“Dickering for Dollars: How to Get the Most Bang for Your Buck”

Whether you’re hawking hot dogs or high-tech software, you must decide how much to charge. That means pricing yourself — the bane of many entrepreneurs’ existence.

There’s no easy way to figure out how to bid for business. Even the most confident business owners can turn to jelly when negotiating a contract, unsure how to tread that fine line between appearing too greedy and giving in too quickly.

"If pricing isn’t set by the market, you must invent a price," according to Steven Cohen, president of the Negotiation Skills Co., a consulting firm in Pride’s Crossing, Mass. "Entrepreneurs need to re-examine what they charge each time they negotiate."

Winning Strategies

Cohen encourages business owners to prepare to negotiate by knowing their "BATNA" (best alternative to a negotiated agreement). This may mean walking away if certain conditions aren’t met or settling on a future date to continue dickering.

Steer a negotiation toward your desired end point by using time and silence to your advantage. Cohen suggests applying the "fading opportunity" tactic, in which you set a low price in exchange for a prompt agreement.

Example: " ‘If you agree by 2:00 today, we can do it for $20,000 — or you’ll have to start over.’ Justify this one of two ways: You’ve been authorized by your partners to do this today, or your opportunity cost is lower if you don’t have to spend more time negotiating," advises Cohen.

Silence Is Golden

Finally, tap the power of silence. Don’t rush to fill every pause in the conversation. If you keep quiet after others stop talking, they may feel obliged to continue speaking — and reveal more of their biases or concerns. This, in turn, can help you craft a proposal that satisfies their needs.

In advising entrepreneurs, Cohen often corrects their misconceptions about what it takes to seal a deal. He identifies three mistaken beliefs that can lead unwary negotiators into trouble:

1. I shouldn’t volunteer a figure. "It’s common to think that the first person to mention price loses," says Cohen. "That’s nonsense. It’s really how you raise the topic that determines the result."

   In fact, it’s often wise to drop hints of your charges early in the negotiation process to see how the other person responds. Cohen calls this "trial ballooning." He suggests posing a question such as: "If we were to talk about a range of $20,000 to $30,000, how would that sound?" Once you get the buyer to agree to a price range, pinning down a specific number later becomes far easier.

2. At every opportunity, I must reinforce how great my business is. If you constantly insert another "commercial" for your products or services, you’ll lose chances to listen and learn. Too much boasting or self-promotion can drive away would-be clients.

   "This is especially important if you’re selling something intangible," says Cohen. "Give customers a chance to tell you how much they value what you offer."

   Advance the negotiation with questions, not statements. Ask: "What do you need this for?", "What deadline are you under?" and "How will this add value?"

3. I absolutely must get this order. That’s a dangerous attitude, because it will lead you to take desperate — and unnecessary — measures. Instead, accept from the outset that if you don’t reach an agreement, you’ll survive.

Writer: Morey Stettner