On Wednesday, April 3, 2013 from 6:00 – 7:00 pm, Negotiation Fox will present a one-hour online webinar, “The Art of Making Better Deals.” The webinar is sponsored by Artist Trust in Seattle and is open to anyone who would like to participate. Thanks to support for Artist Trust, they are able to offer this presentation at a very affordable price. I hope you’ll tune in! To register, CLICK HERE
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The Nevada County Arts Council kicks off its first annual Arts Convergence conference in Grass Valley, CA, on Saturday, November 17, with Nancy J. Fox, a/k/a Negotiation Fox, a negotiation training and consulting firm, among its esteemed speakers.
According to Brian Buckley, Executive Director of the Nevada County Arts Council, “Arts Convergence 2012 is an amazing collection of presentations designed to inform and inspire artists and arts organizations.” The day-long conference at Sierra College features 15 workshops and two general sessions that will “lift the spirits, skills and expertise of artists of all genre and experience levels.”
The theme for the conference is ABC: Arts Build Communities. Participants will be able to choose from sessions of general interest and sessions specifically geared towards literary, performing, and visual artists. Some workshops will enhance specific artistic skills, and a number are geared toward helping arts organizations.
Negotiation Fox’s Artful Negotiating: How to Value your Work and Talk with Clients, Vendors, and Suppliers, is included among the general interest sessions. When asked about her participation at the conference, Fox said, “This conference is truly groundbreaking in its scope, and I am honored to be a part of it.”
Thanks to a grant from the California Arts Council’s State-Local Partner Program, artists can attend Arts Convergence 2012 for only $45 ($30 for NCArts members!) For further information or to register, please go to:NCArts’ website at: nevadacountyarts.org. You can also email to: firstname.lastname@example.org.
Nevada County Arts is a member-supported, all-volunteer organization that acts as advocate and liaison to city, county and state government, chambers of commerce and other regional organizations. The mission of NCArts is to facilitate collaborative efforts that promote and sustain the visual, literary and performing arts of Nevada County in order to advance the cultural, social and economic life of our community. To become a member, or for more information please go to nevadacountyarts.org.
Our level of confidence can play a big role in the outcome of a negotiation. If we feel confident and strong, then we will be able to advocate more convincingly for what we want. Yet, all too often we go into a negotiation fraught with jitters and self-doubt.
One way to overcome our nervousness is to imagine that we are advocating on behalf of others, rather than ourselves. Research shows that the confidence level of most people rises significantly when they negotiate for something that benefits others, such as a co-worker or family member. So rather than think of the situation as a negotiation, train yourself to view it as an opportunity to advocate on someone else’s behalf. This change of mindset will allow you to leave the jitters behind and focus on the mutual benefits of coming to agreement with the other party.
Go forth with confidence and negotiate!
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Barter is a method of exchange by which goods or services are directly exchanged for other goods or services without using a medium of exchange, such as money. Whether in your artistic career or in your personal life, bartering is a form of negotiation that can help you:
- Preserve cash – no or low out-of-pocket to get what you want
- Improve cash flow – allows you to preserve capital
- Weather periods of seasonality – survive slow business cycles
- Turn excess inventory into cash – if you have built up a large inventory of artwork, then bartering is a means to move some of it in return for things that you need
Here are a few things to be mindful of in barter situations.
1. Establish a time and/or money equivalent
In a barter situation, the two parties are not trading apples for apples. Therefore, in order for a win-win situation to exist, both parties need to find measurable, quantitative standards for exchange.
- If bartering for services, the standard could be a reasonable hourly rate for the parties’ respective services multiplied by the amount of time each of them will have to spend.
- Hard costs (cost price) could be another standard. Let’s say that you need a new refrigerator and the owner of the appliance store is willing to trade for one of your artworks. A comparison could be made between the appliance dealer’s cost to replace the refrigerator on his showroom floor and your cost to replace the artwork. In your case, that price would include materials plus your time to re-create it, and perhaps a gallery commission if you’re bound to pay it.
- Related to the point above, consider the distribution level at which each party is bartering. Some industries have multiple distribution/pricing levels, e.g., retail, wholesale, distributor, manufacturer, in descending price order. As an artist, you have one or possibly two, e.g., retail and gallery (wholesale).
2. Know the lowest price for which you can buy the barter item with money elsewhere
This may not impact your decision about whether to barter, but it will keep you from getting the wool pulled over your eyes if the other party starts to cite a unrealistic “retail price” as a standard of measurement
3. Know your own hard costs, but don’t be enslaved by them
If you are in a cash flow bind, or if your studio’s back room is stuffed with older works that you need to move out, you may be better off bartering below your hard cost – which is already a sunk cost – to get the things you need.
4. Don’t let others convince you to barter for things that you don’t want or need
If your best friend tries to convince you to barter an artwork for awnings for your house, because s/he owns an awning company, then that’s only a good deal if you really want or need the awnings. If you don’t, then don’t barter. Instead, negotiate with your friend over the price of the artwork and make an art sale!
When I worked in the corporate sector, I built up a huge number of frequent flyer miles from all the travel I was required to do. Those miles were of little value to me, because the only place I wanted to go was home. While a contractor was doing some work in my house, he mentioned that he and his wife were planning a trip to Spain. The cost of the skylight he was putting in became a barter transaction for two airline tickets! That was a real win-win.
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1. Artworks are often sold at auction, a situation that involves competing bids. We see from the research that if two or more people are bidding on something, the final price might well exceed the estimated top price. Case in point: the recent sale of Edvard Munch‘s “The Scream“, which – at approx. $120 million – set a record for the highest work sold at auction. If you have two or more parties interested in your work, play it to your advantage.
2. Artists may want to try re-structuring some of their works from “for-sale” items to auction items. Consider trying it at an art fair or gallery opening. The internet offers numerous possibilities for that, as well.
3. Beware of this human tendency when you are the buyer in a competitive bid situation. Before you start bidding, be sure you have a top price in mind, and don’t let your emotions cause you to exceed that price when the bidding begins.
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Real-Life Negotiations: T-Mobile’s Bid for MetroPCS
In Negotiating Rationally, Professors Max H. Bazerman and Margaret A. Neale maintain that in competitive bidding situations, often the buyer falls prey to the “Winner’s Curse.” In practical terms, this means that the winning bidder often ends up paying more than necessary – frequently more than the actual value – for the thing that s/he acquires.
Why would someone voluntarily pay more for something than it’s worth, you ask? Some common reasons follow:
- Bidders often don’t have enough information; therefore, they may overestimate the present value of what they’re bidding for.
- Acquirers frequently don’t consider that the other bidders may not have any more information than they do.
- Bidders may think the synergy created between something they already own and what they’re buying will make the acquisition worth the inflated amount they paid for it
- Fear of competitive offers often leads bidders to be content with less information than is truly needed for a thorough analysis.
Let’s examine these reasons within the context of a real-life negotiation situation:
Last week, T-Mobile announced its intent to purchase Metro PCS for the equivalent of $11.28 per share. Two days later, Sprint said that it may consider trumping T-Mobile’s offer. According to Pacific Crest analyst Michael Bowen, Sprint’s bid might value Metro PCS’ shares at something between $12.50 – $15.00 per share.
In February, Sprint considered buying MetroPCS at a price that, according to analysts, would have generated savings of $8 billion to $9 billion for the combined entity. This is much greater than the synergies expected from the deal between T-Mobile USA and Metro PCS, which are estimated to generate savings of $6 billion to $7 billion on a net present value basis. Ultimately, Sprint opted out of the deal in February, choosing instead to invest in its own network. But on the news of T-Mobile’s offer, they’re considering jumping back into the game.
It’s doubtful that either T-Mobile or Sprint has more information than the other regarding the true value of MetroPCS. What reason would MetroPCS have for giving more information to one than the other? It’s clearly in their best interest to let the bidding go higher. Is Sprint stepping in because it assumes that T-Mobile knows more than it does about the value of MetroPCS? If Sprint does make an offer, will T-Mobile fall prey to a similar, possibly erroneous, assumption and make an even higher offer?
What about the estimated savings generated from the synergistic value of the combined companies? In studies of past M&A’s, there’s no evidence to support that the excessive price paid was equal to the synergistic value. According to an article published in the Wall Street Journal in September 1981, approximately 1/3 of acquisitions prove to be failures; another third fail to live up to their expectations.
Often, bidders’ willingness to accept less information than they would have liked, stems from their fear of competitive offers. Is Sprint’s last-minute bid simply a case of “I didn’t want it before, but if you want it, then I want it, too, because I don’t want you to have it?”
Potential acquirers would be well served by guarding against over-confidence in their own judgment. Bazerman and Neale maintain that, “Potential acquirers should temper their optimism by recognizing that the winning bidder is likely to pay a far greater price than the target is actually worth.”
It will be interesting to watch the outcome of the bidding between T-Mobile and Sprint in the coming days, and, in the coming months, to see how much value was actually created for the winning suitor. Will the final outcome be a match made in heaven, or another classic case of the Winner’s Curse?
Copyright Nancy J. Fox, October 2012 – All Rights Reserved
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According to research, our satisfaction with the outcome of a negotiation doesn’t depend solely on how much we objectively gained or lost, but rather on four factors: our measurable gains and losses, how the negotiation made us feel about ourselves, whether the negotiation process was collegial and fair, and whether we developed a productive working relationship with our counterparts.
Therefore, in order to maximize satisfaction and build a strong working relationship, we want to control what we can in a negotiation. This may include the negotiation process. Take the time beforehand to discuss with the other party how you will negotiate before talking about the issues to be negotiated.
One question you might ask yourself is:
Where will we negotiate? Don’t assume that the other side plans to meet at your location or vice versa. As good negotiators know, assumptions may be erroneous and, consequently, detrimental. Your counterpart may have a different idea about where you should negotiate.
Negotiating on your home court can be advantageous, because it allows you to control the environment and feel at ease. But traveling to the other party’s turf can send a message that you are serious about making a deal. It also gives you opportunities to observe your counterpart in his surroundings. If you’ve not visited your counterpart before, you may learn more about his/her interests and have the opportunity to meet others who are indirectly involved in or affected by the negotiations. You might also consider negotiating on neutral territory, such as a hotel or restaurant conference room.
Here’s a true story that demonstrates the impact that choice of site can have on the outcome and satisfaction in a negotiation.
A former student, Ted, was the new Executive Director of a not-for-profit organization. As is often the case when someone new takes the helm, there was resistance on the part of some employees. With one employee, Donna, this resistance escalated to the point of insubordination, breach of confidentiality and disloyalty to the organization. Ted was finally forced to call her on it. In response, Donna, who had worked for the organization for many years, complained to the Board President about Ted’s reprimand. Feeling that he had to mediate, the Board President scheduled a meeting between Ted, Donna and himself. He assured Ted that he would support Ted’s authority to manage the organization and its employees. Ted assumed the meeting would take place in a casual setting, such as a coffeehouse. Imagine his surprise when he was informed, thirty minutes before the meeting, that it was to be held in the conference room of a large law firm! This choice of venue and setting sent a loud message to Donna that her complaint was valid and worthy of serious consideration, rather than a reprimand for her inappropriate behavior; the meeting appeared to be more of a reprimand to Ted for his management style. The discussion was so overshadowed by the implications of the location that Donna left feeling vindicated, and Ted left feeling that his authority to lead the organization had been severely compromised. Ted left the organization after only three months.
The important thing is to talk about the negotiation location in advance so you will be aware of and prepared for it. If you have a preference of place for your negotiation, frame your preference in terms of the benefits for the other party. On the other hand, if the other party’s location preference won’t negatively impact you, keep in mind that conceding to your counterpart on relatively minor process issues, builds trust and goodwill. This may pay off to you when it’s time to discuss issues of substance.
 research by Jared Curhan and Hen Xu of Massachusetts Institute of Technology and Hillary Anger Elfenbein of the University of California at Berkeley,
 Adapted from“Start Your Talks Off On the Right Foot,” first published in the Harvard Negotiation newsletter, September 2009.
 Adapted from“Start Your Talks Off On the Right Foot,” first published in the Harvard Negotiation newsletter, September 2009.
ALL RIGHTS RESERVED – Nancy J. Fox 2012
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As artists grapple with the task of pricing their works, their first – and toughest – negotiation may be with themselves. Since artwork has no Manufacturer’s Suggested Retail Price (MSRP), Book Value or systematically quantifiable price, how much is it worth?
Conventional wisdom says that something is worth whatever a buyer is willing to pay for it. This means the artist should price the work within a realm that will attract an offer from a buyer in order to establish a negotiating range within which the two parties can attempt to reach agreement. However, in trying to establish that price, other issues, such as emotional attachment, may cloud the artist’s ability to think rationally about the value of the item to a prospective buyer. For example, perhaps this is the first work in a new series, or perhaps the work was inspired by a dream trip to Italy.
Research conducted by Daniel Kahneman, Jack Knetsch and Richard Thaler, found that we value things higher once we own them – a phenomenon they call the Endowment Effect – and that giving these things up represents a loss to us. For example, they found that people valued a specific coffee mug at a median price of $2.88 – $7.12, depending on whether they were buying or selling the mug.
In dealing with the emotional sense of loss that may accompany selling their work, artists must consider whether a work is truly sacred, in which case perhaps s/he does not really want to sell it, or whether it is, as Professor Max Bazerman (Harvard Business School) refers to it, only quasi-sacred, in which case the artist needs to take a more objective approach to valuing it.
After surveying the market for comps, reviewing recent selling prices and other due diligence, artists must set a price – sans emotional attachment – that will bring in offers. Those offers are a starting point for negotiation.
Copyright © 2012 by Nancy J. Fox
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“He who speaks first, loses”, is a widely heard statement about negotiation that implies that it’s best to let the other person make the first offer. However, there is a plethora of empirical data to show that this is a myth. Most times, you’ll do better in a negotiation if you make the first offer. Why? Because, if you’re a savvy negotiator and have done your homework, you’ll set that offer high (or low, depending upon whether you’re the seller or the buyer). There are times, however, when you’ll want the other party to speak first.
We’ll be discussing this point – and many other great strategies – at greater length in my workshop on March 15th in Long Beach. To learn more, REGISTER NOW!
This Wednesday, March 7 at 8:30 a.m., I’ll be sharing some negotiating tips on Christopher McAuliffe’s popular blog-talk radio program, “The Coaching Show”. The host station, WSRadio.com, will archive the program, so you’ll be able to get access to the segment later at your convenience.
Although the negotiation tips I’ll be sharing with McAuliffe’s listeners are targeted to professional coaches, they are useful for anyone, including artists.