Should You Go First in a Negotiation?

The Strategic Choice of Making an Opening Offer

James, a seasoned dealmaker from a leading RIA aggregator, sat down with Robert, the founding partner of Pegasus Advisors—a firm with $2 billion in AUM—he wasn’t entering a blind negotiation. With ten similar transactions completed and extensive due diligence in hand, James faced a crucial decision: Should he make the first offer?

This moment—deciding whether to start with an opening offer—can set the tone for everything that follows in a negotiation. Both research and real-world experience highlight the psychological and strategic significance of what’s known as the Anchor Effect. However, anchoring isn’t always the best approach.

Let’s explore when to go first, when to hold back, and how James might best position his proposal to Pegasus Advisors.

The Power of Anchoring

The first offer in a negotiation often acts as the psychological anchor around which all subsequent discussions revolve. Studies indicate that even seasoned negotiators can be subtly influenced by the initial number. A high first offer can elevate the negotiation's ceiling, while a low offer can quietly diminish expectations.

For example, in financial services negotiations, clearly expressing industry-standard values early in the conversation enables the offering party to benefit from anchoring while seeming fair and transparent.

James could start with a well-structured offer supported by multiples from comparable deals and market comparisons. This would enable him to lead the negotiation while showcasing professionalism and preparedness.

But should he?

When It’s Smarter to Wait

There’s a strong counterpoint: let the other side go first when the value range is unclear or when understanding their motivations could provide leverage. This is especially true when:

• The other party, in this case Robert, is emotionally or personally invested in the business.

• Valuation can vary greatly depending on qualitative factors such as brand equity, client retention, and team strength.

• You believe the other side has an exaggerated sense of their value.

Letting Robert speak first may reveal his personal motivations—whether they arise from legacy, prestige, or family concerns—which are often more important than just the numbers. This insight could help James create a deal that fulfills Robert’s emotional goals without overpaying.

Three Factors That Tip the Scale

So how should James decide whether to anchor or defer? Here are three decision filters based on negotiation science:

1. Information Asymmetry

James has a considerable advantage in anchoring if he possesses stronger and more specific data regarding market comparisons, deal structures, and realistic valuation multiples. If he believes Robert lacks clarity, taking the initiative could reinforce expectations in his favor.

2. Bargaining Style of the Other Party

Understanding Robert’s style is essential. If Robert is a Collaborator, he will want to co-create a fair deal and may respond positively to a well-considered first offer that is supported by standards. However, if he is more Competitive, he might counter aggressively, suggesting that James should hold back and let Robert reveal his cards first.

3. The Role of Standards

Even when the initial number is aggressive, backing it up with credible standards—multiples from other RIA deals, established fee structures, or valuation norms—can offer a solid psychological justification. This upholds credibility while still establishing a favorable anchor.

What Should James Do?

If James is confident in his valuation data and believes that Robert values transparency and logic, a thoughtfully crafted opening offer supported by industry standards could be the appropriate approach. It sets the stage for the deal, demonstrates confidence, and triggers the anchor effect in his favor.

However, if Robert’s motivations are unclear—or if James suspects that Robert overestimates the value of his firm—holding back might be the wiser choice. Letting Robert make the first move could uncover an unexpected starting position or even a surprising willingness to concede, paving the way for a more favorable negotiation.

Takeaway

Anchoring is powerful, but timing and context are essential. In negotiations—particularly high-stakes ones such as RIA acquisitions—the initial offer is more than just a number; it’s a signal. Whether you make the first offer or hold back, the crucial factor is understanding what that signal communicates and how it positions you for the rest of the deal.

💬 What’s your take?

Do you prefer to make the first move in negotiations, or do you wait to hear the other party out? Share your experiences or thoughts in the comments—especially if you’ve been involved in a deal like this one. Let’s compare strategies and learn from each other.

🔁 If you found this helpful, please like or share it with someone who is navigating their own negotiation.