If you are a buyer, your LIM on a whiteboard would start with a single point — your M.  Say rmb 1,000. Your I would be lower — maybe 750.  You L is theoretically 0, but let’s say that a reasonable figure is 500.  You have a line from 500 (on the left) to 1000 (the point where you started the line).

Your seller also has a LIM, but his moves in the opposite direction.  He will start high — maybe rmb 1,500, and draw his line in the opposite direction.  His I might be 1100, and his M could be 800.

Are you going to reach a deal?  Where?

Your starting position is 500 while he starts at 1,500.  Pretty big difference. If you are not careful, this could get personal and emotional.  His offer sounds unreasonable — yours is insulting.  But hold on.  

His counter-offer of 1100 and yours of 750 are still pretty far apart.  But if the negotiation continues, it becomes clear that neither of you are in BATNA territory.  Your LIM-MIL profiles overlap from 800 to 1000.  That means that THEORETICALLY you should be able to do come to an agreement at around 900.

What can go wrong?  2 things.

1)  Your opening offers can be so far apart that it seems unlikely you’ll ever reach a deal.  That’s the danger of setting unreasonably high Ls (opening positions).  If the buyer has offered rmb 1 in the opening round, the seller would probably walk away and invest the time in finding other counter-parties.   And that leads to the next problem;

2)  Lack of visibility.  If both sides in the above negotiation had showed each other their positions at the very start, then this deal could be arrived at quickly and easily.  But transparency is not a common tactic in China, and very few counter-parties will show you their M (bottom line price) at the beginning of the negotiation.   

LIM describes your negotiating priorities.

Simply put,  LIM is a framework for your negotiating priorities. 

 L = Like, or your best case scenario for the negotiation. 
 I = Intend, or what you think is most reasonable.
 M = Your bottom line.  Anything lower and you will not accept the deal.

How do you arrive at the different targets?

Variables include more than just money

Your first task is to decide on the variable or bargaining points that you will offer and discuss.  This is down by analyzing your own goal system to determine what your best case scenario is.  Then break down your goal into all its component parts.  It may be that your goal really is 100% about the money and you don’t have to include anything else. Usually, however, your variables will include some TIME requirement (shipping schedule, roll-out timetable, delivery dates), TERMS (cash or charge, credit terms, payment dates, late fees) and POWER (who owns 51% of the new venture, contact disputes will be mediated in HK).  There are many others, and you have to figure out a LIM for your entire package of variables.

Setting LIM

M is your bottom line.  This may be your break-even or it may be the terms that you are already getting from an established partner.  In many cases someone higher up in the organization is involved in setting the M or bottom line terms.

L is what you can reasonably expect as your best case scenario.  Your L proposal should be ambitious and maybe a little aggressive – but not so crazy that it scares away potential partners or clients.  You probably won’t really get your L, but it will give you a chance to state your priorities and establishes a benchmark for your expectations.

I is where you think you’ll probably end up.  I could be based on the deal you are getting now or it could be industry standard for similar deals.  Some people put I midway between L and M, which is suitable for some negotiations. 

The important thing is to put together your LIM after you have developed a comprehensive list of variable and bargaining points.  If you try to analyze your variables after you have already submitted an initial proposal, you may come off looking dishonest or disorganized. 

Knowing what to ask for is a key to success when it comes to negotiating in China.