In December’s issue of Inc. Magazine, Norm Brodsky describes a paradox of successful negotiation. The less interest you have in doing a deal, the more likely you are to get one you’ll find difficult to refuse.
Brodsky is considering selling his businesses (records storage, secure document-shredding and delivery). He turned down an offer from a major corporation because they would not buy the delivery business. A VC firm then approached Brodsky. Brodsky explained to the VC partner why they should buy all three of the businesses, set his price and then told the VC partner he would not negotiate.
A short time later the VC partner shot Brodsky an offer several million dollars below the asking price. Brodsky didn’t respond. The VC firm then inquired about why Brodsky had not responded and Brodsky again informed them he would not negotiate. He really didn’t care if he sold his businesses or not. Low and behold, the VC firm agreed to the price and the deal is in the due diligence phase.
This lesson is applicable in business litigation as well. If you are willing to walk away empty handed you are often much more likely to get a good deal. You are probably in the strongest negotiating position when you really don’t care if the case settles or not. However, it is rare in the litigation context that an initial "take it or leave it" approach results in a settlement. Particularly if you are negotiating with an insurance company there will be an expectation that you engage in a negotiation process with multiple offers going back and forth. Usually a case will not settle until both parties have the perception that they could do worse if they go to trial. The parties need to sense the risk.
Still, as Brodsky demonstrates, the "take it or leave it" approach can be very effective under certain circumstances and is a very powerful negotiation technique with the right client and case. Being a good poker player doesn’t hurt either.