Funny Money is ‘Money whose value has been artificially increased, or money
that is not worth as much as it appears to be:
The banks have used funny money generated by creative accountancy to
deal with vast amounts of public debt’ (Cambridge Dictionary)
In negotiation people use ‘funny money’ as a strategy to
make money look insignificant. The aim is to put the other party under pressure
and make them agree to a deal that is unfavourable to them.
This tactic is used especially when dealing with big numbers.
Let’s say two parties are negotiating over a $12.25 million
contract. The buying party is asking for a 2.25% discount. They make it look
like it is only a small ask, so not much to the overall price. What they don’t
mention is the dollar amount for good reason. When the situation is already tense
and the selling party is already under pressure to get the deal the selling party
might agree to the deal without even having checked the actual number because it
did not sound like much money.
Three vital tips to not fall into the trap of the ‘funny
money’:
1)
Never let the other party put you under
pressure. Take your time. You can do that by taking a break; walk out of the room
and review the information you have. Postpone the meeting to another day or get
someone else to review the information for you and then make an informed
decision. Once you have done that you will most likely counter with another
offer.
2)
Don’t show your own pressures. Never let the
other party know under what pressure you are. You might have internal deadlines
you have to meet or there could be budget pressures to get to a deal.
You also have your own pressures; maybe you
need to meet your KPI’s or you are working towards a promotion.
3)
Understand what pressures the other party is
under. They are using a tactic that can potentially make you agree to something
that you might later regret as you might have agreed to a deal that gave too much
away.
Chances are that they are under similar
pressures. Do they have a boss or a client who they are reporting to? Do they have
budgetary constraints?
Call them out on it and ask why they are putting
you under pressure as that means that they are under pressure too.
4)
Finally, be confident and own the conversation, don’t
let them own the conversation.
#negotiationskills #octalonegotiation #negotiation #dealmaking #businessnegotiation
Comments
Post a Comment