$2 billion for a basketball team seems stupid to me.
But that is what Steve Ballmer, the ex-CEO of Microsoft, paid for the Los Angeles Clippers.
With that said, here are 5 things such a purchase teaches us about sales negotiation.
1. Value is in the eyes of the buyer.
It doesn’t matter what anyone else thinks.
There is no shortage of people who thought the price was too high, but our opinions don’t count. The only opinion that counts is the buyer’s.
2. Supply and demand will always drive price.
There are only a limited number of professional sports teams for a billionaire to buy. That means when one comes on the market, you have to jump.
Ballmer had already missed out on two previous attempts to buy teams — the Sacramento Kings and the Milwaukee Bucks. He saw his opportunity with the Clippers and he took it.
3. Creating a sense of urgency will always drive a price higher.
Yes, there was a rush to get the deal made, and the natural result is it drives the price higher. If there was no rush to make the deal, it’s easy to assume the price would have been lower.
4. Ego and emotion will always impact a negotiation.
Let’s not kid ourselves. Steve Ballmer has an ego and the last thing he wanted to have happen is to be rebuffed for a third time in trying to buy an NBA franchise. No wonder he upped his offer by $200 million at the last minute. To him, losing was not an option.
5. Negotiations will always go faster when the decision makers are engaged.
There’s no doubt the essential people on both sides of the fence were involved in the negotiation, and as a result, it was able to finalize it quickly. We certainly wouldn’t want buyer’s remorse to slow the process!
So there you have it — 5 things this latest purchase teaches us about sales negotiating.
A big thanks to Steve Ballmer, ex-CEO of Microsoft, for confirming in my mind that regardless of the size of the deal, some things about negotiating just don’t change.
Copyright 2014, Mark Hunter “The Sales Hunter.” Sales Motivation Blog. Mark Hunter is the author of High-Profit Selling: Win the Sale Without Compromising on Price.
On the supply and demand side, the seller had a lot of power because there were so many interested buyers. Also, even though he paid $2B, I believe that when he sells he’ll get at least $4B for the team. Professional sports teams are appreciate very quickly.
Thanks for putting these basics in negotiating into a concrete example. This could be a decent investment though considering the advertisement deals.