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Tips for Successful Bartering

24 Wednesday Oct 2012

Posted by Negotiation Fox in Negotiation, Uncategorized

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Arts Strategies, Barter, Bartering, business skills for artists, GYST, Negotiation, negotiation for artists, Negotiation Fox, negotiation skills, negotiation skills training, negotiation strategies, negotiation strategies for the arts, negotiation training, negotiation training for artists, negotiation workshops, persuasion

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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Real-Life Negotiations: Lessons for Artists

14 Sunday Oct 2012

Posted by Negotiation Fox in Auctions, Negotiation, Uncategorized

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Arts, Arts Strategies, auctions, business skills for artists, competitive bidding, Edvard Munch, Negotiation, negotiation for artists, Negotiation Fox, negotiation skills, negotiation skills training, negotiation strategies, negotiation strategies for the arts, negotiation training, negotiation training for artists, negotiation workshops, T-Mobile

Has my October 2nd post about the possible merger between T-Mobile and Metro PCS left you wondering what this has to do with artists?  Let me explain.

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.

Real-Life Negotiations: T-Mobile’s Bid for MetroPCS

09 Tuesday Oct 2012

Posted by Negotiation Fox in Negotiation, Uncategorized

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Arts, Arts Strategies, business skills for artists, competitive bidding, Harvard Project on Negotiation, Margaret A. Neale, Max H. Bazerman, MetroPCS, Negotiation, negotiation for artists, Negotiation Fox, negotiation skills, negotiation skills training, negotiation strategies, negotiation strategies for the arts, negotiation training, negotiation workshops, Sprint, T-Mobile, T-Mobile USA, Winner's Curse

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:

  1. Bidders often don’t have enough information; therefore, they may overestimate the present value of what they’re bidding for.
  2. Acquirers frequently don’t consider that the other bidders may not have any more information than they do.
  3. 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
  4. 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

Warholian Messsage

11 Saturday Feb 2012

Posted by Negotiation Fox in Negotiation, Uncategorized

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Arts Strategies, Negotiation, negotiation for artists, negotiation skills, negotiation strategies, negotiation strategies for the arts, negotiation training

I stumbled upon this site, www.warholian.com,  through one of my FB friends. Among the many messages in this picture, lies one that can be related to negotiation.

As I’ve mentioned before, negotiation outcomes are closely tied to our relationship with the other party and to our ability to empathize with them.  If we restrict ourselves to a narrow circle of relationships with people just like ourselves, we deny ourselves the opportunity to broaden our perspectives.  When it comes time to sit down at the negotiating table,  an artist’s tendency to “mix with all classes of society” should provide an advantage in being able to relate to a broad spectrum of people.

Don’t Let These Misconceptions Keep You from Getting More

01 Wednesday Feb 2012

Posted by Negotiation Fox in Negotiation

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art, arts negotiation strategies, Arts Strategies, Business Skills, Deepak Malhotra, GYST Ink, Harvard Business School, Howard Raiffa, Negotiation, negotiation skills, negotiation strategies for the arts, negotiation training, William Ury

Are you sometimes your own worst enemy?  Do you find excuses for why you can’t or won’t do something?    Let’s look at some misconceptions about negotiation that may be keeping you from getting more, because negotiation is the fastest money you will make or lose.

Misconception #1:  Negotiation isn’t relevant for me.

Often, people associate negotiation with labor union vs. management disputes.  They envision picket lines and angry people shouting across the table at one another. It’s not surprising, therefore, that artists might shudder at the thought of any association with it, believing that nice guys don’t engage in such distasteful practices. But union negotiations are just one of many types of negotiation situations.

In fact, we negotiate daily with nearly everyone we encounter, in business and in our personal lives. Procuring funding from a wealthy patron is a negotiation; so is deciding whose turn it is to walk the dog. Because resources are so precious for artists, it’s critical to acquire good negotiation skills in order to stretch your resources as far as possible.

Misconception #2: Negotiation is not socially acceptable.

Some of our misconceptions about negotiation are cultural.  Most Americans do not grow up learning to negotiate.  Words such as haggling or chiseling add to the negative connotations of negotiation.  But, bargaining is a way of life in 75% of the world!  It’s accepted, it’s expected and it’s respected.

Learning to negotiate provides a double payback.  You will benefit when you are in the role of the seller, e.g., selling an artwork, as well as when you are the buyer, e.g., purchasing things you need for your studio or your personal life.  Both will improve your bottom line.

Simply put, negotiation is seeking agreement.  It need not be a contentious process.  William Ury, co-author of Getting to Yes, defines negotiation as a discussion leading to agreement or to the decision to walk away and pursue other alternatives. Another definition: Negotiation is the art of persuading someone to do something they don’t want to do. My personal favorite: it’s letting other people have it your way. However you define it, you are negotiating every day, whether you recognize it as such or not.

Misconception #3:  Negotiation is a business skill, so I won’t do well.

Historically, negotiation has been considered an art; ergo the “art of negotiation”.  Indeed, negotiation involves interpersonal skills, the ability to convince and be convinced, and to know how and when to employ various negotiation tactics: these activities engage the creative side of the brain.  Yet many artists consider negotiation a business skill, and therefore harbor the misconception that it is something they would not be good at.  Given the context of negotiation as an art, this is simply not true.

More recently, negotiation has also been recognized as a science, in that it involves systematic analysis for problem solving.  In his book, The Art and Science of Negotiation, Professor Howard Raiffa purports that less is known about the scientific side, though research continues in this area.

One thing is certain:  there is no shortage of disputes.  Raiffa (and most other professional negotiators) believes that, “many disputes could be more efficiently reconciled if the negotiators were more skillful.”  So artists, let’s get started.

GETTING STARTED

The first step in becoming a good negotiator is to develop a negotiation mindset. Everything can be negotiated, but you have to ask. The other party isn’t going to willingly give up profits or savings to you if you don’t ask for them.  Would you?

As validation for the above, I turn to research by Professor Deepak Malhotra, who is currently on the faculty at Harvard Business School.

The research stems from a negotiation class that Professor Malhotra was teaching at the Kellogg School of Management, to students who worked during the day and took classes at night. Professor Malhotra asked the students to negotiate something in real life and turn in a written report about the experience. Thirty-five of the forty-five students negotiated something for themselves; the remaining ten negotiated something work-related. The results were impressive: for those who negotiated something for themselves, the median savings was $2200; those who negotiated something for their employer produced a median savings of $390,000. These results are testimony to the power of negotiation training. But even more illuminating is the students’ response to the question of what tactic they used to attain this success. The students reported, “Choosing to negotiate at all.”

If you don’t ask, you won’t get. Negotiation opportunities present themselves on a daily basis, but if you don’t adopt a negotiation mindset, you may not recognize them. You can choose to seize these opportunities or to ignore them and get less.

As with anything, practice makes perfect, so use situations where the stakes are low to practice your negotiation skills for catching bigger fish.  For example, if I want cremini mushrooms for a recipe I’m making, but the grocery store is out of them, I ask for a discount on the white mushrooms I purchase as a substitute.  I’m a regular customer; their job is to have basic ingredients in stock.  They’re happy to accommodate my request.  It’s not about the $2.00 per pound that I save, though that adds up over time.  It’s about practicing my negotiation skills, so that I’ll be ready when I face a $2,000 negotiation.  These small negotiations do not take much time. They require only that you have a negotiation mindset and the confidence to ask.

A COMPETITIVE EDGE

Because of its universal applicability to work situations, many employers give preference to candidates with negotiation training. If you are an artist who is seeking employment or advancement in your current position, good negotiation skills can help your profile cut through the clutter and give you a competitive edge.

Copyright Nancy J. Fox, January 2012

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This article is the first in a series of posts that will appear at the beginning of each month as part of the strategic partnership between Negotiation Fox and GYS*T Ink.

Better Deals Through Connectedness

25 Sunday Sep 2011

Posted by Negotiation Fox in Negotiation, Uncategorized

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art, Arts Strategies, Business, connectedness, Negotiation, negotiation strategies for the arts, negotiation training, visual arts

When we think of negotiation, we often focus on the differences between what we want and what the other party wants.  While it’s important to have identified those differences, it’s equally important –  perhaps more so – to identify our common interests, and to explore how we are connected.

Even when you are negotiating with someone whom you believe to be diametrically opposed to your position, you are connected in some way.  That connectedness may be far removed from the issues you are negotiating, but if you take time to explore, you will find it.  It might be a sport, form of entertainment, favorite author or actor, etc.  Reduced to its lowest common denominator: when people hurt themselves, everyone’s blood is red.

Let’s consider a negotiation between an artist and a gallery.  Both are interested in maximizing their respective financial positions with regard to an exhibition;  those positions would appear to be opposing.  But looking behind these positions you see that both share a passion for art, both want to successfully market the exhibition, both want to build their reputations.  They have many shared objectives.

Discussion of commonalities is a great way to open a negotiation discussion. It alleviates tension, puts people at ease and builds rapport, all of which set the tone for a collaborative approach to negotiaton rather than a combative one;  an approach that is more apt to result in a better deal for both parties.

Commonalities invite affirmative responses;  more yeses than nos.  That initial yes momentum may carry through when you start to discuss the thornier issues.

In summary, use these tips to make better deals:

1.  Take the time to explore commonalities and build rapport with the other party

2.  Use common interests to set a collaborative tone at the outset of the negotiation

3.  Use affirmative language, whenever possible

4.  Discuss thorny issues at the end of the negotiation, so that you benefit from the positive momentum established earlier on

Humanity in the Workplace

21 Sunday Aug 2011

Posted by Negotiation Fox in Negotiation

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Business Renaissance Institute, Dr. Richard King, From Me to We, Negotiation, negotiation for artists, negotiation strategies for the arts, negotiation training

Today I had the privilege of attending a meeting of the Business Renaissance Institute (www.bri-usa.com), whose mission is to “transform workplaces by adding more humanity to the bottom line.” Among the approximately 30 attendees, all but two or three had PhD following their names;  this is a group of highly educated, evolved and successful people who want to make a difference.  The topic under discussion was From Me to We, not coincidentally, the title of a new book written by three  BRI members/founders, each of whom spoke briefly about it.

I want to share an anecdote from Dr. Richard King, whose numerous and impressive credentials include a three-year stint as CEO of the Birtcher Corporation;  he was hired to turn that organization around.  Upon assuming his new position, Dr. King met individually with the six people directly under him and asked them these three questions:

  1. Are you happy working here?
  2. Why aren’t you happy working here?
  3. What can you contribute to this organization?

After these meetings, Dr. King and his team were able to effect the changes necessary to turn the Birtcher Corporation around.

As arts aficionados and practitioners, we should be living BRI’s mission to add more humanity to the bottom line every day.  Our product is the humanities.   But product notwithstanding, sometimes the day-to-day challenges of creating and delivering that product can cause us to lose sight of humanity in the workplace:  people don’t always agree, issues at home may make us cranky, and so forth.  Dr. King’s three questions could go a long way toward restoring a happy, collaborative and creative environment at work;  the kind of environment that fosters artistic output.

What does this have to do with negotiation?

1. You may not be able to let everyone have their own way, but you can hear them out and acknowledge their feelings.  Sometimes that alone is sufficient validation to elicit a more collaborative attitude.

2. By asking someone what s/he can contribute to the project or organization, you re-kindle his/her commitment. Committed people can do amazing things.  Conversely, if someone is not committed to an agreement, they will later find reasons to back out.

3. The answers to those three questions may give you new perspective and new ideas, as well.

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