URL: http://www.entrepreneur.com/magazine/entrepreneur/1999/december/18676.html

No kidding, my very first "negotiation" took place at a flea market in Morocco. It was for a leather jacket. Per local custom, I grimaced, pointed out countless flaws in the garment and feigned disinterest; the merchant whined, gesticulated wildly and began dropping the price sharply. Each time he said, "This is my final offer," I sauntered out of his stall. And each time, the grizzled old man called me back, lowering his price again. Ultimately, I got the jacket at way, way below the asking price. I smugly thought I was a natural, until I found out the merchant still made a 1,000 percent profit!

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A speaker and attorney in Los Angeles, Marc Diener is the author of Deal Power: 6 Foolproof Steps to Making Deals of Any Size (Owl Books/Henry Holt). You can reach him at MarcDiener@aol.com.

You make a best, last or final offer in two situations: when you either truly can't do any better, or when you think you can get the other side to close a deal on the spot (or pretty close to it). Either way, take a light touch and choose your words carefully. Not only will the phrase "take it or leave it" miff pretty much anyone--it leaves you no graceful way out. After all, even if you really believe you have nothing left to give, a skilled opponent may show you that you do.

Better to hedge. Hedge on what you're final about, hedge on when you're final, even hedge on how final you are. "This is the best I can do under the circumstances." "Why don't you think it over for a week?" "If I don't hear from you by the 1st, I'll have to start looking for someone else." Or, if you must, go ahead and be tough, but be ready for hardball.

So what if the other side makes its final offer before you're ready to make yours? If you're on the receiving end, you have to be careful. Understand the psychology of brinkmanship. A final offer is a bold move. If you test a "take it or leave it" ultimatum too aggressively, you may back a clumsy opponent into a corner. They won't know how to get out of it, and they'll dig in their heels just to save face.

A little deal-making diplomacy serves you better. For example, you can ignore the offer and continue to negotiate. Consider restating it as an aspiration: "I agree with you, and I'd also like to get this done quickly, but we still need to talk about..." If a deadline is involved, you may suddenly become "unavailable." Or you can try my favorite--a few open-ended questions. "What do you mean when you say `best' offer?" "Why did you decide to make your last offer just now?" "Under what circumstances would you make a better offer?" Listen carefully--the answers may give you just the opening you need.

Let's return to Morocco. When faced with the final offer in more competitive negotiations of this flea-market variety, the "walk-away" is the countertactic of choice. As indicated, they say "Take it or leave it." You say "See you later" and move toward the door. It's dramatic, it's fun, and many times, the other side calls you right back.

Many perceive the walk-away as a high-risk gambit, but it really isn't. As you reach for that doorknob, you may be thinking "What if they don't call me back?" Not to worry. If they don't, you can always turn around...and walk (or call) right back. So they didn't buy your bluff. Big deal! But for your opponent's ruffled feathers, there's nothing to lose, except (maybe) a little face.

Of course, when you really know your bottom line, the walk-away is more than just a bluff. It is the ultimate expression of deal-making strength, the power to say "No deal." However, it won't work unless you've done your homework and set negotiating goals that are exactly right for you. And how to set those goals will be the subject of our next column.