A few years ago, I was coaching a real estate developer client ahead of an upcoming negotiation. His organization had been working on a prospect—a potential tenant—for more than a year based on untested assumptions.
Because the potential tenant signed a letter of interest and expressed their desire to sign a lease, my client figured everything was good, so he passed them along to another department to finalize the contract.
What my client didn’t know is that the potential tenant had given a counterfeit agreement and never intended to make a deal.
In other words, although the potential tenant expressed interest, that yes was a no-in-waiting or a maybe at best. But how could my client have known?
Using the Rule of Three to Test the Agreement
In any negotiation, there are three types of agreements : counterfeit, confirmation , and commitment .
When my client heard the first yes—“We love the location and the terms. Let’s move ahead.”—he should have used a Mirror™ (Move ahead?) or a Label™ (It seems like you are happy with the layout of the building and what we’ve outlined in the contract) to make sure the potential tenant really meant it.
If the prospect responded to the Mirror or Label in the affirmative by either saying yes again or further explaining what he meant by “let’s move ahead,” my client would have received the second yes, confirming the prospect’s intent. At this point, my client should have paraphrased the entire conversation to get the commitment. If I understand this correctly, you love the location, you love the building, and you think the neighborhood is great. On top of this, you are also happy with the terms of the deal and would like to sign the contract and get the process rolling?
During his preparation, my client didn’t understand the value of testing yes. Had he, he would’ve figured out that he was the fool of the deal—not the favorite.
Are You the Favorite or the Fool?
Nine months later, the potential tenant told my client that their organization produced an internal report that said the location wasn’t ideal for their business. As a result, the prospect was backing out of the deal. As for the consequences for my client? Lost time. He could have been negotiating with other prospects and earning hundreds of thousands of dollars for his company.
Upon hearing this news, something didn’t add up for my client. He wanted to learn more about the prospect’s motivation for changing their mind. Why would they have agreed to do business only to back out at the last minute? My client also wanted to ensure that the other side knew they would be hurting themselves by wasting a ton of time on a deal that never materialized.
My client scheduled a meeting with the supervisor of the individual who signed the letter of intent. During that discussion, my client used several Black Swan tools—including an Accusation Audit®, Calibrated Questions™, and Labels—to ultimately discover that there was never a deal in the first place.
It turned out that my client’s company was the “fool” in the situation; the “favorite” was the prospect’s existing property owner. The potential tenant simply engaged my client to get a better deal from their current landlord. Once they used my client’s offer as leverage, they got a better deal on their current location, signed a lease, and stopped taking calls from my client.
Always Get Proof of Life of the Deal. Always Test Your Agreements
Using The Black Swan Method™, you can determine the Proof of Life of the deal and whether you’re the favorite or the fool. Next time you’re at the table, ask your counterpart something along these lines: With so many widget manufacturers to choose from, why do you want to do business with us?
The more thoroughly they answer that question—and the closer they come to using your own value prop in their response—the more confidence you can have in the deal.
Likewise, you can increase the chances that your counterpart will follow through by testing your agreement with Calibrated Questions, Summaries, Paraphrasing and Labeling.
To improve your skills as a negotiator and achieve better business outcomes, check out the Negotiation 9® infographic.