Texoil Negotiation

...

We appealed to his honest side. “Look,” we said, “We started at two million, we’ve gone way down. Do you want a deal or not?” He admitted that he had a cap on his spend. He offered $450k. I said at that level we’ll need a 20% stake. We went back and forth and landed on $450k, 15% stake, and 40 hours of work between the two of us upon returning from the vacation.

Learning About Self

I believe I showed a couple key strengths in this negotiation. First, by continuing to re-center the discussion about value, we earned a higher ending agreement. [I believe we had one of the most favorable agreements in the class for the gas station proprietors.] We were able to sell the Texoil rep on the concept that he needed us and the skillset we brought. When we got down to a number that worked for him, he was open to non-cash solutions.

One of the challenges in this case was information asymmetry. Not knowing the opponents’ information, limitations, and whether they were just pulling our leg. After the rep brought up that $650k was the price including an entirely new station with a convenience store, plus new pumps, I realized we had to be willing to pivot down. We acknowledged that taking into account the store and new pumps, the number was at least 500k to build, and they still needed us or it wouldn’t be a successful business. Knowing when your value proposition is different than originally stated is another key to getting the deal made.

At one point my partner said, “Do you want a deal or not? You approached us to buy the station, but it seems like you’re not actually interested. Are you?” That did elicit the reaction of, “well yeah.” I think this shows that sometimes, when you’re stuck, zooming out to the 10,000 ft level can be beneficial.

The mistake I made during this negotiation was that I let my mouth run wild for too long at certain points. I need to be more conscious, and actively listen.

One thing I’m proud of is that we were open to a lot of creative solutions that were non-cash based. This gets at my own decision making criteria, where I land somewhere between a “charismatic” and a “thinker.”[4] I like seeing both the big picture and seeing the data. The thinker side that relishes the data feed, in some ways is very challenged by the ambiguity of negotiation. In some ways you don’t always know if you got the best deal you could get. That’s hard as a thinker who wants to win. Having that “charismatic” side, however, helps in terms of creating the grand strategy; coming up with the value proposition. Maybe I don’t get the most perfect deal, but at least the conceptual thinking and game-plan is on solid footing.

What would you do differently?

I have two regrets. First, my partner and I should have listened more to the rep at the start of the conversation. He was great at letting us talk. It turned out he didn’t actually know much about the situation, so we played right into his hands.

The second mistake was not creating some sort of hierarchy of who was chief negotiator or roles. We discussed our overall plan, and that we were setting our initial value at two million, but after he re-anchored at 200k, we were off our game. There were a few times when my partner said something that I wasn’t completely in agreement with, and probably vice versa.

We ended up taking a break a little more than half way through to resettle and to discuss where we were at. This was partially due to frustration. In retrospect, this was a shrewd decision and could have been taken early. I think the lesson is, if the opponent is doing something unexpected, stop and think deeply or take a break. It doesn’t seem to hurt.

---------------------------------------------------------------