Fair Price?

As a machinery dealer, I hear the word “fair” thrown around a lot during negotiations with customers. I think most people don’t mean any harm when they say it. They say it because they’ve heard other people say it. They think it sounds genuine and persuasive. But it grates on me because what does it even mean when you say the word “fair?” In Webster’s dictionary, “fair” is defined as, “Marked by impartiality and honesty: free from self-interest.”

Let’s be honest with ourselves, in our deal we’re both negotiating in our own self-interests, so don’t talk to me as though you’re an impartial judge. I still believe in being truthful with customers in negotiations, and I care for the welfare of others, I just don’t think it’s accurate to label business agreements as “fair.”

I admit, it’s hard for me to not say “fair” sometimes when negotiating, so I have a few alternative phrases I plug in when I’m tempted to say the word. I say things such as, “That idea makes sense,” or “That sounds sensible,” or “That sounds good.” Everybody gets the meaning, but I don’t have to say the dreaded word.

Unfortunately, sometimes you just have to live with using the word “fair” when making deals. It’s always used by parties in Graff-Pinkert’s business brokering division. It seems like every selling company starts out valuing their business at 6-7 x EBITDA, while every prospective buyer says “fair market value” for a machining business is 3-5 x EBITDA.

I admit, there is a valid rationale for using the phrase “fair market value” in the case of buying and selling businesses. In such a huge transaction, it’s helpful to have a price range as a starting point for the negotiation.

But still, in the end when any deal is made, assuming everyone involved has been honest and clear (Yes, that’s a big assumption), the price agreed upon is not fair, and it’s not unfair. It’s just the price.

Question: When was the last time you paid a “fair price?”