How to Negotiate: A Primer on Deal Making

chess board negotiations

chess board negotiations

The industry you work in is irrelevant, but knowing how to negotiate the best deal possible is not!

Naturally fascinated by humans, and how we interact in various situations, I have often found myself quietly observing as people conduct business around me.  One of the more interesting themes I have noticed lately is what I like to call the “recession-regression” mentality, and here’s a hint as to its definition: its close cousin is apathy!

The “recession-regression” mentality, in layman’s terms, is when people just accept a cost without questioning it.  They have somehow taken on the mentality that “it’s a recession, and times are tough, I just have to pay this, and wait out the storm.”  This observation is especially baffling when you compare it to the mentality that these same people have when business is booming: the “appreciation-deflation” mentality (where people are making good money and don’t want to give it away).  It’s almost as if money means more to people when they have it, then when they don’t!  It is counterintuitive, but spot on for 7 out of 10 transactions I see every day.

This observation/revelation has prompted me to share some tips on negotiating, because guess what: hard times are the best times to negotiate in.  So that landlord of yours who doesn’t return any calls, that paper supply company that hasn’t given you a discount after 10 years of loyal service, and that phone company who just doesn’t care that there is static on your line, have another thing coming to them if they think you are going to just roll over and pay-up after reading this article.

Now if you are like me, you are a skeptic by nature, so let me assure you that I am well versed in negotiating, and not making this all up.  I have spent the last three years of my life negotiating with big banks on behalf of homeowners in need of assistance, and have worked on at least 1,000 deals personally.  If that isn’t enough for you how about this: much of my childhood was spent asking my parents for money to buy stuff, and my father would always reply “how much is it?”, if I said $5 dollars, he would give me $4 and tell me to go get it.  And I would.  Enough about me, let’s talk about you.

If you haven’t had the work experience, nor had the obi-wan-kenobi of negotiating raise you, then there is a good chance that you may not even realize how many things are negotiable all around you.  So let’s start at the top:

  1. Everything is negotiable.
    1. There are very few things in this world that are truly “hard” costs, and if you don’t ask you will never know.  Whether it is a large corporation or a small mom and pop shop they are almost always willing to do what it takes to keep you on board as a customer.  Big corporations aren’t stupid; they know that the cost per acquisition of a new client is much more expensive than giving an existing client a temporary discount.  Furthermore they are not willing to cede market share to their competitors; because it is not just one client they will lose it is going to be a whole host of bad PR that the client is going spread as well.  Therefore the best angle to play with big corporations is that you are going to take your business elsewhere, but don’t lead with that, build up to it if you meet resistance.  With large corp’s the key is persistence.  Keep calling and complaining until they help you, if the person you are speaking with can’t make the decisions that are necessary to take care of you ask to speak with the person who can.
    2. “Mom & pop” shops don’t want to lose you to the big corporations; but I have found that since you are often dealing with the owner themselves they can become irrational, and emotional, if threatened about taking your business elsewhere.  Play gentle.  Focus on the amount of time that you have been a patron of their service, talk about loyalty and how satisfied you have been with their work.  Slowly drill down to the fact that you just can’t afford to pay what they are asking, but that you don’t want to go anywhere else.  Use phrases like I hope you understand, etc. get them to empathize.   Work on getting a discount, but if you can’t get the price down, see if you can get them to keep the price the same but increase whatever their product is.  For example if you can’t get them to give you 20 boxes of paper for anything less than $600.00 then see if they can throw on a couple extra boxes for free.  The loss that they will be taking should be less, and in return will lower your cost per box.
  2. Always start with charm, 90% of the time it will work.
    1. Is it easier for someone to say “no” to someone who is irritating them, or to someone who is being polite? (Allow me to answer this one for you: studies have actually shown that people often find pleasure in denying a rude person what they want.  It is somewhat satisfying, as if they are teaching the rude person a lesson by not giving them what they want.)
    2. If you happen to lose your cool, never attack them personally, always attack the policies etc.
  3. Get the person you are speaking with on your side.
    1. An exercise that I find particularly helpful when upset and calling to get a credit or discount on a service, is to start the conversation by saying “<Sally>, I know that it is not your fault that I keep having problems with my service, and I honestly don’t blame you but no matter how much I call I can’t help but feel like <AT&T> just doesn’t care about me as a customer, I am hoping that you can help me fix this today”
    2. Ask them to imagine that it is happening to them.  Ask them if they understand where you are coming from.  Make them empathize with you.
  4. Always make the other person feel like they have won.
    1. This isn’t a new concept, but it does work.  If you have to do repeat business with someone, or are concerned with your reputation, you do not want to be labeled as a shark (as it will put your opponent on defense right off the bat).  You need to make the transaction as satisfying for them as it is for you.  For example going back to my childhood, the one trick that worked the most was the “meet in the middle”.  I knew the toy cost $5, and my father gave me $4, so I would start at $3 with the seller, and when they inevitably turned me down I would retort by saying “well all I have is $4, can we meet in the middle?” By doing this I was allowing the person I was negotiating with to feel as if they had won, because they got me to come up from my initial offer; yet I was ok with spending $4 the whole time.  He walked away happy, and I walked away ecstatic!
  5. Always have the consideration on hand.
    1. Thought is the enemy of negotiations.  You want to get them on your side and close the deal as fast as possible (but don’t come off eager or frantic as if you are getting a steal.)  In the example above it was easy because I would have the money right there in my hand, but what if it’s larger?  If it’s a bill, have the webpage open and when they are thinking it over with you tell them: I can wire the money over right now/I can make the transfer right now.  People have a hard time turning down instant gratification.  If it’s a lease have a couple copies with you at all times, and a couple pens.  Get it done then and there. Don’t ever be pushy; just make it clear that you can do this right now if they agree to your terms.
  6. Counter a counter.
    1. If you make an offer, and they counter based on price, you have four options: accept, meet in the middle (separated for emphasis, even though it is technically a counter), walk away, or counter them back.  When countering back, you need to ask for something that they are not likely going to give you, or something that you would be ok with if they gave it to you, but don’t go overboard.  If they want .20 cents more per sq ft. on a lease, then tell them you are fine with it if they will pick up the utility bills.  If they want a 7 year contract instead of a 5 year, then tell them that you want the security deposit cut in half.  The point here is that you express that your requests are reasonable given what they are asking for; this should bring the ball back into your court for suggesting some common ground.
  7. Always be willing to walk away.
    1. As I touched on in the opening, negotiating is often easiest during “hard times”.  Almost everyone’s business is hurting right now, and they simply cannot afford to lose you as a customer.  Need proof: take a look at the commercial spaces available for rent around you.  The prices posted are low, and if you make an offer I bet they will go even lower.  Find a comparable space for your business and then go to your landlord.  Be polite show him comps and explain that you cannot afford to continue to pay the rent you are paying, and ask him to meet in the middle if he can’t match what the others are asking.  Believe me the last thing this guy wants is to have his open space sit on the market with no income coming in.  He is better off lowering your rent and having the space occupied than not lowering, having you default, and having an unrented space for six months to a year.
    2. Don’t forget that your greatest leverage is the threat that you will walk away, if they don’t budge, then walk.  Fifty percent of the time they will stop you before you get to the door 😉

A lot of this may sound like common sense, but if put into practice you can save money during these hard times (and use those funds to expand when this messed up economy turns around).  So go through your expenses, and start renegotiating, or even just calling to find out if there are any promotions they can offer you is a great start!

Remember: A Penny Saved, Is A Penny Earned

-JJM

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John is the Vice President here at JohnHart, and as such is responsible for managing and directing the firm towards obtaining its ultimate goals.
He is also one of our main contributors on the Blog. (please see his profile page on the main site for more information.)

About John Maseredjian

John is the Vice President here at JohnHart, and as such is responsible for managing and directing the firm towards obtaining its ultimate goals. He is also one of our main contributors on the Blog. (please see his profile page on the main site for more information.)

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