Negotiation Question

[alyssamma]

All,

It seems that whenever someone posts a "is this a good deal" type question, regardless of the numbers, the replies always have the recommendation to offer less.

I'm interested in hearing from people who *don't* do this. I know that might make this an empty thread

I'm asking because in my opinion, the best deal is when it is win-win and not zero sum. If you both walk away feeling good about the deal, it seems, to me at least, that things will work out better in the long run.

Note, I am *not* talking about paying more than you should. I'm talking about paying a fair price for something.

For example, the seller may throw in some extra product, be more willing to answer the phone if you call with a question after the sale, etc.

Anyway, thoughts/opinions welcome.

Thx.

Kevin

[guile]

Good post! I am always looking to get the most for my money but I also realize there is another person on the other end of "the deal". It's important to keep that in mind when considering your offer price.

g

[BluePlate]

Kevin,

I agree, one of my biggest purchased routes I paid a little more for the total route then asking price.  The seller agreed to finance the route over a 12 to 14 month period of time.  I figured it would have cost me more to go to a bank.  The route was very solid.  I think we walked away with a win win on both sides.

[tedk]

For me it often depends how much I need a machine. If I am buying on spec I am more likely to press a lowball offer. You can get some really good deals with a lowball offer and the guy who really wants out may be quite happy. If I have a specific need, a reasonable price works fine for me too. I adjust my thinking by the type of equipment and the immediacy of my need.

Merry Christmas to all.

Ted

[G-man422]

Great posts guys.  I think of myself as a "wholesaler" of machines.  I buy cheap and then either fix and use or sell for a profit.  Obviously if the seller doesn't need cash fast they will reject my offer, but if they need to sell fast I'm there (and the seller and I are both happy like Ted said).   

[guile]

For me it often depends how much I need a machine. If I am buying on spec I am more likely to press a lowball offer. You can get some really good deals with a lowball offer and the guy who really wants out may be quite happy. If I have a specific need, a reasonable price works fine for me too. I adjust my thinking by the type of equipment and the immediacy of my need.

Merry Christmas to all.

Ted

I think the same way. If it's something I TRULY want, I will try to make it work. If it's something that I'm not to hot for, I'll take my chance and lowball it. The person selling may be MORE then happy to take lowball $ then nothing at all. Nothing wrong with "taking your shot". I just got a few really good deals this way. They weren't routes, per se, but people trying to sell equipment. They were more then happy to get rid of the equipment at the price I offered.

g

[philo]

Part of what I percieve to be a problem out there is that people think their machines are worth more than they are. Often times they are unrealistic in what they are asking. The 'lowball' offer is sometimes tough to take but is more often realistic than what the seller is asking, IMHO.

 

Regards,

 

Philo

[alyssamma]

Phile, I understand and agree with your point. However, I was talking about the "knee jerk" reaction of telling people to lowball - even when the deal is fair.

You are correct in that often times people overstate what something is worth. In those cases I do not believe you are lowballing. I believe you are offering a fair price.

For this post, however, I am specifically talking about when the asking price is fair, still trying to get a "better" price out of the seller.

Kevin

[Bravo Duck]

A lot of times you don't know if the deal is fair or great or poor going in. If the deal includes equipment on location then you don't know if the revenue numbers are accurate for a couple of months.

People have described their equipment to me as being in "great" or "excellent" condition and when I got there to see it, it wasn't acceptable to me to even put on location.

This is business, under normal circumstances its their job to look out for their best interests and your job to look out for yours. If you reach an agreement then everything is honkey dory. The exception is when the other party is under duress, ( the baby needs an operation or something). I know at what level I need to get into equipment to make it worth my while messing with it so I would pay someone under duress that amount even if they were willing to accept less.

[Jax Snacks]

I use ebay and CL to help determine the fair market value of equipment. I also encourage the other party to check out those sites as well.

Most Vending Wannabees simply can't accept the fact that they grossly overpaid for their equipment. That $600 8-select U-Turn is really only worth $150 at the most. The $350 biz-op triple head is really only worth $90. The $600 Shootin Hoops is really only worth $80. On and on...

The originally paid price of anything (house, car, stocks) has NOTHING to do with its fair market resale value.

I know none of the previous route owners were completely happy with the amount I paid them. But it was more than anyone else would offer them since I based it on fair market value. Some of those deals took 6 months to 1 year to close just to get the seller to accept the harsh reality that they overpaid and will never recoup their original investment.

Never pay for someone Else's mistakes. (Unless of course they happen to own a bank, insurance company, investment house or a car manufacturer!)

Happy Holidays

Jax

[alyssamma]

Tom/Jax, again, I agree with what you say. However, I am talking about the situation where a fair price *has* been determined and set by the seller. In those cases, there are still calls to lowball.

That being said, I am seeing a trend here. Perhaps the answer to my question is that since sellers always overstate things, a buyer will always try to lowball, regardless of the "fairness" of the existing deal.

Again, I'm not talking about the guy who is selling a Vendstar for $150. I'm talking about the guy who is selling something for a fair price.

Regardless, the responses on this thread have been interesting to me

Kevin

[Bravo Duck]

 However, I am talking about the situation where a fair price *has* been determined and set by the seller.

Kevin

 

The value of a product is determined by what someone is willing to pay for it.

The buyer will always determine the "fair price" not the seller. Lets say a Vendstar operator decides that $150 is a fair price for his machine because he paid $300 for it. What happens? No one buys his machine unless he lowers his price or untill a clueless buyer is found that agrees that $150 is a fair price (not likely).

Ideally both parties have complete knowledge about value and other factors regarding a transaction. Usually this is not the case and one party has a superior understanding of the situation (think car dealers). The one with a superior understanding has a negotiating advantage.

[alyssamma]

Tom, ok, now I disagree with a post

The value of a product is something hard to quantify, but a fair price is different from the value. The *value* is determined by what someone is willing to pay. But a fair price is independent of that. For a perfect example, consider profiteering. In those cases, the *value* has gone up, but the fair price has not.

You and I can disagree on the value for an item. It may be worth more to you than to me, or vice-versa. But that has no bearing on a fair price.

Market conditions will, of course, determine how close the selling price is to a fair price. In a seller's market the final price will be more than the fair price. The reverse will be true in a buyer's market.

Understand that I am talking about *price* and not *value*. The buyer does not "determine" the fair price. The buyer can determine the value of the item to him/her, and what he is willing to pay for it, but that has nothing to do with a fair price.

Of course, the exception would be a buyer who has the same knowledge as a seller about a product. In that case the buyer can determine a fair price.

What I am talking about is that exact situation. The buyer knows what a fair price is. The seller has offered that price or even lower. There are several posts here where that situation occurs. In each post, people say "lowball".

And this is what I am trying to understand. Why, when a fair price has been determined, will people try to lowball.

I'm not saying this is a "wrong" thing to do. In fact, I agree with Ted's post and will often offer lower for something I don't "need".

But for things I do need, I always try to offer a fair price. Again, not saying this is right/wrong, just trying to understand some different viewpoints on the matter.

Kevin

[Bravo Duck]

What I am talking about is that exact situation. The buyer knows what a fair price is. The seller has offered that price or even lower. There are several posts here where that situation occurs. In each post, people say "lowball".

Kevin

What we are talking about here is the definition of the term "fair value" which is very subjective and different for everyone.

I've noticed that the condition of machines is very subjective and different for everyone as well.

Here is a situation that happened to me on monday in which "lowballing" worked out well for BOTH the seller and myself:

A guy who lives approx. 3 hours away from me advertised some Northwesterns in "great condition". We agreed on a price which was 1/2 his original asking price. Before we came to an agreement  I grilled him on condition again so he walked into his garage with the phone and described what he saw, This one machine has some M & M residue and there is a scratch here and there but otherwise they are clean and location ready.

We agreed to meet at the state line which is about the half-way point. When I got there and we unloaded his truck the equipment wasn't even close to the condition he described. Everything was dirty and requires cleaning, some cracked globes, some wheels corroded from peanuts, etc... .

If I had agreed to pay this guy the full "fair value" of this equipment then I would have turned around and walked away and he would have been mad to say the least. But because I had lowballed him the deal was still doable.

Before I left home I put the agreed upon price in my right shirt pocket, in my left shirt pocket I put an extra $100. If the equipment was as described I would have gladly have given him the extra $100.

As it is, going in to 2009 I will have some equipment into which I have some money and some "sweat equity".

 

[alyssamma]

Tom, the situation you describe isn't what I'm talking about

However, your response is similiar to what other people have said. They lowball because they don't believe a fair price has been reached. In fact, you said you would have given an extra $100 if the equipment was as described, which implies the agreed upon price wasn't fair - or at least could have been more fair

So maybe that is the nature of this business. Things are never as described, so you lowball and then everyone is happy.

[Jax Snacks]

Kevin,

I am a bit confused and I am not sure where you are trying to go with this! So let me ask a few questions.

Are you asking when lowballing should be employed as a tactic in the negotiations? You mentioned needs vs. wants as an example.

Or are you questioning the moral and/or ethical aspects of lowballing? Since you are essentially taking advantage of the buyers desperation to sell and/or their lack of competing offers.

There are dangers to lowballing as you know. You may insult the seller and loose the deal. So if you really NEEDED it, then it was a bad call. But if you just WANTED it, then it may be a risk worth taking.

If it is your conscience that you are concerned about, then this just falls in line with all of the other discussions on "doing the right thing".

As stated before, many times you can't trust the seller and the lowball price is the fair price. We could go on-and-on with this since it is very subjective. I am sure Ralph Nader would have a very different view point on this topic than Donald Trump.

IMO, negotiations are like playing a poker game. The experience level, ethics and tactics of all players can be vastly different. Not sure if I said anything worth talking about, but this is something each serious vendor needs to consider someday as locations get harder to obtain and route purchasing is the only viable option in a saturated market.

Jax

[alyssamma]

Jax, I like the Nader vs. Trump comment

I guess maybe my question wasn't too clear. I'm not asking about moral issues or when you should lowball.

It is just that there are lots of posts that say "is this a good deal". Sometimes the deal is good - sometimes great. Othertimes the deal is horrible.

However, regardless of how good the deal is, there are some who will still suggest lowballing.

For example, 10 XYZ EasyPros for $100 (i.e., $10 a machine) still in the box - never used. Obviously this is a great deal. I can promise you that someone will say, "offer $75".

So, that is really my question. Why the urge to always lowball?

Based on the responses I've gotten so far, I believe that most buyers instinctively assume two things:

1) The route doesn't make as much as the seller states or the machines are not in as good condition as the seller states.

2) The seller is asking more than everything is worth - see #1 above

So, based on that, the suggestion is always to lowball.

I don't think anything is wrong with this. It is really just a question of curiosity.

Kevin