Business Negotiation October 3, 2013
When is it Wise to Buy Now and Negotiate Later? Is it Better for the Buyer or Seller?Does it ever make sense for a buyer to authorize a seller to star work before an agreement is reached? The answer is not “yes” or “no.” In most cases, it’s a matter of business judgment.
In a typical “buy now-negotiate later” arrangement, the buyer needs something started quickly and asks the seller to begin immediately on what is usually a time and material basis. Limited funds are allocated to keep the work going. The parties agree to negotiate and finalize a contract later.
Such an arrangement poses serious negatives from the buyer’s standpoint. The buyer gets locked in to the seller as a sole-source. Aggressive sellers find it easy to exploit these buyer disadvantages. They can use their sole-source power position at negotiation time to charge as much as the distressed buyer can bear. Not all sellers are so aggressive, but the potential for a buyer to pay dearly is real when they have to negotiate after they have authorized the seller to proceed.
Despite these disadvantages, it is sometimes in the buyer’s best interest to negotiate after work is started or even after it is done. “Buy now-Negotiate later” may be called for under the following conditions:
For the seller, “buy now-negotiate later” is usually advantageous, but not always. A seller may be better off saying no to “buy now-negotiate later” because they may get a better price before the work is started than after is it completed.
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