Business Negotiation Lecture Notes

Context of the Discussion

• Chris proposes the creation of a video to Mo to boost store awareness.
• The conversation revolves around budget, cost, and expected Return on Investment (ROI).

Budget and Importance

• Initial Budget: $1,000
• Aim: To increase foot traffic by 2-3 people per day.
• Average Product Sale: $100

ROI Calculation

• Increased Revenue Estimate:
  • $250 daily revenue increase
  • $7,500 monthly revenue increase
• An investment of $1,000 seems appropriate for a monthly $7,500 return.

Validating Expense

• Chris questions if $1,000 is appropriately valued.
• Suggests not doing the video if it's not important.
• Encourages Mo to evaluate other areas where the $1,000 could be more impactful.

Value Proposition and Risk

• Chris offers to do the video for free but shares in profit based on new customers.
• Proposal: $50 per new customer, taking all the risk.
• Key Quote: “All profit comes from risk” - Peter Drucker

Customer Hesitation

• Mo concerned about 50% revenue share if the video succeeds.
• Chris suggests a minimum engagement fee of $4,000.

Negotiation Tactics

• Chris provides options:
  1. Pay $4,000 upfront, keeping all profit thereafter.
  2. Free video with 50% of new net revenue, with a possible limit of one year.
• Mo agrees to the $4,000 offer.

Insights on Business Values

• Highlights that spending trends reflect value priority.
• Suggests evaluating how significant $1,000 is relative to other business or personal expenses.

Practical Tips for Beginners

• Encourage setting expectations and deliverables within realistic boundaries for offered budget.
• Everything is negotiable; tailor work scope if needed.
• Take calculated risks sparingly when starting out.

Meta Commentary

• Reflects on the importance of grounding business conversations in reality.
• Emphasizes on young entrepreneurs understanding the value and risk associated with their services.