Counterparty Needs to Have Authority | DomainInvesting.com

Counterparty Needs to Have Authority

14

I have bought and sold quite a few domain names to larger companies with multiple levels of decision makers. In these dealings, I have negotiated with a variety of individuals at different positions within the companies. One thing that should be discussed is whether the other party has the authority to negotiate terms and agree to a deal.

I have discussed deals with everyone from marketing managers to lawyers to executives. Generally speaking, I assume that the other party is authorized to discuss a deal because they either contacted me to discuss a domain name or they were the point of contact for me. As a negotiation gets going a bit, you should think about asking the other party if they have the authority to do a deal with you.

The primary reason for learning this information is that you don’t want to reach a deal with the other party only to learn that someone else has the power to cancel the deal. It can be a major time waste if you negotiate a price and terms only to learn that there are other people that need to get involved before the deal can be finalized. It is pretty crappy to reach a deal after an extended negotiation, only to learn that the deal isn’t really done yet. It is also annoying to get a price for a domain name, agree to buy it, and learn that the deal needs to be approved by someone else before moving forward.

A secondary but important reason to establish that the other party has authority is that you can prevent the other party from coming to terms with you and then stating that they need to take the decision to someone else or to the “board.” This can be a negotiating tactic to get a better price (ie: good cop / bad cop). If you have already established that they have the authority to consummate a deal, you have eliminated the chances of pulling out this tactic at the outset.

I can assume the c-suite executives have the authority, and I would only ask them about it for the second reason I mentioned. It might be good to ask a lower level employee like a marketing manager, SEO manager, or webmaster.

I can’t give great advice on how to ask if your counterparty has authority without possibly belittling them. I would probably say the best way to approach it is to ask something like, “if we can agree on terms, do you have the authority to move forward with the deal or will other parties need to approve it?” There are probably more tactful ways to ask though.


About The Author: Elliot Silver is an Internet entrepreneur and publisher of DomainInvesting.com. Elliot is also the founder and President of Top Notch Domains, LLC, a company that has sold seven figures worth of domain names in the last five years. Please read the DomainInvesting.com Terms of Use page for additional information about the publisher, website comment policy, disclosures, and conflicts of interest.


Reach out to Elliot: Twitter | | Facebook | Email

Comments (14)

    John

    Nice valuable post here.

    October 15th, 2015 at 10:17 am

    John

    On a side note regarding an important topic that can affect us all, here’s an update on the looming ICANN transition efforts:

    “The U.S. Must Reject the ICANN Transition If Accountability Falls Short”

    http://www.heritage.org/research/reports/2015/10/the-us-must-reject-the-icann-transition-if-accountability-falls-short

    “Membership is the only option that would allow the community to fully exercise all of the powers deemed necessary to hold ICANN accountable and entrench the multi-stakeholder community as the final authority for operation of ICANN. Regrettably, the ICANN board recently upended this careful consensus by opposing the multi-stakeholder community proposal and suggesting an alternative that would preserve the board as the final authority […]”

    Playing on Community Fears.

    Regrettably, the board’s action has had its intended effect of fracturing the community consensus. Some in the community are fearful that if a proposal is not finalized soon, the transition will never occur. The board is playing on this fear to get the community to back down.”

    October 15th, 2015 at 10:19 am

    Hobi Michalec

    I 100% agree with this. This should always be step 1.

    I’ve worked on deals where someone is so emotionally involved with a transaction and believes that something should go for X amount when in reality they really don’t have any authority on the matter.

    While it can be risky, noticing this and making a call to someone higher up the chain has been imperative on bring several deals to fruition.

    October 15th, 2015 at 12:03 pm

    todd

    “you should think about asking the other party if they have the authority to do a deal with you.”

    I think if someone asked me that question in the middle of a deal I would just walk away from it. You don’t think that comes across as offensive in some way?

    October 15th, 2015 at 12:03 pm

      Elliot Silver

      I do think it could be a bit offensive, and that is why I can’t really offer a great way to ask the question.

      In reply to todd | October 15th, 2015 at 12:05 pm

      Hobi Michalec

      I would recommend you make it one of your opening/qualifying questions.

      Someone who is it a potentially questionable position will answer along the lines of, “I’ve been asked by the CXX to look into this.”

      If they are say the CEO I wouldn’t question it.

      In reply to Elliot Silver | October 15th, 2015 at 12:49 pm

    Larry

    Disagree. “Waste of time” doesn’t even enter into it.

    By asking someone if they have “authority” (or whatever language) you could also scuttle the deal early on when it would have succeeded. See below. (And yes people will get insulted. Only matters of course if the deal dies because of it otherwise who cares? But it will matter and shows a lack of trust. Also shows all you care about is yourself and your precious time..)

    What you want to know by your questions is if they are “the decision maker”. Maybe yes maybe no. Basic concept in selling. Many people are not and even people that are will often feign the need to get approval by others. Well known concept tin man salesman wants both husband and wife for the sales pitch.

    Anyway, how can a deal get scuttled? Well just as you have put in time so has the person that you are dealing with. If you ask them upfront (with whatever words you use) they could then ask a higher up who might say no. And if “no” is said at the beginning of a deal where the person you are selling to (the non decision maker) has not put in much time (just like you) they will be more likely to not put any more effort in. Easiest thing to do. Basic principle. Effort binds people to get something done. Consistency principle in part as well.

    Same goes when you buy a car. More time you spend with the salesman the less likely they will walk from a deal over your final demand. You want to waste their time it is to your favor. Just like they want to waste your time.

    Two cases: Walk into the showroom and say “I will only pay $x” or I will walk. Or, waste 5 hours of salesman time and say “I will only pay $x”. Guess the result.

    I get emails all the time from buyers (and I also buy names). I never ever call someone out in any way. I always go the distance. That is how I earn money. If the deal fails it fails (rare but sure it might happen). It’s not about doing what is easiest and getting annoyed it’s about selling something and getting it done.

    Lastly, of course someone who contacts you will have to get further approval on many deals. So what are you going to do? When a secretary calls you for her boss are you going to say “I will only deal with your boss”? When a lawyer calls you will you “sorry I will only deal with your client?”. If the lawyer says “I have the ability to do this” they can still back out of the deal in the end if they want. Who cares what the excuse or reason is anyway?

    October 15th, 2015 at 7:08 pm

      Elliot Silver

      You brought up some valid points, thank you.

      I was recently dealing with a large company in an attempt to buy one of their domain names. I was given a price and proceeded to try and get a better price. After quite some time going back and forth (the price never changed), I asked the other party if they would still move forward at the quoted price. The other party told me the quoted price was run by the business unit that originally used it and they wouldn’t agree to sell it for the quoted price. The way I understood it was that the deal would not have gone through even if I had said yes from the outset.

      Had I originally known there was another party that needed to give approval to the price, I would have asked for a firm # from the outset and likely would have said no when given a higher price instead of spending time trying to negotiate a better price based on a number that wasn’t “real”.

      October 15th, 2015 at 7:44 pm

      Vinod R

      Very strong points, Have to agree to each and everything of what you said.
      Thanks

      In reply to Larry | October 16th, 2015 at 9:50 am

    Patrick McDermott

    Elliot may I offer a suggestion that should not offend a potential buyer or scuttle the deal. In fact, it may help close or expedite the deal. I’m borrowing from the “Take Away” Closing technique.

    Role Playing:
    Elliot wants to buy a domain from me. He makes contact. We discuss the price, negotiate, agree on a price.

    Elliot then says he has to “think about it”, discuss it with his dog, whatever. Then I calmly say: “Mr. Elliot, I understand you want to think about this or need to discuss this with others (I would not say “Get Approval” unless he used those words first.) but please realize that based on just your interest I cannot withhold this domain from possible sale.

    It’s happened before, Mr.Elliot, that while the original party was “thinking about it” someone else came along and bought the domain. Then a week later
    the original party wanted to go ahead with the domain purchase and became angry when he learned the domain had been sold. He said that I knew he was interested in the domain and I shouldn’t have sold it because he contacted me first.

    “Mr.Elliot, please take all the time you need to think about this purchase but understand that I cannot reserve it for you.

    If you would like me to withhold this domain from possible sale then please deposit $100 into my PayPal account as a “Withholding fee” then I will not sell this domain for 3 days no matter how much I am offered. You will have First Buyer Rights for 3 days ending at midnight on…

    If you do go ahead with the purchase, the $100 will be applied to the purchase price. If you don’t, the $100 will stand as a Withholding fee.

    (Note: There is the risk someone could come along and offer more than your agreed upon price with the original party and may even up their offer once you say the domain is being withheld for possible sale. That happened to me but through my tears I honored my original deal. I still cry about it every now and then. :'(

    Okay, is this a dumb idea? Crazy? Bonkers?

    I love criticism, even harsh criticism but please be constructive.

    October 16th, 2015 at 10:56 am

      Logan

      Patrick, you basically sold the buyer a 3-day call option for $100. He had the right but not the obligation to buy the domain name at the agreed upon strike price regardless of what the market price was (the other buyer’s higher offer). I don’t know the value of the domain name but it seems that your option price of $100 was much too low given your regret. Had you asked for a $1,000 option price he may not have taken you up on the option contract and you would have been free to sell your domain name to the buyer making the higher offer. In brief: charge more for your option contracts, typically a fixed percentage of the discussed “think about it” price. 5% to 10% might be good.

      Logan

      In reply to Patrick McDermott | October 19th, 2015 at 10:56 am

    Patrick McDermott

    Logan, thank you for your response. You misunderstood my intention. The $100 was just a place marker. It could have been $1.00, $1,000, $10,000 or what ever fits the situation.

    The point was to keep the potential Buyer on the hook if he has to “think about it or discuss it” without offending him. I believe I accomplished that.

    I want the potential Buyer to realize the domain may no longer be available if and when he comes back. This way I’m not pressuring him. He will pressure himself.

    I also want him to have some skin in the game but just a token amount not enough to turn him off.

    Your suggested 5% to 10% sounds good but it would depend on the situation such as the value of the domain as you see it, your economic situation and how likely someone else is to come along to buy it.

    Caterers and Wedding Venues charge a non-refundable deposit to ‘hold the date’ for you. I want the potential Buyer to do the same.

    Everything has risks. You could agree to sell a domain for $1,000,000 today and then receive an email offer from someone else offering 5,000,000 tomorrow. What do you do?

    October 19th, 2015 at 12:07 pm

      Logan

      Patrick, my contention that you sold him an option still stands — you felt obligated to go through with his offer instead of the higher offer because you accepted the $100 place marker. That’s basically the same as accepting a premium payment in a call option. He felt no obligation to complete the deal at the price but you did, in exchange for the $100. Had you not accepted the $100, you could have and likely would have taken the higher offer from the other buyer. I was just suggesting that $100 wasn’t a high enough compensation for the risk that you took in allowing the buyer to tie up your asset for three days. The risk being the dollars you gave up by not selling to the other buyer.

      In reply to Patrick McDermott | October 19th, 2015 at 2:03 pm

    Patrick McDermott

    Logan,

    You are still misunderstanding.

    there was no $100 place marker or deposit or 3 day hold. They were just illustrations for a scenario I made up after reading Elliot’s column.

    You plug in what ever numbers are right for the situation.

    The ‘regret’ sale was a Sedo sale. I accepted a Buyer’s offer. The next day without ever contacting me another person paid directly to Escrow.com an amount about 3 times the Sedo sale for the same domain. I had to honor the Sedo deal.

    The Buyer was slow to pay. After 3 days I contacted Sedo and was told a Buyer has 7 days to pay.

    That Buyer could have reneged and Sedo wouldn’t have done anything to force the sale.

    I didn’t regret the sale just the bad timing.

    October 19th, 2015 at 4:03 pm

Leave a Reply

Name *

Mail *

Website