Calculating deal opportunity costs
You are ambling down the street and you spot a dime on the pavement. You bend over, pick it up, just as a $10 bill flies by. Because you concentrated on picking up the dime, someone else grabs and pockets the $10 bill.
The opportunity cost of pocketing the dime is $9.90.
Profitable deal making invariably involves opportunity costs — the costs of not landing an alternative deal.
In deal-making, before you even start negotiating, you need to assure yourself you are talking with the right party. If you want to achieve your Best Possible Agreement (BPA) you must talk to the right people.
Too many deal-makers pursue sub-optimal deals with the wrong party. So, instead of ending up with the Best Possible Agreement (BPA) they end up with a Barely Acceptable Deal (BAD).
In a recent webcast I ran with over 200 C level executives, over 60% in an online poll reported over half of their deals could be classified as Barely Acceptable Deals. If you have a high proportion of BAD deals you need to review your dealmaking process now!
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