Who should make the first offer, the buyer or the seller?
POSTED BY Rick Latona IN Featured, Web Sites

I once heard that 86% of statistics are made up on the fly. In that vein, here's my article.

Most of my life I've felt what I think nearly everyone else feels that you are better off getting the other party to make the first offer.  It's the standard in business at large, not just in buyers and sellers of domains and websites.

If I had to guess, and I do, I'd say that 95% of the time when you ask a seller what they want for their website or domain they'll respond with "make and offer".

My opinion was drastically altered up in Boston when Professor Malhotra taught me about Anchoring and the Zone of Possible Agreements (ZOPA).

The ZOPA is the range between your walk away point and theirs. So if your are buying and would pay up to $10,000 for the asset and the other party is selling and would go as low as $2000 the ZOPA is $2000 - $10,000.

Typically in that situation the buyer would offer $500 and the seller would ask for $20,000 or more. Who's better off making the offer?

What I strongly agree with now is that you are better off making the first offer. You want to "Anchor" the conversation. If you are buying and you state $500, the seller now has to come up with a compelling reason why you should pay more. Likewise, if you are selling and start with $20,000, the buyer has to be pretty slick to come up with a justification for a $500 counter.

Professor Malhotra taught us to be prepared, determine what you feel the ZOPA is then anchor yourself so you finish on your side of the zone. You do not want to finish in the middle of the zone. If you do, you didn't maximize your negotiation.

I hope this didn't come across as a lecture. I'm just trying to share what I've been learning and how it's helped me.

Website Brokers, Watch Brokers and even Timeshare Brokers could benefit from these tactics.

  • Guest

    Sorry Latona, another post that makes as little sense as your post about "shake them down into reality" or some other nonsense you posted a few years ago. If the price is $300K and the seller is not motivated, you can offer $500, you can offer $5K, you can offer $50K, you can offer first, you can offer last, it don't make no difference. The price is 300K and this is what you will pay if you want to buy it.

  • http://twitter.com/domaining365 Domaining365

    Hey Rick, this is a first! I've never heard anyone in the domain investing world refer to ZOPA before. Definitely applies in the "who goes first" pricing example you outlined. Appreciate the well researched stats as well :-)

  • http://twitter.com/jmorf James

    Excellent post Rick. Not only do I completely agree with you, but I think you've touched on a sore point for many business people.

    If a business is going into a deal and just trying to game the other party for as much as it can every time, it's just a crap shoot. Consistent sales are not built this way (with some rare exceptions).

    A business needs a strategy, a high, a low...a plan (especially if it starts to scale), and I think far too many businesses operate without one.

    Thanks for sharing.

  • Aggro

    @ Guest

    STFU

    Reality is 99% of transacted domains are not 6 figure domains in case you crawled out of a rock
    Look at the sales on Afternic, Sedo etc

    @ Latona

    Yes - making the 1st offer if you are a buyer is best...if only to distinguish yourself from all the other tire-kicking pricks around "is this for sale? How much is it?"
    It also gets the ball rolling.

    What normally happens is (not talking about stellar domains here):

    Seller: make an offer
    Buyer: ok. $100
    Seller: WTF?! No lowballs!
    Buyer: how the fuck am i supposed to know? I'm not a mind reader...

    Result: wasted time all around

  • http://twitter.com/SkyDomains Frankie Aladi

    Rick,
    As a current student of Intl. Business, I totally enjoyed this post.

    @ Guest

    What you are saying will make sense if you own a one of a Kind 6 figure domain. Unfortunately most domains don't

  • Anunt

    if you are a buyer and really want the domain name, you should pay extra and take it...
    i have lost alot of great domain names trying to bargain...if you really want it...pay extra and take it.

    if you are a seller, you have plenty of time to play negotiating games...no need to rush.

    most important...google the buyers or sellers name...see who they are...then negotiate!

  • http://Internet-Marketing.com Jeff Libert

    If I'm not "actively" selling/soliciting I feel no obligation to "set a price", asking price or otherwise. Also, I'd rather not waste the brain cycles conjuring up a price when I know that most of those who are unwilling/unable to make an offer either a) have no idea as to value; b) are hoping I'm some fool; or, c) are just window shopping (aren't really serious buyers).

    Show me the money. Show me that you're serious. Show me that you know what you are getting involved in. Then I'll pause.

  • Mblumentritt

    Rick,

    Your Company Watch Brokers sold our watch for $10,500 on Oct. 1st 2011 and now is refusing to talk to us and are now giving us crazy stories about why they can't pay us and will not pay us for 6 months. You guys have received the money for the watch and are not willing to pay us. We are now considering this Grand Theft and will be getting the police involved this week. We have tried to work with you, and your partner RJ Bergh is not willing to do so. We have no other choice, what your company has done to my family is so wrong and I am so sick. Our Attorney says to wait the 6 months and then we will file suit and it will be for much more than what the watch sold for, however I want to see this resolved now!!!! Please respond, we need to be paid for what belongs to us.

    The Blumentritt's

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