) Preparation helps; and (2) feeling prepared helps. Yes, you might do fine without preparation, but why walk into a situation without giving yourself every possible advantage?

Remember, confidence is important. But it doesn't take the place of real preparation. In this next story, I had plenty of the former but not enough of the latter.

Selling My First Home (Learning the Hard Way)

This is what I called “my first grownup transaction.” I had a good start on my career as a lawyer; we had begun a family; we bought and were ready to sell our first home. You never forget that first house. It was the late 1960s and we'd bought a detached, three-bedroom, brick home on a little piece of land in a nice family neighborhood. We paid $26,000 for the house (it seemed like a lot at the time!). With two children and one on the way, a dog, a station wagon, and a new swingset in the backyard, we were a living, breathing ad for American middle-class family life. And, after three years in the house, we were about to outgrow it.

The real estate market had not been great. It had been flat to moderate. But, we had made some improvements to the house—repairs, painting, decorating. I figured, the house had to be worth somewhat more simply because (1) it was three years later and (2) we had improved it.

We decided we'd sell it for $30,000. It seemed like a fair price—not greedy, not desperate. I remember we came to our decision on Thursday evening. We were ready to put the house on the market the following week.

Then, on Friday morning, I remembered this friend, another lawyer named Gene who had always said that he and his wife, Carol, liked our house and its location. In fact, they'd said, “If there's ever a home for sale in your neighborhood, let us know.” When I got to the office, I found Gene and told him we would be selling the house the next week but we'd give them first crack at it. So if he bought it, we'd both save by not having brokers' fees.

He was excited and said he and Carol would come look at the house that evening. At 5:30 Gene and Carol walked through our house, tried every light switch, opened every cupboard, and flushed every toilet. And, thankfully, everything worked, closed, and flushed. I was getting pretty excited myself. Then, I overheard Carol in the third bedroom say, “I think we'll paint this room yellow.” She didn't say, “…if we buy the house, we would paint this room yellow.” She said, “we'll” as in “we will” when we buy the house, not if we buy it. We practically had the sale made.

Then we adjourned to the negotiation center of all homes—the kitchen. Before anyone could say anything, Carol looked out the window and saw the swingset. She said, “Would you throw the swingset in with the deal?” I thought to myself, “You mean the really heavy, cumbersome swingset that I desperately don't want to move?” I took a thoughtful pause and said, “Okay, we'll throw in the swingset.” This deal was all but done. Gene asked how much we were selling the house for and I replied, “$30,000.” Gene didn't flinch on the price. He said they'd go home, talk it over, and call on Monday. I was feeling great. We'd sold the house in one day.

The weekend passed; Monday came and Gene didn't call. Tuesday came and went; no call from Gene. Wednesday morning came and still no word. But, walking down the street that day, I saw Gene. He said the words you never want to hear in dealmaking, “Ron, I was going to call you.” In other words, ‘I have something to say to you that I don't want to say so I've been putting it off.’ He said, “We bought a house.”

I said, trying to be calm, gracious, and all kinds of things I wasn't feeling, “Really? Where?”

He said, “About seven houses down the street from yours.”

I had to know. “Gene, do you mind if I ask how much you paid for it?”

“$27,500,” he said, adding, “You know, we've been looking for a house in your neighborhood for a while and there have been six houses that have sold or are for sale with the highest asking price of $28,000.”

“Oh,” I said weakly, “congratulations.”

What a lesson. In that simple transaction, or missed transaction, I learned the importance of preparation. If I had walked through my own neighbors' homes during their open houses, I'd have seen how much they were expecting and how their homes compared with mine. If I had examined the public records of selling prices in the area or if I had used a professional broker, I'd have better understood market value. If I had done research and utilized the available resources, I'd have been better prepared and a better negotiator.

In the end, of course, we sold the house. The sale price was $28,000. So it didn't cost us anything. Or did it? We had to make three more months of mortgage payments.

How to Prepare (and How Not To)

How to Prepare: Why Don't People Do It?

We humans fall back on excuses (and they sound a lot like the ones we tried to get away with when we didn't do our homework in grade school).

“I know it already. I don't need to prepare.” Sure, it's your business or profession or investment so you ought to know it inside and out. You assume you're up to date, but you may not be. Give yourself a review. You're likely to find some surprises. Just because it is your business, you could be too close to it and take too much for granted. Step back and try to take an outsider's look. We guarantee you'll learn something.
And no matter how much you know about your side, you don't know enough about their side.

It's what you learn after you know it all that counts.

—Harry Truman
“There's not enough time.” Preparation is actually a time saver. The more you know about your side and theirs, the more shortcuts you can take in negotiation. Concepts require less explanation. Jargon is already understood. Major issues separate themselves from minor ones. When people tell us there's not enough time to prepare, we say “baloney.” If a deal starts to turn into a disaster, there always seems to be enough time to postpone the deadline and hope for an eleventh-hour miracle, so surely there was enough time up front to avoid that last-minute disaster. Simply put, if you invest in preparation now, you will make fewer mistakes later and save yourself the time of implementing corrections of those mistakes.

If you do not have time to do it right, when will you have time to do it over?

—John Wooden, UCLA basketball coach
“I don't know what to prepare.” This one may appear to have merit. But it's not acceptable. Yes, there's a lot of background you could gather, perhaps limitless information. Yes, some information is more valuable and some less. No, you can't absorb all of it, nor do you want to. But what you can, and should, do is use a preparation plan to maximize your exposure to relevant data and minimize wasted effort and time.

How to Prepare: A System

We've learned that taking the time to prepare can build confidence and effectiveness. But the reality is we don't always have enough time to prepare as fully as we might like. In that case, having a plan or using a system for just that contingency can still be empowering. What do you do if you're faced with an almost immediate need for a response? Size up the situation quickly and say, what can I do to increase my preparation in a matter of seconds or minutes? Remember the numbers exercise on page 83?

If you didn't have time to review them in advance of having to connect them sequentially, your confidence and effectiveness might be lower. But your confidence and results improve if you were given, and could apply, the following system: Draw a vertical line down the center of the page. Note that all of the odd numbers are to the left of the line, and all the even numbers are on the right. Despite the apparent lack of time, understanding that system empowers you to go further in connecting the numbers in sequence than if you did not have it. Even when you are short on time, you will be more effective if you have a system in place.

That's what we're going to provide—a system for when you don't have time, and one that, of course, works very well when you do have time, that will maximize your results. In negotiation, that system is the Preparation Checklist.

The Preparation Checklist

The Preparation Checklist is a tool that gets you in the habit of preparation to make sure you're ready when you sit down to negotiate. It is broken down into six “Information Gathering Steps” and two “Action Planning Steps.” At the end of this section, we provide you with a Preparation Checklist that you can use as a guide before every negotiation. Here are the components.

Six Information Gathering Steps

1. Situation Summary. Briefly describe what this negotiation is about. Identify your objectives and overall goals. Include who, what, when, and why as they apply to this deal. Though you may think you have the facts firmly implanted in your mind and know your objectives, writing them down helps you both organize your thoughts and clarify your understanding of the challenges you face.
2. Precedents. Knowing precedents gives you the power of the past. You can quote or cite, as well as learn from those events that have already happened, thereby giving credence to your position. Knowing how similar transactions, particularly those involving the other side, unfolded in the past may guide you in structuring this one.
Do not just focus on a single precedent, such as one that supports your position. Be familiar with precedent(s) the other side might use. Case in point: Cal Ripken's 1992 contract negotiation. Our precedent was the highest paid players in the game of baseball—$6 million per year. Their precedent was the highest paid shortstops in the game—$4 million per year. We knew our precedent and we knew theirs so we were ready.
3. Interests. You most likely know your own interests, but theirs are the keys to getting past what seem like rock-hard positions. Determining interests means getting beyond what they say they want to what they really want, things that may not be readily apparent but may well bear on the outcome of the transaction. Dollars may define positions (prices, salaries, and so on), but noncash value may often define interests (settling quickly, service, security, experience, recognition). Effective probing may uncover their real interests.

First, you have to know what you want. That sounds self-evident, but you'd be surprised by how many people don't actually know what they want with the kind of precision that a negotiation demands. Then, you have to think of the 2,000 ways to get to where you want to go: what the trades might be, what the arguments might be, what the moves might be on the other side. And you watch carefully, and listen carefully, talk less, and remain persistent.

—Ambassador Charlene Barshefsky
4. Alternatives, including Highest Goal and Walkaway. Alternatives make you less dependent on one kind of deal and more open to variations. There's no take it or leave it when you have alternatives; therefore, there are far fewer impasses. Further, knowing their alternatives to doing the deal with you may guide you in accessing their leverage. Employing alternatives gives you the Power of Options. Going into a negotiation without options is like going into battle with one weapon. What if the battering ram won't knock the door down? Did you bring grappling hooks to fling over the walls? If not, you're not going to get inside.

If you don't know your options, you don't have any.

—Diana Korte, Women's Health Advocate

You also must know your Highest Goal and Walkaway positions. You will not achieve a lofty goal unless you aim for it. Where would you ideally like to come out? If you don't make that ask, you will not get it. At the same time, know where your bottom line is: How much would you give up to make the deal? If you don't face that hard question in advance, you may find yourself repeatedly lowering your expectations as the deal progresses.

Be willing to walk at a certain point. But decide where that point is before you start negotiating and write it down.

Developing a Walkaway is an important step of the Preparation Checklist. It furnishes a finite figure upon which to build your negotiating strategy and it also assists in protecting you from making emotional changes.

A good example unfolds in a story told by Mike Blackstone, the Institute's Sports Practice Leader, who served as the contract negotiator for an NBA team:

Woohoo! We Walked Away!

In the NBA, the free agent signing period is a time filled with long hours, enormous stress, and many dealings with exceptionally difficult people. Our staff did a great deal of work in preparing for these negotiations, which included establishing very clear Highest Goals and Walkaway positions, both of which, at times, can be hard to stick to. Each free agency period presents only a few players who make real sense for your team at that given point in time. With a limited number of attractive candidates and plenty of competition, the negotiations can get intense and heated at times.

There was one such negotiation that I will never forget. We did our research and gathered every bit of information we could. All of that data was used to develop a strategy, compose scripts for each call, and establish a Highest Goal and Walkaway for this deal. The player's agent came in with what we thought was a ridiculously high offer, but, thanks to our preparation, not one that was unexpected. His “ask” was substantially beyond our Walkaway, so we had no realistic room to adjust. We didn't break off the negotiation abruptly. We “did the dance” for a while, talking and exploring, giving the other side the opportunity to adjust, reconsider, recalibrate, or compromise. In contrast to many people, we created a Walkaway we believed in and didn't submit to negotiating pressure, and therefore stood our ground with confidence.

Of course, the agent was not happy. He did eventually find the player a home with another team, for a deal that was much higher than the largest deal we had thought was reasonable. It would seem the agent got his Highest Goal. But the player did not live up to, or even come close to, the value of the contract. We were content with our decision before that outcome, and that outcome validated our preparation and Walkaway.
5. Strengths and Weaknesses. Ironically, almost all negotiators overestimate their own weaknesses and the other side's strengths. Try to take an honest inventory of each side's real strong points and vulnerabilities. Ask yourself if your weaknesses are apparent to the other side or if you are being overly sensitive to them. The same applies to strengths. Give yourself credit for your pluses. Assess the other side's strengths analytically, not emotionally. Examples of other factors include: The competitor may be bigger but not as market-responsive as your company. They may have been around longer but are they as in-tune with today's demands? Knowing your strengths and weaknesses is vital.
6. Team. Create a team on your side. It may consist of co-negotiators, experts in various aspects of the deal, or good cop–bad cop, information sources, and devil's advocates with whom you can role-play. Practice as a team before you go to the table.
Also, assess the other side and the members of their team. Look at their resumes and experiences. Who are their decision makers? How do they make decisions? Have they ever done a deal similar to this one? What was the result? Don't get caught by a higher authority tactic and don't overlook those who may, in fact, influence the decision.

Two Action Planning Steps

7. Strategy. Now that you have the known information available to you, write down the questions you want to ask. You need to make some decisions in advance of formulating and making proposals.
How much probing do you want to do? Do you want to control the negotiation or let the other side control the flow? Do you want to lead from strength or react to a lead from the other side? Do you want to start high or low? How many face-to-face meetings do you want to have? No answer is right or wrong. The answer depends on your needs, your goals, the tone and style of the other side, timing, and egos.

Plan your concessions in advance. Where will you give? Where will you stand firm? How will you make a move so that it gives the least and gains the most? Don't be afraid to take a time-out during the negotiation to reassess the situation.
8. Scripting. Don't attempt to keep all facets of your proposal in your head. Set forth and write out your proposals in advance. Test them, state them, and restate them until you are comfortable and you have perfected your pitch. Don't stop practicing until you are satisfied that you will confidently deliver your message. When possible, have a devil's advocate look over your script to make sure he/she doesn't see an issue or an opportunity you might have missed.
Keep in mind that the information gathered in the Preparation Checklist may be subject to alteration or otherwise be fluid depending on how circumstances unfold. Whenever you have exchanges with the other side, a summary of those exchanges should be inserted in the Updates Section at the foot of the Checklist.

Make the Prep Checklist automatic. Get in the preparation habit. Carry the Checklist with you at all times. Follow it methodically, step by step, and create more extensive responses when the time allows. For those negotiations that come without warning, by phone, by email, or just show up at the door unannounced, you can create an instant version, what I call the “yellow pad checklist.” If someone says, “We have a rush job and need a quote before close of business” or “I was driving by and saw your for lease sign,” by using the yellow pad version of the Preparation Checklist, you can handle the instant negotiation. Tell the prospect you'll call back in five minutes, or an hour, or ask the client to wait in the lobby while you finish up some business. Spend that time with your legal pad. Go through steps one through eight with key words next to each, or your personal abbreviations that cover the hot spots. Build your confidence by briefly scripting, then mentally practicing, your proposals to the other side. Once you have the Preparation Checklist and its steps fixed in your mind, you always have it with you. Hopefully, you will have some time to give yourself the edge of preparation.

Make your use of the Preparation Checklist so routine that you don't feel undressed walking into a meeting without having done a version of it. You'll derive two benefits:

You will be better prepared by using the Checklist system.
You will feel better prepared so you'll have the added weapon of confidence.

Preparation Checklist

What follows is a Preparation Checklist form that you can use as a guide before every negotiation.

IMPORTANT: The spacing on the following form is for convenience only. Expand each item as requirements dictate and time allows. A truly complete Preparation Checklist grows with each interaction of the involved parties. Remember that going through the checklist is not about filling in information for the sake of filling in information. If you don't know something, make a note of it so you can go back and write down the questions you will ask or research you will gather to get the information. Knowing what you don't know could be as important as what you do know.

PREPARATION CHECKLIST

Information Gathering

Situation Summary:

Define the situation and objectives for this negotiation:

Include who, what, when, and why:

Precedents:

Deal comparables (for and against you):

Interests:

Wants and needs of the other side (probe for undisclosed interests):

Alternatives:

Various deal structures (Including Highest Goal and Walkaway):

Other options that are worth considering if this deal doesn't work (for us and for them):

Strengths and Weaknesses:

Components of the deal, situation, relationship, experience that are/are not in your favor:

Team:

Who are you dealing with on the other side?

How do those people operate?

What does their prior experience tell you?

Roles and responsibilities of the people on your team:

Action Planning

Strategy:

The plan to achieve your goal, including timing and next steps:

Scripting:

Bullet points for message or proposal you want to make, including questions you want to ask.
If possible, have someone act as your devil's advocate:

Updates:

Add conversation notes, with dates, as situation progresses.

If there is any doubt in your mind about the importance of a checklist, consider my partner Jeff Cochran's story about the “Pilot's Checklist.”

Pilot's Checklist

After college, I joined the Peace Corps and was assigned to work in Nepal. As you might imagine, traveling in this tiny Himalayan country could be extremely arduous at times. The village I worked in was 200 miles away and was 19 hours by bus to the capital city Katmandu on a good travel day.

However, there was a tiny airport near my village that had flights to Katmandu once per week. This airport was not the kind most people are accustomed to. The runway was a dirt strip in the middle of a field, where goats had to be moved out of the way whenever a plane had to take off or land.

Needless to say, my first flight from there was memorable. The plane was a tiny four-passenger puddle jumper, the kind amateur pilots use to learn how to fly. I walked out across the dirt runway/goat path to the plane, the pilot took my bag and put it in the little hold beneath the fuselage, and I climbed up all three steps to get on and into my appropriately tiny seat.

As I buckled my seatbelt, I saw the pilot reach beneath his seat and take out a clipboard. He started reading whatever was on the paper and I started to panic. If he doesn't have a whole lot of experience and is just now reading up on how to fly the plane, we're in big trouble. I leaned over and tapped him on the shoulder.

Me:

“Hey, how you doin'?”

Pilot:

“Good, sir, how are you doing?”

Me:

“I'm fine. What's up with the extra reading material?”

Pilot:

“Ah, it's just my checklist.”

Me:

“How long have you been flying?”

Pilot:

“Over 20 years.”

Me:

“And you still need the checklist?”

Pilot:

“Yes, it has key items about the plane that as pilots we shouldn't overlook.”

Me:

“And you still need that after 20 years?”
The pilot turned the clipboard toward me and pointed down the list, “Would you want me to overlook anything on here?”

Me:

“Nope. For my money you go ahead and check: = Check away!”

Jeff's story always reminds me of how simple but essential checklists can be, no matter how experienced or knowledgeable a negotiator, or a pilot, may be. That pilot's checklist story hit even closer to home for most of us when Sully Sullenberger landed a plane in the middle of the Hudson River in New York after an impact with geese caused a mechanical failure. The most essential point Mr. Sullenberger made about that landing was that they were fully prepared. The pilot's checklist was so ingrained as part of their operating procedure that during the emergency the pilot and crew didn't have to think about what to do, just how to do it.

Now let's take the pilot's checklist concept in other life situations. A sports team practices based on its playbook before every game. An actor or actress reads the script and the director's notes over and over before going on stage. When conducting our business negotiations, many busy people tend to skip information gathering and planning steps and wing it despite knowing better. Why? Because preparation takes time and it isn't fun. So they spend as little time on it as possible and hope that they will still end up with a positive result.

That thought process makes no sense. Preparation is the only aspect of a negotiation you totally control. Everything else is, to a greater or lesser degree, out of your hands. Think like a pilot and go through the Preparation Checklist and you will maximize the likelihood that you clearly understand what you know and what you still need to find out. Use it to make sure you don't walk out of a meeting saying, “I can't believe I forgot to ask them about…” or “Why didn't I give them information on…”

The most systematically prepared people have the best chance at negotiation success. Embrace the grid that follows as you pilot your negotiations.

A Case Study: The Sur-Real Sales Challenge

To see how practical and helpful the Preparation Checklist can be, what follows is a sample of a Preparation Checklist filled in by participants in one of our seminars, based on the information in the case study below. For another example of following the eight steps of the Preparation Checklist, see the Major League Umpires story in Chapter 12.

The Background

It's June 5th. You're the director of corporate sales for the Virginia Dunkers, a franchise with one of the strongest brands and loyal fan bases in professional basketball. Your job is selling advertising to corporate sponsors for the team's media properties (TV, radio, Internet), special programs/promotions and events, and within the arena (signage, hospitality, in-game features). The Dunkers' fan demographics are highly educated, moderate to high incomes, largely male, ages 18–49. Advertising initiatives directed to the Dunkers' fan base have been very successful at helping companies increase brand awareness and sales, particularly for new product launches.

Here are three success stories: Shade-O, ultraviolet transition sunglasses, generated additional revenue of $450K/year for three years to their introductory campaign via the Dunkers venue. XPlay, a fantasy league, saw revenue of $575K/year for five years, thanks to its Dunkers-based marketing. Both companies invested in programs utilizing video media, signage, hospitality, and in-game features. Blasto Chips invested $120K in a promotion for Dunkers VIP ticket packages through in-store promotions resulting in the company's highest fourth-quarter sales to date.

However, there have been some marketing disappointments. HomeGame, mobile phone sports apps, committed to invest $500k/yr for five years, but due to missed deadlines, unacceptable creative materials, and poor early sales results, the client cancelled after one year. Buzzzz, the energy drink company, planned to spend $300K for two years on in-arena signage, but has not seen an impact on sales and is now considering terminating its relationship for the upcoming season.

The team owners are putting heavy pressure on you to increase ad sales, generating at least one major new Dunkers marketing partner with a minimum spend of $400K/year. You're thinking, “Where am I going to find a $400K advertiser?” when your phone rings. It's Nick Blitz, president of ADZrUS, a major advertising agency. He wants to explore an ad buy for his new client, Geek Wilson, and his latest digital breakthrough, Sur-Real, a virtual entertainment system due to hit the Southeastern market December 7th, one month after the Dunkers' first regular season game. You schedule the appointment and start your research.

Nick Blitz is a 40-year-old ad agency pro, known as “the ad man with the golden touch” for his successful product launches. He has an affinity for highly targeted marketing, sometimes through sports associations, sometimes via other narrow channels such as Internet media. His most recent such success was the rebranding of Metro Bank, introduced during a hockey all-star game about a year ago. His buy for the bank included in-arena advertising, an in-game TV spot, and the offer of a premium incentive for every new account opened. Within two weeks of the intro, the bank opened 2,500 new accounts with deposits totaling $2 million, plus steady increases since (in the face of declines at competition). But this targeted approach (vs. mass media) carries risk as well. Blitz's launch of a recent album by the band, Sludge Factory, via Internet streaming radio ads, fell flat with sales of fewer than 2,000 units.

Geek Wilson is a digital whiz kid, a genius at developing products that consumers become addicted to. Historically he has been reluctant to spend large sums of money on advertising because he can't identify quantifiable ROI. As a result, his products have never been market leaders but he is extremely proud of his latest invention and wants his personal profile associated with it.

Sur-Real is a compact, portable entertainment and communication system delivered by surround-type goggles. Sur-Real can download music and movies, play video games, be used as a cell phone, and utilize business software and email. Target market is primarily male, 18 to 35, moderate to high-income. Geek Wilson is not a great believer in expensive, traditional mass media, feeling its waste coverage cannot justify the costs. Blitz and his agency launched a wireless mobile phone/entertainment product that was considered revolutionary a few years ago (the Mobile Tainer) with a sports franchise in another area of the country. That deal was closed when that sports franchise used all the technological bells and whistles their arena had to offer in a live demonstration.

That's a snapshot of the situation. Now you need to prepare for your meeting with Nick, his client Geek Wilson, and his CFO, Suzy Slasher, who always demands a 10 percent proposal reduction. Available Dunker's inventory and pricing:

Six pre- and post-game radio spots for full season—$25,000 per full season spot
Three pre- and post-game TV spots for full season—$50,000 per full season spot
In-arena advertising: One Video Board Rotating Feature, all home games—$100,000
In-arena advertising: One permanent ad near Jumbotron, all home games—$125,000
Two game in-arena product demos (includes five booths)—$125,000
Forty premium Season tickets—$10,000 each (four-ticket minimum)
Two skyboxes for all home games—$125,000 each

Based on 82-game season—41 home games.

*The Sur-Real* Sales Challenge Prep Checklist**
Note: You may not have all the previous information at your fingertips to fill in your Prep Checklist. You'd have to do research, fill in information, probe, fill in more, and so on. The Prep Checklist is a living document, updated as new information is gathered, the situation changes, and the negotiation proceeds.
Information Gathering

Situation Summary: Define the situation and objectives for this negotiation. Include who, what, when, and why. [Incorporate the background facts above.]

Precedents: Deal comparables (for and against you):
	For You: Shade-O—$450K/year—three-year deal XPlay—$575k/year—five years and ongoing BlastoChips—$120K—highest Q4 sales using just in-store promotions
	Against You: HomeGame—$500K—five years, cancelled contract after one year because of Dunker's failures, which included creative miscalculations, missed timelines, and poor sales results. Buzzz—$300K—two years ongoing, in-arena advertising program has not seen strong sales results, likely because it only purchased signage and no other inventory (i.e., TV, radio, tickets, and so on).
Related situations/deals that you can learn from in order to model your strategy. Nick Blitz and Metro Bank—in-arena advertising, in-game TV spot, and account opening premium resulted in 2,500 new accounts with deposits of $2M in first two weeks of grand opening. Nick's client Sludge Factory band sold only 2,000 units of their new release using just ads in Internet streaming radio. Suzy Slasher always wants a price reduction of at least 10 percent of the initial proposal. Nick Blitz and his agency launched a wireless mobile phone/entertainment product that was considered revolutionary a few years ago (the Mobile Tainer) with a sports franchise in another area of the country. That deal was closed when that sports franchise used all the technological bells and whistles their arena had to offer in a live demonstration.
[Their] Interests: Wants and needs of the other side
	Geek Wilson Would like to have his own personal profile associated with the product Get new product to market, gain high visibility fast, make Sur-Real market leader Make sound economic and marketing decisions, quantifiable ROI on ad spend Suzy Slasher Live up to reputation for delivering 10 percent reductions Nick Blitz Maintain status as leading marketing exec with successful track record, insure a hit, avoid a miss.

Alternatives Including Highest Goal and Walkaway
	Various deal structures (including Highest Goal and Walkaway) Highest Goal—525K total spend Walkaway—net 400K after 15 percent discount
Other options worth considering if this deal doesn't work (for us and them)
	For us: Offer attractive, one-time discount from standard rates Do a smaller deal as a test—with commitment to increase if successful Create a custom package, created just for this product intro, utilizing variety of Dunkers inventory and opportunities
	For them: Choose other teams Advertise in mass-media, other than sports Blend mass-media and Dunkers or other team media buy
Strengths and Weaknesses: Aspects of the deal, situation, relationship, experience that are/are not in your favor.
	Strengths: Good geography Your audience is the ideal target market for Sur-Real: Males 18–49, well-educated, moderate to high incomes Dunkers are a powerful brand and have a loyal fan base that has a strong affinity for the team's sponsors. Advertising initiatives directed towards Dunkers fan base have a strong track record of success in helping companies increase their brand awareness and sales during new product launches.
	Weaknesses: No past relationship with influencers or decision makers Failure of HomeGame and Buzzz partnerships could hurt if Blitz and Geek Wilson learn of them Geek and Suzy Slasher are reluctant to invest large budgets in advertising
Team: Who are you dealing with on the other side? How do those people operate? What does their prior experience tell you?
	Roles and responsibilities: Their team
	Nick Blitz—will lead day-to-day negotiations 40-year-old ad agency pro with an affinity for highly targeted marketing, sometimes through sports associations, sometimes via other narrow channels such as Internet media. Willing to take risks but wants to protect his “golden touch” reputation.

	Geek Wilson—Sur-Real developer Digital whiz/inventor, a genius at developing products consumers love. Personally not a good marketing communicator, historically reluctant to commit large sums of money on advertising because it is difficult to quantify ROI. Geek's first time working with Blitz and his agency ADZrUS.
	Suzy Slasher—Geek Wilson's CFO Prides herself on always cutting deals by at least 10 percent of proposal price.
	Roles and responsibilities: Your team
	Senior VP & VP, Corporate Sales/your bosses—decision makers on pricing levels and final deal approval. Director of Corporate Sales/you—face of the negotiation, handle day-to-day discussions, recommend final deal to your bosses.
Action Planning
Strategy: The plan to achieve your goal, including timeline and next steps.
	Initial Strategy Find out more about Mobile Tainer product launch. Try to learn more about Nick through other sports teams that have dealt with him (if appropriate). Research Geek's other products and overall success. Work on a program that stresses new product launch advantage of Dunkers' experience and demographics with the variety of media inventory that can be accessed for exposure, both in-arena and broadcasting opportunities. Factor Geek's desire for personal association with the product into the mix. Leave room in proposal for Suzy to do her work—at least a 10 percent cushion. Arrange for a telephone call or meeting to probe more fully as to their interests, get a sense of their budget, and to fill in gaps, if any. The involvement of Geek is important to the success of this campaign. We can facilitate his direct involvement, through personal appearances and hospitality opportunities so he can impact success, to cater to his ego, but to do so in a way that actually delivers results. We should open up by asking questions, to see what they (Nick and Geek) have in mind before we make any type of proposal, as we still have some gaps in the Prep Checklist. Consider a multimedia demonstration to the client live and in-arena.
	Estimated Timeline: June 5—Today, the day you got the call from Nick Blitz June 7—Start to gather appropriate materials and compile list of questions June 10—Meet with internal team to discuss deal Week of June 15—Conference call with Nick to discuss initial parameters and expectations. Probe for details Week of June 20—In-arena tour and in-person meeting with Nick and Geek Week of July 5—Tweak deal points and finalize proposal
	July 5–August 7—Negotiation period August 7—Agreement must be finalized September 21—Creative/ads must be completed November 7—Season starts November 21—Dunkers play rival Shooters (targeted night for product sampling) December 7—Product launches at retail
Scripts: Bullet points for message or proposal you want to make, including questions you want to ask. Add conversation notes and updates as situation progresses.
	Initial Script:
	Probing Questions: What is your marketing plan for Sur-Real? Product positioning, media plan, PR, promotional plans, timeline, and so on. What are your (marketing/sales) goals for Sur-Real? Retail sell-in, brand awareness, presence, sales at intro, sales at holiday season, sales year one, and so on. Tell us more about how the Mobile Tainer was marketed successfully. (Note: for Nick only.) What are you hoping to get from a partnership with the Dunkers? What else? What's most important to you? Why? Do you have any other concerns?
[What follows is an example of a potential script that could be developed after you have finished your preparation and probing and are ready to make a proposal.] We are glad that you helped us understand what you are looking for from this relationship. The Virginia Dunkers can offer Sur-Real an unparalleled opportunity to reach its target audience: males, ages 18 to 35, well educated, with high incomes, the most likely and influential buyers. The Dunkers can provide Sur-Real with a direct link to its primary target customers through a unique promotion that will allow Geek to cobrand his product with the power of the Dunkers name in an exciting and cutting-edge launch via our home-arena venue. To create maximum impact and immediate penetration, we recommend the following forms of advertising. This package combines TV and radio pre- and in-game advertising with in-arena signage, utilizing live, real-time presence that will not be delayed by consumers (recorded and deferred for later viewing), as well as a hospitality/entertainment component to impact key retailer relationships (where Geek can meet personally with key accounts to convey his passion about Sur-Real). Two pre- and in-game radio spots for full season—$50,000 Two pre- and in-game TV spots for full season—$100,000 In-arena product sampling for Sur-Real (five booths, all home games)—$125,000 Permanent ad adjacent to Jumbotron, all home games—$125,000 One skybox, all home games—$125,000 Total Package Price = $525,000 [The scripting portion of Action Planning is a chance for you to get your ideas on paper and, if possible, have someone “Devil's Advocate” your strategy and approach. You don't need to write out a movie script; bullet points are enough, unless you're someone who needs greater detail.]

Confidence Is the Secret Weapon (But the Real Secret Is That Preparation Is the Key to Confidence)

If you're prepared, you can go into the most challenging negotiation with confidence. You can accomplish almost anything. As demonstrated in the preceding case study, preparing opens the door to raising confidence and increasing the likelihood of success in the most challenging negotiations. Preparing even works in the context of the reality television world. Witness the work of contestants on the network television show Shark Tank. They're out to win over the “Sharks” and gain public support through diligent preparation. It just so happens that the preparation steps the successful contestants took mirror the steps of the Preparation Checklist. The following story is taken from an essay in the Fall 2013 Wharton Magazine. (The parenthetical notes are ours.)

Guppies in the Shark Tank

The popular show Shark Tank invites inventors to come pitch their products and services to a group of seasoned investors who will each take a turn crushing people's dreams or making them an offer to invest in their business. Don't mind the 7 million viewers that are watching on TV as well!

One such pair of inventors was Ryan Frankel and Kunal Sarda, Wharton alumni, who came up with a language translation community that offered real time access to human translators. They did such a good job in their presentation that Sharks were fighting over who was the best partner for them. Between the Sharks and other investors, they raised $1.5 million in investment capital.

Mr. Frankel wrote in hindsight that the reason they were so successful in getting investors to buy-in (outside of developing a good service) was due to their incredible level of commitment to preparation.

“We asked questions to understand what was important to each investor [Interests]. Before the negotiations, we researched their past investments and interests [Precedents]. We looked at past comments made by the Sharks and talked to people who worked with them so we could understand what factors made a deal attractive.…We determined the least we would accept and were prepared to walk away [Walkaway].…We tried not to focus solely on the money [Alternatives, Interests]. In case we received competing offers, we evaluated the nonmonetary assets each investor could add, such as areas of expertise, business contacts, and specific skills [Team, Alternatives].”

This is preparation excellence. They set out to understand who they were dealing with and what made them tick instead of simply thinking about themselves and their own interests. They took the time to think about their walkaway position as well, so that in the heat of the moment, they didn't make a bad deal.

On top of that, Mr. Frankel proactively decided that they would not let emotions get in the way and cause them to become victims of deal fever [Strategy]. Deal fever is when people think they are getting closer and closer to making a deal, they push way past their walkaway position and make bad deals because even if it's a bad deal, it's somehow better than no deal.

And lastly, Mr. Frankel and Mr. Sarda very astutely realized that the only way to maximize their chances of keeping their emotions in check was to “practice, practice, practice, and more practice [Scripting]. We called on many of our friends for mock negotiations, and while we're still working on this aspect, we felt the practice significantly improved our mental readiness for negotiation.”

Sources of Information

Access to information has increased exponentially since the 1990s when the Internet began to gain prominence. Think about how buying a car has changed. We used to walk into dealerships blind; now we have pricing information from Kelley Blue Book, TrueCar, and Cars.com, reviews from Car and Driver and Consumer Reports, and myriad other websites and resources that allow us to learn almost everything we want to know about a car before we enter the showroom.

Now, think of your negotiation. You may know what information you need in order to be prepared, but where do you go to find it? There are three basic routes to information.

Reference Sources. Start with generic information and work your way to the specific. Depending on the category of your negotiation—buying, selling, or leasing, bidding and awarding contracts, royalties and residuals, personal services, dispute resolution, business succession, divorce, or family decision making—you want to hone in on the data most relevant to your deal. Begin with search engines such as Google or Yahoo!. They will point you to relevant websites, news, images, publications, and so on. Then, use these same search engines to find social media pages for the organizations or people you are dealing with. You may be surprised by how much you can learn from a LinkedIn, Twitter, Facebook, Pinterest, or Instagram account. Finally, consider trade publications, industry reports, blogs, and other reference sources available both online and offline.
Networking. You're surrounded by experts. First, there are experts from inside, that is, those on your team—business partners and investors, coworkers from your own company. Do not forget to leverage their experiences. Then, there are experts from outside—corporate lawyers, real estate lawyers, tax accountants, stockbrokers, financial advisors, insurance and investment advisors, advertising and marketing practitioners, lobbyists, any of the myriad professionals whose advice you heed. Think about all they know about you and your business. Then multiply that by all the clients and businesses they serve. These and other experts comprise your personal knowledge network, a human library. Use it. Your accountant may have direct experience in the industry in which you're negotiating. Your investment advisor may have heard about shakeups in the boardroom of the company across the table from you. A great place to start is LinkedIn. Who do you know? And who do they know?
The Other Side. There's another party in your network, one so obvious that it is often overlooked. Don't forget the one with whom you are negotiating—your boss, your investors, your potential client, whomever. Who knows more about the situation than the other side? Don't ignore this obvious source of knowledge. Probe them to learn more. But, be careful of the information they provide as it comes with a potential bias. Some negotiators fear that probing the other side makes them look weak. If done where appropriate, it can not only help gather important information, it also acknowledges that the other side is knowledgeable, which is an important reality to keep in mind whenever negotiating.

With each source of information and the information provided, turn back to the Preparation Checklist for the questions to answer and fill it in as you get the information.

Sources of Information Checklist
Reference Sources		Network
	___Online/Offline ___News ___Articles ___Blogs ___Company Websites ___Press Releases ___Videos (YouTube, Vimeo) ___Social Media (Twitter, LinkedIn) ___Subscriptions (D&B, Hoover's)		___Business Partners and Investors ___Coworkers ___Clients ___Suppliers ___Competitors ___Professionals (Accountants, Lawyers, Investment Advisors, etc.) ___Friends

Everybody Has an Arnie in San Diego: A Real Estate Story

I was involved in a property negotiation that turned almost 180 degrees as a result of tapping into one source of information. One day, out of the blue, I got a call from a real estate client from my days practicing law. He opened with, “Ron, I need your help.” He reminded me of a piece of property between Baltimore and Washington that he'd bought for $3 million six or seven years earlier. I had assumed he'd sold it long ago. Well, he would have but, unfortunately, a real estate slump had set in shortly after he bought. On top of that, he'd sunk $600,000 to $700,000 in taxes, insurance, and other expenses. In all that time, the land never moved. He got no offers, no inquiries, not even a lukewarm feeler.

But the day before he called me, he had gotten a call. Somebody was interested. He said, “I'm so excited, I just don't want to blow it. Will you help me make the deal?”

I said, “You know, I'm not the one to do the legal paperwork anymore, but I'd be happy to negotiate the deal.”

“Great,” he said, “What do we do now?”

I said, “We talk,” meaning, we get prepared.

I asked what we knew about comparable land prices in the area. Since only a few parcels had been sold in recent times, we got a thorough history, none of it indicating an upturn in prices. We knew that my client had his parcel on the market for $4.4 million. But he'd held it a long time and that was, in effect, his negotiation weakness.

I asked him everything I could about the prospective buyer. To protect everyone's privacy, we'll just call them the San Diego Electronics Distribution Company. I asked him what he knew about them.

“Not much.”

I said, “Okay, let's find out what we can.”

The San Diego Electronics Distribution Company was a public company, which was good news. It meant we had immediate access to information—annual reports, earnings statements, press releases—the works. They had only gone public a few months earlier so they had a lot of cash on hand from the stock sale. We looked at their locations. They not only had a distribution center in San Diego but they also had them near Chicago, in Texas, Mississippi, and Florida. They had expanded across the country and their literature said they planned to expand further, into the Mid-Atlantic region, which is the corridor from Philadelphia south to Northern Virginia. More good news: Baltimore/Washington sits squarely in the middle of that territory.

Little by little, we were gaining information and, therefore, strength. I said to myself, what else can we learn? And how else can we learn? That's when I thought of my friend, Arnie, who had moved to San Diego to run a network affiliate television station. TV general managers have a way of knowing lots of people in a town, whether it's by selling to, buying from, or serving the community with the important players. So, I called Arnie—one call to one person. I'm not advocating shortcuts. But I do want to emphasize the power of using your network. In this case, all it took was one call.

I asked him what he knew about San Diego Electronic Goods Distribution Company.

He said that since they were a wholesaler, they didn't buy advertising time, so he didn't know them as a customer. “But,” he said, “it's amazing that you'd ask me about them right now.”

“Why?” I asked.

Arnie said, “The executive vice president of the company sits on the board of the Chamber of Commerce with me. At the last meeting, he leaned over to me and said, ‘since you're from Baltimore, can you give me the names of some residential real estate brokers in the area?’”

I couldn't believe what I was hearing. The executive vice president of our prospective buyer wanted the names of realtors in our area. Somebody from his firm was contemplating a move, maybe several somebodies. In a very short time, we'd gone from knowing nothing to knowing a lot.

My friend added, “Oh yeah, Ron, the exec VP also asked me for the name of a good lawyer in Baltimore. I told him I didn't know any but I gave him your name instead.” (I don't have to add that Arnie is a bit of a wise guy.)

My client and I went to the meeting. Instead of being desperate, we were prepared. (Well, my client was still a little on the anxious-to-sell side.) The other side walked in and started by telling us our asking price was ridiculous (which it wasn't, based on comparables). We reminded them that our property already had railroad sidings leading in and easy access to highway truck routes. They reiterated that our price was out of line and added that their company may just concentrate on expansion in the Deep South, rather than in our geography. That statement didn't leave us feeling good about them from the standpoint of integrity. Their own literature and our information indicated otherwise.

But, do I call them liars? Never. We set our defensive strategy but we don't poke holes in their story because, to do so would just make communication all but impossible. This was, evidently, their idea of shrewd negotiation. Instead of challenging them on it, I simply said that we respected their business needs. In fact, we too were considering alternatives such as subdividing the property (which, in our case, was true). So, they should do whatever they have to do. Just let us know, in case we haven't already sold our property, if they should decide to pursue moving into our area.

At that point, I was losing circulation in my leg due to my client squeezing it so hard he cut off the blood supply. Obviously, he didn't feel quite as cool about this as I did. But he did keep quiet; I should say, he kept quiet until we walked out of the room. “Ron, Ron, Ron, why are you taking such a risk? They were my one and only buyer!”

I said, “They still are. Yes, we took a risk. But given what we know, it's a low-to-medium risk, not a high one.”

You always take a risk when you negotiate. But the more prepared you are, the lower the risk. In this case, we knew there wasn't an appropriate additional location in the Deep South. They were already there. They needed to expand north, to the Mid-Atlantic. And we knew they were house shopping for their people in our area.

We waited. And we waited. To my client, every day of silence was proof of his worst nightmare, a blown deal. He'd heard nothing on this property for years and now he was hearing nothing again. On the eighth day, the San Diego Electronics Distribution Company called. They wanted to talk. No, they wouldn't pay $4.4 million, but they did make an offer. We countered and eventually settled on $3.9 million. It was only a little more than what my client had sunk into the property. But it was at fair market value. And it was more than he had expected.

The deal was done. My client was ecstatic. All because of one phone call to one source of information in our network. Sometimes the key source will leap to mind; sometimes you have to dig for it. But before you sit down to negotiate, when you're preparing, ask yourself, “Who's my Arnie in San Diego?”

Refresher

Chapter 5: Prepare…Or Else

How do you feel when you're unprepared?
Scared, outmatched, overpowered, anxious, angry
How do you feel when you're well prepared?
Confident, like a winner, strong, calm
What are negative results of being unprepared?
Embarrassment, a bad deal, no deal.

Why People Don't Prepare

I know it already. I don't need to prepare. Beware of surprises. Everyone needs to prepare.
Not enough time. Preparation is a time saver. The more you know, the less time it takes to explain or understand or correct mistakes.
Don't know how to prepare. Valid but unacceptable. Use prep time to maximize exposure to relevant data.

A Systematic Approach—Eight Prep Steps

Six Information Gathering Steps

Situation Summary
Precedents
Interests
Alternatives (Highest Goal/Walkaway)
Strengths and Weaknesses
Team

Two Action Planning Steps

Strategy
Scripting

Confidence—The Secret Weapon

The more prepared you are, the more confident you feel, the better you negotiate.

Sources of Information

Reference Sources: online digital, industry publications, libraries, public data.
Networking: who you know, lawyers, CPAs, brokers, marketers.
The Other Side

*“See? I told you the negotiations would be a lot more fun without a battery of lawyers.”*

Jack Ziegler © 1998 from *The Cartoon Bank*. All Rights Reserved.