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:

  1. When there is no time to negotiate. An example would be when a pipe in your house is leaking and the basement is flooded.
  2. When the buyer wants to find out if the seller knows what they are doing. Doing part of the job may reveal the seller’s competence or lack of it.
  3. If the seller is willing to commit to a “not-to-exceed” dollar amount. In that case the buyer is aware of the most he or she will have to pay.
  4. When the seller’s history shows that they are unlikely to exploit customers. The smart buyer asks for references and checks them.
  5. When the job cannot be estimated until enough work is accomplished to provide visibility. For instance, a contractor repairing termite damage to a foundation might not be able to make a realistic estimate until the extent of the damage is uncovered.
  6. When the buyer believes that the seller’s price is heavily loaded with problems and probably costs that are unlikely to occur. In that case it may be wise to negotiate later or to let the seller complete the job on a time and material basis.
  7. In the rare situation where the seller’s bargaining position will be worse later. This may occur when the seller is afraid to lose the job in the process because they need it to keep their people working.

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.

THE PROGRAM WAS GREAT! MY SEMINAR LEADER AND THE STRUCTURE OF THE COURSE KEPT ME CONSTANTLY STIMULATED. I NOW AM BETTER PREPARED TO GO INTO AN IMPORTANT NEGOTIATION MEETING AND STAY IN CONTROL, WHILE FINISHING THE MEETING SATISFIED.

Deanna D.
CASE MANAGER at THE JACKSON LABORATORY

IF YOU HAVE THE TRAINING BUDGET AND TWO DAYS TO SPARE, YOU'LL STRUGGLE TO FIND A PROGRAM MORE FAR-REACHING, ON-POINT, AND INSTANTLY IMPLEMENTABLE.

Jeff G.
BUSINESS DEVELOPMENT MANAGER at THE M.K. MORSE COMPANY

EXCELLENT COURSE, BRINGS MORE CONFIDENCE IN MY ABILITY TO NEGOTIATE. I THINK THIS COURSE IS A MUST FOR ALL EMPLOYEES WHO DEAL WITH CUSTOMERS.

John S.
CHIEF ENGINEERING MANAGER at EXXONMOBIL

THIS WAS VERY EFFECTIVE WITH A STRONG FOCUS ON BOTH-WIN NEGOTIATING.

Kathleen L.
SENIOR ANALYST at BLUE CROSS/BLUE SHIELD OF MICHIGAN

THE KARRASS CLASS WAS THE SINGLE BEST TRAINING CLASS/SEMINAR I HAVE EVER ATTENDED. EVERY TIME WE DID AN EXERCISE IT TAUGHT YOU WHAT TO DO DIFFERENTLY NEXT TIME. THANKS.

Kim C.
PROCUREMENT at AMERICAN EXPRESS

THIS PROGRAM HAS GREATLY INCREASED MY CONFIDENCE AND ABILITY TO NEGOTIATE FOR MYSELF AS WELL AS MY COMPANY.

LaDonna E.
SENIOR STRATEGIC BUYER at HALLMARK

THE NEGOTIATING CLASS WAS VERY INFORMATIVE. THE INSTRUCTOR PROVIDED AN INSPIRATIONAL MESSAGE THAT CAN BE APPLIED TO EVERYDAY LIFE.

Mary S.
INTERNATIONAL SOURCING at FMC TECHNOLOGIES

WE NEGOTIATE EVERY DAY OF OUR LIVES, BOTH PERSONALLY AND PROFESSIONALLY. THIS COURSE DEFINES THE PROCESS AND PROVIDES TECHNIQUES TO ACHIEVE SUCCESSFUL RESULTS.

Phillip H.
VICE PRESIDENT at GE

PRIOR TO THIS CLASS I FELT AS THOUGH I WAS GETTING EATEN ALIVE BY INTERNAL NEGOTIATIONS WITH SALES REPS. NOW I FEEL PREPARED TO CHALLENGE WHAT THEY ARE SAYING AND BET TO THEIR REAL NEEDS.

Steve Q.
PLANNER at HONEYWELL

MANY PEOPLE FAIL TO ACHIEVE THEIR POTENTIAL BECAUSE THEY DON’T SEE THE OPPORTUNITIES TO NEGOTIATE A WIN/WIN AGREEMENT WITH THEIR COLLEAGUES. THIS CLASS IS AN EYE OPENER TO THIS DYNAMIC..

Stuart B.
CONTRACTS MANAGER at HEWLETT-PACKARD
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