One of the factors never to be overlooked in any negotiation is time. Time pressure works for and against both parties, often in interesting ways. Anyone who has been involved in union negotiations, for example, knows that the largest concessions always come just before the strike deadline. In fact, sometimes that’s the first time any concessions occur! Knowledge of the deadlines faced by the other party can be a powerful tool.
The pressure to come to an agreement is generally greatest on the party with the nearest deadline. Magazines are much more inclined to negotiate liberal terms for ad space the day before the issue closes than they are the week before. The prospect whose insurance policy is about to lapse is more eager to renew the policy than one with a 90 day grace period remaining. Know your prospect and know their deadlines.
One way to use time to your advantage is by making small concessions one at a time, drawing out the negotiating process if that is to your advantage. On the other hand, you may need to bring the deal to a close, in which case you may want to make a BFO, or best and final offer.
As a seller, though, don’t be surprised if the buyer calls your bluff. They have nothing to lose and plenty to gain by telling you your BFO isn’t good enough. If you back down and make a further concession, all you’ve done is prove to the buyer that you’re a bluffer—and that your word isn’t any good.
The time to make a BFO is when you discover you’re negotiating with yourself. You can tell that’s the situation because the other party isn’t offering any concessions—you’re the only one making any movement. It’s one of the most frustrating situations you can face. You make all the moves, getting nothing more than a “that’s not good enough” response from the prospect. The time to take a chance and make your BFO is when you have nothing to lose.
Dave Donelson distills the experiences of hundreds of entrepreneurs into practical advice for small business owners and managers in the Dynamic Manager's Guides, a series of how-to books about marketing and advertising, sales techniques, motivating personnel, financial management, and business strategy.