Write down your limits

I learned the importance of writing down limits for a negotiation during the seminars in which I run a mock negotiation. Originally, I had participants write down their goals and limits and turn them in before they would start negotiating. While they were busy negotiating, I reviewed each team’s limits and goals to see where the negotiation would end up. In fact, I could predict the results based on this review and was seldom wrong. However, every now and then, someone would settle outside the limits the team had handed in. When I asked why, the person invariably would answer that he or she had forgotten the limit the team had set.
Usually the class had a good laugh and that was that. But it bothered me. I started having participants write down the limits and goals and keep a copy with them during the mock negotiation. That solved the problem. Participants never forgot their limits again.
It’s easy to understand how people can get caught up in a negotiation and reach an agreement that they would not otherwise agree to if they had just set their limits and then remembered them as the negotiation drew to a close. A lot of people would avoid buyer’s remorse if they would set and stick to their limits. When you write down your limits — your walk-away points —before you start negotiating, you are well on your way to remembering —and enforcing — your limits.

Know your “or else”

After you have created the list of alternatives, decide which alternative is most acceptable to you. Pick your personal or else. Decide what you want to do if the negotiation doesn’t close. Think about that course of action. Play the scenario out in your mind.
Knowing what your “or else” is — that is, knowing what your favorite option is if the deal doesn’t close — defines your limits for each negotiation. Suppose that you’re willing to pay $300,000 for a house before you set your “or else.” Then remind yourself that you have choices and list all of them. After you write down your list, you may decide that you can accept another house that is cheaper. This way, you can be firm or even lower the $300,000 price you were willing to offer. On the other hand, if you decide that no other house would be right for you, the price could go up rather than down.

A few years ago, the Harvard Negotiating Institute came up with something it calls BATNA — the Best Alternative to a Negotiated Agreement. That’s the Harvard way of saying “or else.” BATNA is a core element in its negotiating course. It defines your best alternative if you can’t close a deal. Most negotiations settle before either party’s limits are tested. World-class negotiators have been doing this for centuries. The “or else” label is my own tag that I used with a client as a young lawyer, and it has stuck with me ever since. But your limits and the other party’s limits loom over every negotiation like peregrine falcons circling high above, ready to swoop down for the kill. You are much better accepting this reality before the negotiation ever starts.

Know what the other choices are

Don’t develop just one alternative deal in a negotiation. List all the alternatives available to you should the negotiation fail to close on the terms you want. Don’t edit your list. Make it as long as possible. Life is always about exercising options. What are your options if you walk away from this deal? You have nothing to lose and everything to gain by listing your choices. Don’t inhibit yourself. Instead, list all your options, even if you don’t think they are very valuable or practical. You have plenty of time to edit them down later. If you’re buying a new car, your alternatives may include going to another lot, choosing another model, choosing another make, or delaying the purchase.

If you’re interviewing for a job, your alternatives may involve accepting a lower wage, accepting another job, continuing your search, going to another city, changing professions, or going into business for yourself. The point is that you have many alternatives. Keep your options open. Don’t limit yourself. Whatever the alternatives are in your situation, list them clearly and completely. If you find that you can’t list any alternatives, you aren’t ready to start negotiating. One result of being well prepared is the ability to create this list of alternatives before a negotiation begins.

Before you enter the negotiation, you should also try constructing a similar list of alternatives for the other party. The more you know about the choices available to the other side, the more strength you have in the negotiation. Consider these exercises as a part of your preparation.

Know that you have other choices

Texas billionaire Nelson Bunker Hunt is often quoted as saying, “There is always another deal around the corner.”
One reason Bunker made so many good deals during his life is that he was always willing to walk away from a deal if it wasn’t right. He was good at setting his limits and then sticking to them. Bunker’s slogan must be part of your core beliefs. Keep repeating his quote until it becomes a part of your belief system:
“There is always another deal around the corner.” Poor negotiators tend to attach themselves to the notion that they must close every negotiation with a purchase or sale. Good negotiators, on the other hand, often walk away. Walking away from a bad deal is just as important — maybe more important — than closing a good deal. (
In fact, you often have two incentives to walk away from a bad deal:

• You aren’t stuck with the headache, financial stress, or other difficulties associated with the bad deal.
• One of your competitors will end up with the job, while you are off chasing the good job, the profitable job, the job with the clients who are easy to work with.

Whether the object of your affection is a stock, a piece of real estate, or a potential lover, you must have in your heart and in your mind that you are not stuck. The biggest prison is the one you build around your mind if you decide you don’t have choices.

“There is always another deal around the corner.” Make this phrase your mantra. Repeat it until it becomes part of your core. Own it. This truth can influence your entire life and bring positive results to all your future negotiations. In the entertainment industry, this mantra holds especially true. Writers and actors deal with constant rejection. I profess this mantra to my writer clients before they attend a pitch meeting to sell an idea. The chance of them selling a pitch the first time they walk into a room is remote, especially for first-time writers, because many other writers are always waiting to pitch their take on the same idea. Another deal is always waiting for you somewhere. It just may take some time to find it. Start making this your mantra today. Don’t wait until you’re in the middle of an emotional situation to convince yourself that you have other choices.

The truth of this mantra can only be grasped in the crisp light of a clear and uncluttered day — not in the depths of a specific problem. Remember the scene before the intermission in Gone with the Wind where Scarlett O’Hara stands at the foot of her war-ravaged plantation, Tara, looking into the sunset? Nothing, not even the Civil War, deters Scarlett from knowing that she has other choices. She vows to rebuild her plantation and her life despite the obstacles ahead. Think of the negotiation in a similar fashion. Know that you have other choices and opportunities elsewhere.

How to Set Limits in Easy Steps?

When you know how to set limits and have confidence in that ability, you change the entire negotiating process. But it is almost impossible to set and enforce limits unless you have an attitude of prosperity. If you do not have a firm belief about the prosperity all around you, you may have a hard time setting limits. People who believe that the world is a stingy place and see the world through an attitude of lack and limitation usually think that they have to close the deal or another one won’t come their way. The truth is that the universe is a bountiful place. No matter what your calling, there are more jobs, more opportunities, more chances to express your success than you could ever possibly take advantage of. Embrace the magnificent range of possibilities that life has to offer as you read this section because that is the mind-set of a world-class negotiator. Kenny Rogers may have said it best in his hit song “The Gambler,” which was about the high-stakes negotiation that takes place around a poker table.
Rogers croons this important truth:

You gotta know when to hold ’em,
know when to fold ’em,
know when to walk away, and
know when to run.

Notice that the word “know” appears in each line of the chorus. Being able to set limits is directly tied to knowledge, and knowledge is the result of preparation. Of course, you have to be prepared about the marketplace. You need to know the likely outcome of the deal. But you also need to spend time preparing about your own life and vision and don’t forget to find out about the person you’re negotiating with and know what he or she is seeking. The last thing you want to do is blindly enter a negotiation and end up looking like a novice because you haven’t prepared adequately. This section contains three steps that master negotiators around the world use to set limits. Notice how each of these steps includes the word “know.”

What It Means to Set Limits?

Your limits define the absolute most you are willing to give up to get what you want. Setting limits means establishing the point at which you are willing to walk away from the negotiation and pursue some alternative course. Your limit may be the highest price you’ll pay for a car, the lowest salary you’ll accept from a prospective employer, the farthest you’re willing to drive before it’s your spouse’s turn to take over, or the latest curfew you’ll allow for your teenager. If the negotiation doesn’t close before your limits are crossed, then no car, no job, no trip, no date — no dice.
In business negotiations, setting limits may not seem necessary because the marketplace can define the boundaries of the discussion. People generally have an idea about the price of goods or services; they know what others are paying for comparable homes, cars, or cleaning services. They assume the discussion will not go beyond an acceptable range or what they consider to be a fair and reasonable value for the product or service under negotiation. Not true. Even business negotiations can go off track, especially in times of economic downturn or if other business conditions change suddenly. Think about the last three times you became upset about something in your personal life. It’s almost a certainty that at least one of those situations was caused by the fact that your limits were crossed. You probably didn’t articulate those limits in advance. For example, your neighbor comes over unannounced to chat. You have only a few minutes to spare, but you fail to tell your visitor. Out of kindness, you listen while your blood pressure rises as the neighbor talks for an hour.

Unfortunately, setting limits is a very difficult task for some people. It takes practice and assertiveness. Start small: Set a limit of 60 seconds the next time someone calls to chat when you don’t have time. Tell them upfront. That should be enough time to take care of the pleasantries necessary to maintain the relationship and still get you off the phone. You don’t have to be rude about it. Simply set your limitations. Your time is precious. Setting limits is worth the effort. People who consistently make bad deals usually don’t set limits before the negotiation starts. They don’t know when to walk away. You must know your limits and know how to enforce them. Knowing that you’re prepared to walk away gives you the strength and confidence to be firm, even if the other party isn’t aware of your limits or your ability to enforce them.

Setting and Enforcing Limits

Setting limits and then sticking to them is one of the most important and most difficult lessons you can learn. This chapter tells you how to set limits and then how to use those limits to take charge of every negotiation in your personal and professional life.
If you’re like most people on this planet, you can use some pointers about enforcing limits. Many people don’t even want to think about setting limits because they have such a tough time enforcing them. At one time or another, you stayed in a relationship just a little bit too long because you never set your limits. You probably agreed to do something you didn’t want to do because you were unable to stick to your limits. Or you were angered by somebody because you failed to make your limits clear to him as he “crossed the line.”
To help you conquer this nearly universal problem, I divide it into two pieces. One is setting your limits. The other is enforcing your limits. The importance of limits shows up most clearly when you’re in a romantic relationship and you don’t want to think about it ending, so you don’t think about your limits. But when limits are crossed — when it’s often too late to correct the course of events — these words are heard: “Now you’ve done it! You have really crossed the line!”
Set your limits before you enter a negotiation. Setting limits early saves an enormous amount of time during the actual course of the negotiation because you already know your options. And knowing your options makes you more decisive during the discussions. Rapid decision making depends more on having your limits well in mind at the start of a negotiation than it does on intellect.
After you set limits, they will help guide you through the negotiation. When you carefully and realistically predetermine your limits, they serve as rudders, navigating the negotiation through rough waters. Worried about dirty tricks being thrown at you? Scared of unfair tactics? No worries, as long as you set your limits.