Business law 6.3

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You and Sally agreed to develop a negotiation plan, mapping out a strategy to purchase the Boca Raton property to establish the restaurant. After reviewing the market plan and the terms of the proposed agreement, you suggest to Sally that it would be great if the two of you could map out the areas you believe could be negotiated with the owner. The plan would provide you with a prioritized list of issues to facilitate an agreement with the owner. Sally tells you that she has a perfect tool for plan development. Sally has emailed you a copy of the mapping tools and asks if you would take a shot at filling it out. Compare your term sheet information and the owner’s positions listed in the Marketing Study for the property in Boca Raton (PDF).  In the negotiation matrix, map out the issues that you and the owner expressed in the marketing study.

You told Sally that you were going for a win-win in the negotiations. She recommended that you review the article below to learn the language needed to make winning arguments.

Read the following:

5 Win-Win Negotiation Strategies (Harvard).

https://www.pon.harvard.edu/daily/win-win-daily/5-win-win-negotiation-strategies/

Review the marketing information and the seller’s position concerning the property and priorities.

Complete and upload the Term Sheet (DOCX) answering the issues presented and include your principle objectives in the forms.

Read the Contract Negotiation Process (PDF).

Review this video:

Orange Example/Negotiation by Design (YouTube/7:46)

Upload the following documents:

The Learning Canvas Matrix

The Term Sheet

REAL ESTATE SALE CASE STUDY

Background

SALES INFORMATION

Property Location:

1424-1450 N FEDERAL HWY,

BOCA RATON, FL 33432

Price $5,990,000

Sale Type Investment

Cap Rate 7.01%

Sale Conditions Lease Option

Property Type Retail

Property Sub-type Restaurant

Less

 General Retail
Freestanding

 General Retail
Storefront
Retail/Office

 Office Medical

Building Class C

Lot Size 1.36 AC

Gross Leasable Area 7,615 SF

No. Stories 1

Year Built 1970

Tenancy Single

Parking Ratio 10/1,000 SF

Zoning Description B4

APN / Parcel ID 06-43-47-20-15-001-

0011

Date Created 5/29/2019

ID#: 16181065
Last

Updated: 6/18/2019

DESCRIPTION

Total 7615 Sq. Feet 6,000 Square foot Under Air, with a 1,615 square foot Outdoor
Covered Patio and deck for outside dining.

HIGHLIGHTS

 Local 24-Hour always open 30 year old diner chain currently in three locations

 Walking distance to Downtown and Mizner Park and the Museum. Additionally, the IPIC
Theater is just within half mile

 Property can seat 259 combined inside and outside, 93 Parking spaces and a covered
patio seating with a full bar and wine case set up

 Located on the FAU (Florida Atlantic University) corridor on Federal Hwy just north of
Glades Road with a B-4 Zoning

 Current tenant in building is relocating by August 31st, 2019 meaning this is a wonderful
owner/user OR investment opportunity

 Strategically positioned along heavily trafficked North Federal Highway with a Vehicle
Per Day count of over 34,000 cars

SALE NOTES

Free-Standing Restaurant Building, For SALE at $5,995,000 OR NNN Lease for $35,000

monthly, plus $4,200 in property taxes monthly Current Tenant Relocating by July 2019 or

August 2019. The property is offered for Sale or Lease By the Owner. Half A Mile North of

Mizner Park, Boca Downtown Museum, and IPIC Theater. Free Standing Luxury Building

recently renovated in 2013, In and Out. The current tenant operates 7 Days a Week, 24 Hours.

Tenant scheduled to vacate in July or August of this year, per request. Exterior covered Patio

and partially uncovered with Fire torches and Water Fountain. Full Bar and Wine Cabinet

Display area. Dining room Kitchen with Hood, separate Chef’s Kitchen with Hood and Main Line

Kitchen with On Demand Hood.

Brokers Representation of Property owners position

1) The Owners position: What do they want? Why?

The Seller would like to capitalize on his most profitable real estate holdings. Selling the

property at maximum return is the Owner’s ultimate goal, and she realizes that the age

of the building is eventually going to present problems in any future sale, even though

the building was recently completely renovated. The building owners’ interest is to sell,

preferably within the next two months, before or on the date of the current lease

terminates. If not, the Owner’s carrying cost increases since the building may go vacant

until she identifies a new leaseholder. A sale solves all of the Owner’s issues because

the price includes the Amortization of the building renovation costs in the asking price,

including a six-month lease recovery premium in the event the building was to remain

vacant until a sale. The Broker has stated that that the Owner would consider a lease

arrangement either a straight term or a Triple Net lease. There is also the option for any

variation such as a Net or Net-Net Lease with terms such as taxes, utilities,

Amortization of the renovation costs, and rent-plus percentage based on Gross income

from the Restaurant.

The property owner believes that the property fits well within Sally’s plan to establish a

new Restaurant. Great location, floor setup, lots of parking. The current tenant has had

an exceptional long-term reputation in the area, and the customer base should help

establish and carry over to the new Restaurant.

The though is that If the purchase price is too top-heavy, maybe they will consider the

NNN Lease options. There may be some room for negotiation on the purchase price,

but that depends on Sally’s costs model. There may be a slight margin based on the

carryover of the tenant or discounting the lease price if Sally assumes the final lease

period any holdover pass the lease period. Also, the cleanout costs are high, and

maybe if there was an assumption of that responsibility, there could be adjustments

made.

An assumption probably would make sense if Sally wants to get in early to renovate to

the floor plan and set up the kitchen and dining floor and start ordering and stocking

foodstuff.

The Owner believes that his walk-away alternative is that he will not go over a 20%

discount on all pricing terms. He is willing to carry the property until a buyer comes

along within, at least the end of the current tenant lease expires.

The Owner will discount the price of the sale by as much 30% net thirty-days if offered a

cash buyout and not have to wait for financing to take place.

The Owner realizes that the best solutions for both parties would be to reach a

reasonable price reduction with incentives to close early and turn lease period revenue

over to the buyer.

FINANCIAL SUMMARY (PRO FORMA – 2019)

Gross Rental Income

Annual $420,000

Annual Per SF 55.15

Other Income

Annual –

Annual Per SF –

Vacancy Loss

Annual –

Annual Per SF –

Effective Gross Income

Annual $420,000

Effective Gross Income

Annual Per SF 55.15

Net Operating Income

Annual –

Annual Per SF –

DEMOGRAPHICS

[1 Mile /]

HOUSEHOLD INCOME

$0K – $35K 32% $35K – $75K 34.4% $75K – $100K 10.2% $100K+23.4%

Income Thousand

$0K – $35K 1,775

$35K – $75K 1,910

$75K – $100K 564

$100K+ 1,299

$96,376

Average

AGE DISTRIBUTION

0 – 1920.1%20 – 2913.6%30 – 3914.8%40 – 4912.4%50 – 6420.8%65+18.4%

Age Year

0 – 19 2,869

20 – 29 1,934

30 – 39 2,113

40 – 49 1,763

50 – 64 2,962

65+ 2,618

41.4

Average

TRADE AREAS

1 mi 3 mi 5 mi

[15 Min Drive /]

Total Population

1 Mile 14,259

3 Mile 74,783

5 Mile 177,827

2010 Population

1 Mile 9,942

3 Mile 57,482

5 Mile 153,525

2024 Population

1 Mile 15,710

3 Mile 81,307

5 Mile 190,006

Employees

1 Mile 15,760

3 Mile 84,516

5 Mile 171,639

Total Businesses

1 Mile 2,191

3 Mile 8,493

5 Mile 15,527

Average Household Income

1 Mile $96,376

3 Mile $110,391

5 Mile $98,696

Median Household Income

1 Mile $59,231

3 Mile $74,611

5 Mile $65,969

Total Consumer Spending

1 Mile $163.57M

3 Mile $936.46M

5 Mile $2.2B

Median Age

1 Mile 41.2

3 Mile 47.1

5 Mile 48.7

Households

1 Mile 6,325

3 Mile 32,447

5 Mile 81,325

Percent College Degree or Above

1 Mile 25%

3 Mile 27%

5 Mile 26%

Average Housing Unit Value

1 Mile $498,302

3 Mile $547,651

5 Mile $460,971

MAJOR TENANT INFORMATION

FLASHBACK DINER

SF Occupied 7,615

Lease End Date July 2019

AMENITIES

 Signage
 Monument Signage

TRAFFIC

Collection Street: N Federal Hwy

Cross Street NE 15th Ter, SW

Traffic Vol 34,622

Year 2018

Distance 0.14 mi

Collection Street: NE 5th Ave

Cross Street NE 16th St, N

Traffic Vol 6,578

Year 2018

Distance 0.18 mi

Collection Street: Glades Rd

Cross Street N Federal Hwy, E

Traffic Vol 22,699

Year 2018

Distance 0.24 mi

Collection Street: Glades Rd

Cross Street N Federal Hwy, E

Traffic Vol 22,744

Year 2018

Distance 0.28 mi

Collection Street: NE 20th St

Cross Street NE 4th Way, NE

Traffic Vol 15,308

Year 2018

Distance 0.28 mi

PUBLIC TRANSPORTATION

COMMUTER RAIL

Boca Raton Commuter Rail (Tri-County

Commuter)

Drive 9 min

Distance 4.1 mi

Deerfield Beach Commuter Rail (Tri-County

Commuter)

Drive 13 min

Distance 5.5 mi

AIRPORT

Palm Beach International Airport

Drive 37 min

Distance 25.7 mi

Fort Lauderdale–Hollywood International

Airport

Drive 38 min

Distance 26.7 mi

WALK SCORE ®

85

Very Walkable

TRANSIT SCORE ®

Term Sheet

The Importance of Developing a Term Sheet

A Term Sheet usually is an unenforceable expression of intent but a valuable tool in negotiating a favorable property sales agreement or lease. A Term Sheet emphasizes critical elements in negotiating a sales agreement or lease. Once the landlord submits the sales agreement or lease offer in writing, compare all offers you receive. In negotiating term sheets, it is essential to set limits. If you need expansion or renewal options, be sure your prospective landlord or property owner addresses your concerns in their term sheet. Although not binding, the Term Sheet request may result in the owner retracting the offer. However, the Term Sheet is a valuable negotiating tool because it clarifies the deal. A Property owner can face a dilemma if there is a missed opportunity to close because of their resistance to negotiate. The owner’s ability to turn over space can be adversely affected by the long-term closing prospects if the owner gains a reputation for retracting or renegotiating term sheets.

Time Investment in Negotiating a Real Estate or Lease Agreement

There is a mistaken belief that the deal is done after negotiating an agreed-upon Term Sheet. A well-negotiated term sheet can certainly streamline the process, but a term sheet cannot address all of the legal issues that arise under a purchase agreement or a lease. The Term Sheet lacks specificity and often results in ambiguities that only a negotiated purchase agreement or a lease agreement can determine.

The below forms include questions that must be answered in completing your Term Sheet. Detailed responses provide critical information required for several assignments that employ this Term Sheet. Incomplete sentences, short responses, or forms containing white space will not be graded.

FORM 1

Term Sheet

ISSUES

YOU

OWNER

DESIRED OUTCOME:

What’s the want?

Do you need to learn more? Why? What do the parties value?

KEY INTERESTS:

What do the parties want?

What alternatives are available if no deal is reached?

WHAT ARE THE WALKAWAY ALTERNATIVES:

What do you or the other side lose if no deal is struck? Why?

What options do you have, if they

disagree with your terms?

BARGAINING CHIPS:

What do you have to offer that the other party values?

POSSIBLE SOLUTIONS:

What solutions could work for both parties? List solutions that will overcome any disagreement during the negotiations.

AGREEMENT:

List the items that both sides should have no difficulty agreeing with.

FORM 2

Key Objectives and Considerations in the Real Estate Purchase or Lease Agreement

Key Objectives:

Property Owner:

Restaurant owners:

Considerations:

Identify the
advantages and
disadvantages of buying the Property

Advantages:

Disadvantages:

Advantages:

Disadvantages:

Purchase less risky than Leasing because?

High purchase costs? Is buying a property the best option for you?

Outright sale – buying a property in full. Ownership is transferred immediately. Payment is expected right away

Identify the
advantages and
disadvantages of Leasing the Property

Advantages:

Disadvantages:

Advantages:

Disadvantages:

What are the:

1. Reduced startup costs?

2. Immediate cash flow?

3. Added inventory cost?

Identify the
advantages and
disadvantages of Leasing the Property under the various Leasing Terms offered

(Term Lease, N, NN, NNN)

Advantages:
Disadvantages:

Advantages:
Disadvantages:

Existing problems: Which deal (Sale or lease) do you think the owner prefers? Why?

Is there a potential for a Gradual Sale through Leasing? What would be the terms?

Are there flexible options for transferring Property that benefit an individual who cannot afford to purchase outright but can finance a long-term payment plan? Explain.

Lease Agreement – requires a commitment to a contract that details the conditions and payments you will make for temporary rights to the business.

Identify the resources available to assist in buying the Property

Estimate the timeframe and costs required before the Restaurant generates a cash flow.

If the transition starts before the deal is complete, what financial impact will it have on your cost structure? List the items impacted.

Table 1

Benefits of a Term Sheet Agreed to by Landlord and Tenant

Loss opportunity Cost

Cost of Loss money

1. Unpaid or late rent

1. Security deposit forfeited

2. Search for better replacement Tenant

2. Damaged or bad credit

3. Paying Tenant’s delinquent utility bills

3. Unable to find a new business location

4. Unexpected shared costs

Unexpected repairs to the Property

Unclear maintenance obligations

4. Permanent damage

5. Unnecessary replacements

5. Losing customers because common areas not maintained

Expensive lawyer fees to

Property damage caused by

6. Help with an eviction notice

7. Seek remedies for unlawful use of the premises

8. Clean up hazardous materials

9. Remove unpermitted liens on the Property

6. Unsecured premises

7. Poor security of entryways

8. Other tenants businesses

9. Landlord’s failure to repair

10. Improper janitorial services

11. Burst pipes during the winter

Mental anguish of

Mental anguish of

10. Illegal business activities taking place on your Property

11. Responding to complaints from neighboring tenants

12. Not being a “named insured” on tenant’s insurance policy

12. Being unexpectedly evicted

13. Not placing an advertising sign of your choice outside

14. Unfair competition from other businesses despite promises to be the exclusive store

Table 2

Purchase Lease Agreement Issues

Adjusted Purchase Price: Includes prorated items such as rent, utilities, and inventory up to the time of closing.

Review of required Documents: The documents you need to review include a corporate resolution approving the sale, evidence that the corporation is in good standing, or any tax release that the seller may have promised. You may check with your local department of corporations, state corporation commission, or Secretary of State for more information.

Signing Promissory Note: In cases where the seller has back-financing, have an attorney review any Note documentation.

Security Agreements: The SA lists the assets used for security, such as a promise to pay the loan.

UCC Financing Statements (UCC): Uniform Commercial Code documents are recorded with the Secretary of State in the state in which you will be purchasing your business.

Lease: if you agree to take over the lease, ensure that you have the owner’s concurrence. If you are negotiating a new lease with the owner, make sure both parties agree to the new lease terms.

Bill of Sale: the bill of sale proves the sale of the business. It also explicitly transfers ownership of tangible business assets.

Closing or Settlement Sheet: The closing or settlement sheet will include the financial aspects of the transaction.

Everything listed on the settlement should have been negotiated before the closing

Bulk Sale Laws: Make sure that you comply with sale laws, which govern the sale of business inventory

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All rights are reserved. The material contained herein is the copyright property of Embry-Riddle
Aeronautical University, Daytona Beach, Florida, 32114. No part of this material may be
reproduced, stored in a retrieval system or transmitted in any form, electronic, mechanical,
photocopying, recording or otherwise without the prior written consent of the University.

Contract Negotiations

Processes

Strategies

Techniques.

The goal of a contract is that you reach a fair, reasonable, and beneficial written
instrument that both parties have agreed to.

Step 1 of Contract Negotiation Process: Prepare,
Prepare, Prepare.

The Contracting Process

Negotiations

A contract negotiation is not a race to win. Because even the most favorable
agreement (Win – Win) can turn into a loose – win, or worst a loose – loose. The
best negotiator is not the one who talks the fastest or has the most leverage. It’s
the team who has properly prepared for every potential eventuality. Anticipation
and foresight based on your preparation makes you prepared to enter into a win
– win agreement. Negotiation is not a race to the finish line it’s a process that is
aimed at bring both parties to the bottom line signature that mutually assures that
the parties on both sides will receive the bargained for benefit they agreed to.

Imagine having to negotiate a contract with your supplier and you have no clue
about the price of the supplier and how that compares to the market. That means
that you must have conducted a price/cost analysis, and you fairly know what it
costs the supplier to deliver goods/services.

This is just an example of being prepared. Below are some other things that you
need to prepare:

1. Issue Identification
Identify the issues you want to negotiate. For example read the suppliers offer,
highlight important parts and jot down notes about part that you are not clear, or
that you cannot accept.

2. Issue Information
Have good information about each issue that you want to negotiate (after all this
is what preparing is all about).

3. Classify the Issues.
Classify them according to: Negotiable – these are issues that you can negotiate
and be flexible. State your maximum that you can negotiate on these points, so
that at any point in time during negotiations you know your limit. (just in case you
go over your limit and then you get that Donald Trump famous saying: “You’re
Fired”). Non-Negotiable – these are issues that you will not negotiate and not
budge.

4. Prepare the meeting agenda.
When doing this you will outline your issues again, but more importantly you
would want to give the supplier the first turn to highlight any issues they may
have with your contract. When you have a prepared meeting agenda, you will
work according to that, and will not forget any point.

5. Get ready to Negotiate
Understand the most important thing before going to the negotiation table: Most
issues can be negotiated.

Yes, some “negotiation gurus” mention that ‘everything is negotiable’, but in real
life it is not so. There are things that you or your supplier will not budge no matter
what. With that in mind be positive and believe that it will go well. Most of the
time it will.

Step 2 of Contract Negotiation Process:
Negotiation Meeting
This is the meeting proper where you (and your team if there’s one) will sit down
with the supplier. Important here is that this meeting most of the time is not called
negotiation meeting – but any time you meet with a supplier to discuss their offer
it means you are negotiating.

Your negotiation outcome however is most likely achieved before the meeting ie
during the preparation stage, so again do not set foot in a meeting without being
prepared.

If at any point during the negotiating meeting you find that you did not prepare for
a certain issue, then simply mention that you would need to get back to the
supplier on that issue. Then work out the other issues.

Some meeting tips:

• Be friendly but professional e.g. I’m glad we have a chance to sit down and
discuss how we can work together.

• Be positive e.g. It’s good that I hear you have the same viewpoint on this.
• Do Not Get Angry or Emotional. Keep your cool & calm. It’s just business

after all. How do you do that? First, pause for a few seconds before saying
something Second, if you are thinking whether something that you may
say would offend the supplier, then don’t say it. However, if you really
thought about it coolly, and then you still want to say it, then just go ahead
and do it. For example during a meeting that we had with a client he was
discussing about the need of getting a lower price without committing to a
long term contract or bigger volume. When probing he revealed that it was
their policy that even after a contract was concluded, they would still be
looking for other suppliers who may offer lower prices. We simply said: “It
looks like your philosophy towards your suppliers is – I’ll screw the supplier
at the moment that I get the chance. It is difficult to then offer you what you
are asking.” The client kept his cool and then said that it was the direction
from HQ. Thirdly, breath deeply. It relaxes you. You may even joke with
the supplier that you are practicing your breathing so that you don’t get
angry or upset with what he said.

Step 3 of Contract Negotiation Process:
Summarize all points
This is very important, as you need to get the other party’s agreement to all the
points that you discussed. You can simply divide this into 2 categories:

a) Points that you have already agreed; and
b) Points that you or the other side would need to get back to each other.

Some of the points to summarise are:

• Payment terms
• Contract volume
• When the contract/work will start
• Price for the Contract

Once you have written this down, simply shoot a quick email to the other party
and ask for their acknowledgement/agreement to this. Mention that if they have
anything to add, they can add it during their reply to your email.

To write about the contract negotiation process, it may actually take much more
that what is written here, but we trust that this simplifies you contract negotiation
process to simply 3 steps. And that is key – simple.

  • Step 1 of Contract Negotiation Process: Prepare, Prepare, Prepare.
  • Step 2 of Contract Negotiation Process: Negotiation Meeting
  • Step 3 of Contract Negotiation Process: Summarize all points

THE

NEGOTIATION

CANVAS

Learning Version: New to the

Negotiation Canvas? Start here!


MY





DESIRED





OUTCOME


THEIR





DESIRED





OUTCOME


MY





KEY


INTERESTS


MY


BARGAINING





CHIPS


THEIR


BARGAINING





CHIPS


THEIR





KEY





INTERESTS


POSSIBLE





SOLUTIONS



The Negotiation Canvas was created by
Pablo Restrepo and
Stephanie Wolcott, founders of Negotiation by Design. Learn more at
negotiationbydesign.com


MY





WALKAWAY





ALTERNATIVE


THEIR





WALKAWAY





ALTERNATIVE


AGREEMENT

NEGOTIATION




by











NEGOTIATION CANVAS



Learn more about the canvas watching our introductory video.

Title:
Date:
Version:

1) MY DESIRED OUTCOME

What do I want?
learn

more

2) THEIR DESIRED OUTCOME

learn

more What do they want?

3) MY KEY INTERESTS

Why?
learn

more

7) MY BARGAINING CHIPS What do I have that they value?
learn

more

8) THEIR BARGAINING CHIPS

What do they have that I value?

learn more

4) THEIR KEY INTERESTS

learn

more Why?

5) MY WALKAWAY ALTERNATIVE

What will I do if we do not reach a deal?

learn more

9) POSSIBLE SOLUTIONS

What solutions could work for both of us?
learn

more

PS 1 PS 2 PS 3

6) THEIR WALKAWAY ALTERNATIVE

What will they do if we do not reach a deal?

learn more

10) AGREEMENT

What did we agree to?
learn

more















The Negotiation Canvas was created by

Pablo Restrepo
and

Stephanie Wolcott
, founders of Negotiation by Design. This work is licensed under the Creative Commons Attribution-NoDerivates 4.0 International License.

To view a copy please visit: https://creativecommons.org/licenses/by-nd/4.0/ Learn more at

negotiationbydesign.com

NEGOTIATION

by

THE NEGOTIATION CANVAS







TO





CANVAS

NEGOTIATION

by

The Negotiation Canvas is a one-page easy-to-use tool that helps you reach better deals on all your negotiations.
Pablo Restrepo and
Stephanie Wolcott created the Negotiation Canvas to provide you with the most efficient and effective way to prepare and conduct a negotiation. No time to prepare? This tool makes it simple and fast.

Completing the canvas will help you to clarify what you want, understand your counterpart, identify and capture more value and improve your confidence in every negotiation.

The Negotiation Canvas is built as an editable PDF to make it easy to fill out and save your work. You will notice a video icon in the header of the canvas, watch this video for a quick overview using the popular orange example. Select the ‘learn more’ option in each field for a short description on how to fill out that field. Then return back to the Canvas using the ‘To Canvas’ buttons in the lower left corner.

Negotiation Canvas Elements

Desired Outcomes: Steps 1-2
Go

Key Interests: Steps 3-4
Go Walkaway Alternatives: Steps 5-6
Go Bargaining Chips: Steps 7-8
Go Possible Solutions: Step 9
Go Agreement: Step 10
Go


Let’s get started!


Watch our introductory video.

DESIRED OUTCOMES: Steps 1-2

What do you want?

The Desired Outcome is the beginning position of each side of the negotiation. Begin the canvas by writing down what you want from the negotiation and if you can, write down what you think your counterpart wants.

1

2

Typically, people approach negotiation with a preconceived outcome in mind. They want a certain price, a certain place, a certain time, etc.

It is important to identify your Desired Outcome in the beginning, but as we will see, this initial position is only a starting point. You might find later on that you can create even better solutions that are good for both parties.

ORANGE EXAMPLE

– She wants the orange.

2) THEIR DESIRED OUTCOME

– I want the orange.

1) MY DESIRED OUTCOME


KEY INTERESTS: Steps 3-4

Why do you want what you want?

Key Interests are the motivations behind each parties’ Desired Outcome. Asking ‘Why?’ will uncover Key Interests. Why?, is the magical question in negotiation.

3

4

Why do we want what we want?

Why do we want our Desired Outcome? Why do they want what they want?

Why do they want their Desired Outcome?

Try to ask yourself ‘Why?’ at least five times. Write down as many interests as you have related to the negotiation. Do the same with your counterpart. You can ask them why in person or if that is not possible, make your best guess based on the information you have.

Identifying interests will allow you to expand the range of possible solutions that meet both parties’ needs and can create more value for each party.

ORANGE EXAMPLE

· Pulp

· Orange juice

· Thirsty for orange juice

4) THEIR KEY INTERESTS

· Peel

· Orange cake

· Hungry for sweets

3) MY KEY INTERESTS


WALKAWAY ALTERNATIVES: Steps 5-6

What will you do if an agreement cannot be reached?

Walkaway Alternatives are the options you have if you do not reach an agreement. Identifying your Walkaway Alternatives helps you to determine when to stay in the negotiation and when to walk away.

There are three questions to answer in this section:

1. What will you do if you do not reach an agreement?

2. What are the consequences (both good and bad)?

3. Is there a way to improve your walkaway alternative?

The more you can improve your Walkaway Alternative, the more power you will have to negotiate.

Answer the same questions for your counterpart. Only this time, think of ways to weaken their alternative. Remember, you must do this legitimately and with care. Your reputation is at stake and future negotiations with this party need to be considered.

5

6

ORANGE EXAMPLE

In this case, both girls have the same Walkaway Alternative:

· Yield and lose the orange, setting up a bad precedent.

· Fight, risk losing the orange, get punished by mom, set a difficult relationship for future negotiations.

5-6) WALKAWAY ALTERNATIVES


BARGAINING CHIPS: Steps 7-8

What can each party offer to the other?

Bargaining Chips are the items you can offer to the other party to get more of what you want. This step helps you to
bring more value to the table for both parties.

7

8

Looking at the other party’s desired outcome and interests, think of all the things you can offer them to meet their interests. You will notice each field has stars in it. When you list the bargaining chips, list them in order of priority. If you know

something is very important to your counterpart, put that issue in the three-star category. If an issue is not that important, put it in the one-star category.

Moving to the box on the right, what can your counterpart offer you that you value? Make sure to prioritize these issues

as well.

We prioritize chips because substantial value can be created if we can offer the other party something that they value highly but costs us little, for something we value highly and costs them little.

ORANGE EXAMPLE

7) MY BARGAINING CHIPS

Pulp

Money

Glass of water

8) THEIR BARGAINING CHIPS

Peel

Money

Chocolate


POSSIBLE SOLUTIONS: Step 9

What solutions could work for both parties?

Possible Solutions are proposals for an agreement that meet both parties interests. These are the proposals that you will present to your counterpart.

Review the previous steps to help you create solutions. Pay special attention to the Key Interests and Bargaining Chips. Are there other options for meeting both parties’ interests? What Bargaining Chips can you exchange to create more value for both parties?

Try to identify at least three solutions. Three forces you to be creative and might lead to a solution you would not have thought of otherwise. Three also shows flexibility and helps to build trust with your counterpart.

Offering three Possible Solutions helps you find out more about your counterpart’s interests, priorities and preferences.

You can ask which option they prefer and why. This is especially helpful when negotiating with people from less direct cultures.

Even if you do not reach an agreement after this step, you will have more information to revise your proposals and try again.

9

ORANGE EXAMPLE

9) POSSIBLE SOLUTIONS

PS1

Water x Orange

PS2

Money x Orange

PS3

Pulp x Peel


AGREEMENT: Step 10

What did we agree to?

Congratulations! You’ve done it! Once an agreement is made, write down the important details. You will want a record of what is agreed to so that you can review past agreements and assess both success and progress.

Make sure to include all relevant information, such as:

· all Bargaining Chips agreed to

· roles and responsibilities for both parties

· timelines

· measurement and quality

· indemnities, contingencies and termination clauses

· confidentiality requirements

· process for settling disputes

· terms of payment

Remember, an agreement is only successful if it is:

· Better than your Walkaway Alternative

· Acceptable for both parties

· Implementable

10

ORANGE EXAMPLE

Optimal agreement: Emma got 100% of the peel and Sara got 100% of the pulp.

10) AGREEMENT

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