Negotiation: How to calculate your first offer

Scenario A: Both parties are committed to talks

As discussed earlier in this series, it pays to make the first offer in a negotiation. And when both parties are committed to talks, that first offer should be as precise as you care to make it.  

Example 

When offering a salary to a job candidate, it’s better to offer them €126,000 or €155,000, rather than a round figure such as €120,000 or €150,000. 

Reason 

• The more precise your offer, the more likely it is to act as an anchor for the other side. This is because they are likely to attribute more confidence to your offer – it sounds like you know what you’re proposing. 

Benefit 

• You will likely have to negotiate less with your counterpart once talks begin – you have laid down your distinct marker (or dropped anchor) and the other side must now navigate in relation to it. 

Scenario B: The other side has yet to come to the table  

The opposite applies when the other person has yet to decide whether to enter into a negotiation with you. In this instance, it’s better to make a less precise first offer. 

Example 

You want to recruit candidates for a particular role.  

Reason 

• First-offer precision can create a barrier to entry, scaring people away from entering into negotiations in the first place because they are likely to see you as less flexible. 

Benefit 

• By not being too precise, your offer is likely to attract more interest. Potential negotiators also learn less about you and what you’re ultimately prepared to offer, which can be helpful in many situations.