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Understanding and Creating Value

Keith Stacey
Advice For Negotiators On Understanding And Creating Value

Nothing removes the pain of a remembered hurt and similarly nothing removes the embarrassment of a past mistake or transgression. The mere thought of which brings colour to your cheeks and a desire to squirm in your seat. Our recall of these past events serves to remind us not to repeat the same error. A reason to recount the error though, is to provide advice to others in learning from and not repeating our mistakes.  

In this fashion, I share my story of personal embarrassment, in the hopes that it will provide advice to negotiators on the importance of understanding and creating value in negotiation... 

The impending arrival of our first child made it necessary to sell my much-loved trailbike. I advertised it after researching the market and priced it for a quick sale with just enough margin to withstand a determined haggler. A buyer duly arrived and after a brief haggle, a price was agreed at which I was prepared to sell. Then it started. The buyer noticed that my full-face helmet was on the bench and said, “You won’t be needing that anymore. Can you include it in the deal?”. I couldn’t fault their logic and agreed.  

The next thing was a full set of leathers which were again included in the deal at no extra price. It wasn’t until he spotted some spare tyres in the corner of the shed and asked again, that the penny dropped. I was giving valuable stuff away! Things that he would normally pay hundreds of dollars for.  

As a novice negotiator, I had valued these things at what they were currently worth to me. Wrong; a skilled negotiator always values concessions by asking what they are worth to the other party

This value differential between buyer and seller provides great opportunities to add value in commercial negotiations and is one of the key insights in the Scotwork negotiation training - as a recent participant relayed to us. She was tasked to upgrade her company’s ageing forklift fleet. She advertised the old equipment for sale and a buyer was found and a price agreed. The buyer then inquired as to whether there were any spare parts for the forklifts. There was indeed a significant stock of spares.  

Now consider the value differential. The company selling no longer has any use for spare parts for forklifts they no longer own. The buyer, on the other hand, considers the spares as highly valuable because due to the age of the vehicles, parts are hard to obtain.  

The buyer was about to say, “You may as well take the spares as we have no use for them.” Then she remembered in trading, the key consideration is the value to the other party. Realising this, she placed a realistic dollar value of her ‘worthless’ spares, which the buyer was willing to pay. Both parties were now better off, as the seller had some extra cash, and the buyer had a stock of hard to source spares which increased the overall value of the fleet of forklifts. 

So, remember the advice of the master negotiator who says; the key to trading is recognising the value of what you trade in the hands of the other party. 

Keith Stacey
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