Welcome back! Today we're talking about negotiation and the Ackerman Method, which is featured in the book Never Split the Difference by Chris Voss. This book has been a huge bestseller since it was published in 2016, and it contains a lot of great material that really works.

Negotiation is often seen as a hard-nosed, aggressive process, but in my experience, it's much easier when you get to know the other person and understand how they view the world. This creates a space where you can have a real conversation and everyone knows that you have good intentions and that everyone will be treated fairly.

However, there is one part of Never Split the Difference that I disagree with, and that is the Ackerman Method. In this method, if you know you want to pay $100 for something, you start with an opening offer of $65. If they say no, you raise it to $85, then $95, and finally $100. The idea is that this demonstrates that you are running out of room to negotiate and that you are arriving at your final price.

I have tried this on a couple of deals and it didn't work. Let's say you have a business that is priced at five times cash flow and you want to buy it for four times cash flow. That means the business has $1 million in cash flow and is listed at $5 million. According to the Ackerman Method, you would start with an offer of $2.6 million, which is half of the asking price. What do you think the response would be? Unless you're in a special situation where there is no other competition and they have to sell today, the response is likely to be "forget about that."

So how do you start? In my experience, there is no cookie-cutter way. You need to know your seller and build rapport. When I'm working with someone, I have them walk the seller through the math on how to calculate cash flow for the business. This creates trust and understanding, and everyone agrees that the cash flow number makes sense and the multiple is fine.

The most important thing in negotiation is to know your seller and get to be so close to them that they realize you are trying to be fair and not trying to take advantage of them. Chris Voss has a lot of great advice on mirroring and using your voice, but this pricing strategy is not the way to build that trust. Building rapport gives you the space to have a better negotiation and narrow the region of darkness that separates you and the seller from knowing the real price and value of the thing.

If you have any cool ideas or strategies that have worked for you in a negotiation, please share them in the comments!

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