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A clear understanding of your objectives is essential when negotiating. You should be ready to propose a package that is challenging but credible. Your preparation should end with you deciding on your ‘Desirable’ list and using it to form the basis of your first proposal. Use these steps to prepare.

1 List the things on which you can give and take. These are called your negotiating variables. If it is possible to give and take on something, list it as a variable.

2 For each variable, list the ‘Desirable’ (best you can hope for), ‘Probable’ (most likely) and ‘Worst’ (worst that you would want to finish up with) outcome from your point of view.

3 Put a value on the difference between ‘Desirable’ and ‘Worst’. Now you have identified what the most valuable items are from your point of view. Price and volume are obvious values, but sometimes it is more difficult to put a value on a variable.

4 List all those things on which you are not prepared to give and take. You are effectively saying they are non-negotiable.

5 Look at everything done so far from the point of view of the other party. Ask yourself what they will be looking for on each variable – and what variables they will be looking at.

6 Consider where you will have areas of agreement, and where there will be disagreement. If your partner wants to negotiate on the things that you have considered to be non-negotiable, you may struggle to reach agreement.

7 Having weighed up the situation, you should be prepared to propose your first package (see chapter 4) as the ‘Desirable’ set of objectives, although the Discussion (chapter 3) may cause you to modify your first proposal.

Example list of negotiating variables

This table shows how selling a family business looked when listed in the way described. Your preparation will always give you maximum support if you finish up with this sort of five-column table.

Negotiating variable	Desirable	Probable	Worst	Likely difference in value desirable to worst
Basic price (for 100%)	£5.1m	£4.7m	£4.5m	£600,000
Keep a family stake	30%	20%	10%	£1m
Retain directors	Father = MDSon = Prod Dir	Father retiresSon = Prod Dir	Both retire	Pride and/orrenumeration
Pay directors	2 years at£30k each	1 year at £30k	Nil	£120,000
Retain staff	Maintain statusquo for 6 months	3 months’notice clause	3 months’notice clause	Loyalty
Payment terms	100% now	50% now50% two months	100%two months	Securityand interest

Prepare a detailed list of variables and assess their importance to both parties.