Buying a Business Tip: Initial Offer

Here’s an easy tip for anyone buying a car, a house or even a company.

When you make an initial offer, don’t bid a round number like ten thousand or one million. Rather, bid with a more precise number like 9,850 or 1.03 million.

According to research of mergers and acquisitions, investors who offered precise bids generated returns that were 2-3 percentage points higher than those who offered round-numbered bids.

Sellers also were more likely to accept a precise bid without as much negotiation because they assumed, true or not, that someone must have crunched lots of data to come up with an amount so specific.

This is backed up by many other studies in social psychology as well.