I need tips to be a tougher negotiator
May 22, 2008 7:52 AM Subscribe
I think I'm too nice to do certain things entrepreneurship requires. I need tips to be a tougher negotiator and be able to drive good deals.
Here's my background: After 7 years of working regular corporate jobs, I took a 2-year break to do some independent consulting, pretty much working from home. Then I decided to start up a proper business on my own, with about 20 employees. This new business was based around another area of expertise that I had. I've been running the business for a bit more than three years.
Here's my problem: I think I'm too "nice" to be a tough negotiator on business deals like negotiating office rents, equipment prices, etc. It's a character trait that I am a big believer in "fairness", so I can't negotiate the best prices and rates because I want the other person to make a "fair" deal. When somebody tells me something like "Oh Mr. X, our margin on these products is only 5%, I really can't give you any more discounts", I find it hard to press any more. (I suspect the 2-year consulting break may have mellowed me out too much. I was quite an assertive firecracker in my mid-20s.)
My speciality is production, planning, and project management but as a small business owner who doesn't have specialists to handle various areas, much of the high-level negotiating has to be done by me.
What tips do you have to make me better at these things? I want to be that ruthless Donald Trump type of guy who gets the best deals.
Here's my background: After 7 years of working regular corporate jobs, I took a 2-year break to do some independent consulting, pretty much working from home. Then I decided to start up a proper business on my own, with about 20 employees. This new business was based around another area of expertise that I had. I've been running the business for a bit more than three years.
Here's my problem: I think I'm too "nice" to be a tough negotiator on business deals like negotiating office rents, equipment prices, etc. It's a character trait that I am a big believer in "fairness", so I can't negotiate the best prices and rates because I want the other person to make a "fair" deal. When somebody tells me something like "Oh Mr. X, our margin on these products is only 5%, I really can't give you any more discounts", I find it hard to press any more. (I suspect the 2-year consulting break may have mellowed me out too much. I was quite an assertive firecracker in my mid-20s.)
My speciality is production, planning, and project management but as a small business owner who doesn't have specialists to handle various areas, much of the high-level negotiating has to be done by me.
What tips do you have to make me better at these things? I want to be that ruthless Donald Trump type of guy who gets the best deals.
Here's some of the best lessons I learned as an entrepreneur, to do with this subject:
1. Nothing ventured, nothing gained. You might not be able to get a better deal, but if you don't ask, you're guaranteed to not get a better deal.
2. Don't specify the deal you want. Ask for a deal, see what you get - and then ask for a little bit more. Again, nothing ventured, nothing gained.
3. Odds of someone making only 5% on something is SOOOO slim particularly if it's a product. Wholesalers usually mark up by 100% and then retailers mark up by the same amount again.
4. As mkultra says, silence is golden. Often people doing the selling will get nervous when met with silence and will offer a further discount to seal the deal.
Good luck in your venture!
posted by twiki at 8:07 AM on May 22, 2008
1. Nothing ventured, nothing gained. You might not be able to get a better deal, but if you don't ask, you're guaranteed to not get a better deal.
2. Don't specify the deal you want. Ask for a deal, see what you get - and then ask for a little bit more. Again, nothing ventured, nothing gained.
3. Odds of someone making only 5% on something is SOOOO slim particularly if it's a product. Wholesalers usually mark up by 100% and then retailers mark up by the same amount again.
4. As mkultra says, silence is golden. Often people doing the selling will get nervous when met with silence and will offer a further discount to seal the deal.
Good luck in your venture!
posted by twiki at 8:07 AM on May 22, 2008
I think you need to recalibrate your fairness-meter. It's not unfair to advocate for your business. It's not unfair for the other guy to try to get the most $ for his product, either.
posted by desuetude at 8:30 AM on May 22, 2008
posted by desuetude at 8:30 AM on May 22, 2008
Rather than specific tips, I'd like to address your philosophy. The way that you be fair in business is to try to get as much as possible from the person sitting across the table from you, because the person across the table from you is trying to get as much out of you as they can. When both of you are doing that, then the result is fair. However, if the person across the table from you is trying to get as much as possible from you and you are trying to be "fair" then you are going to get screwed. Sometimes a lot, sometimes a little, but the result will never be fair. If you and that person were in a tug-of-war and they were pulling their heart out and you were just standing there, would the result be "fair"? No. I am all for wanting to do right by your fellow man, and in environments other than business, that is done by considering their interests. However, once you start doing business with someone, the only way to be fair is to try to get as much out of them as possible with no consideration of their interests whatsoever. Fair in life and fair in business are two different things.
posted by ND¢ at 8:34 AM on May 22, 2008 [2 favorites]
posted by ND¢ at 8:34 AM on May 22, 2008 [2 favorites]
One of the best books to read on this subject is Getting To Yes. You don't need to be hard-nosed in negotiation. It's a matter of identifying what is important to you and to the other party and then brokering an agreement that is satisfactory to both parties.
posted by reenum at 8:45 AM on May 22, 2008
posted by reenum at 8:45 AM on May 22, 2008
I am a big believer in "fairness", so I can't negotiate the best prices and rates because I want the other person to make a "fair" deal.
You are a capitalist, your clients are capitalists, you are operating in a capitalist system. Your clients are trying to squeeze as much money out of their clients as possible. That's how it works. Your clients aren't sitting around thinking about fair deals for their clients; they're thinking about how to make as much profit as possible. If a client can't afford the prices you offer, find another client.
posted by HotPatatta at 9:16 AM on May 22, 2008
You are a capitalist, your clients are capitalists, you are operating in a capitalist system. Your clients are trying to squeeze as much money out of their clients as possible. That's how it works. Your clients aren't sitting around thinking about fair deals for their clients; they're thinking about how to make as much profit as possible. If a client can't afford the prices you offer, find another client.
posted by HotPatatta at 9:16 AM on May 22, 2008
I'm sort of like you (I think), and found the approach mentioned by reenum pretty useful.
posted by aramaic at 9:19 AM on May 22, 2008
posted by aramaic at 9:19 AM on May 22, 2008
My approach to this has always been similar to yours. I don't sweat the small stuff, but am willing to walk over the big stuff. I've left money on the table, but overall, have done well enough. I don't necessarily buy from the cheapest, and often spend a premium to deal with a local enterprise or advance a subordinate goal.
If you beat the hell out of someone for tiny incremental benefit to you, you may consider yourself 'tough', but you might be doing two counterproductive things... pissing off a valued supplier/diminshing their interest in your success and wasting too much efforts for pennies.
If you are successfully running a business with 20 people, you're probably doing fine and could teach us all something. Sure, you can do better, but maybe by expanding your market, incrementally improving your margins, leading a decent life which contains "right livelihood".
I've met many a tough guy, rich, son of a bitch whose feet I wouldn't pee on if his shoes were on fire. Is that the kind of entrpreneur you want to be? I hope not.
Capitalism is a funny beast. Striving for optimizations does not have to be at the expense of your basic humanity, but should incorporate some value judgment that isn't all economic. A business should improve its community. That doesn't mean being stupid, but it suggests not being petty.
I recommend "Getting to Yes", too. More than that, I recommend Growing a Business . Hawken has some wisdom to share.
posted by FauxScot at 10:06 AM on May 22, 2008
If you beat the hell out of someone for tiny incremental benefit to you, you may consider yourself 'tough', but you might be doing two counterproductive things... pissing off a valued supplier/diminshing their interest in your success and wasting too much efforts for pennies.
If you are successfully running a business with 20 people, you're probably doing fine and could teach us all something. Sure, you can do better, but maybe by expanding your market, incrementally improving your margins, leading a decent life which contains "right livelihood".
I've met many a tough guy, rich, son of a bitch whose feet I wouldn't pee on if his shoes were on fire. Is that the kind of entrpreneur you want to be? I hope not.
Capitalism is a funny beast. Striving for optimizations does not have to be at the expense of your basic humanity, but should incorporate some value judgment that isn't all economic. A business should improve its community. That doesn't mean being stupid, but it suggests not being petty.
I recommend "Getting to Yes", too. More than that, I recommend Growing a Business . Hawken has some wisdom to share.
posted by FauxScot at 10:06 AM on May 22, 2008
I don't think you have to choose between being a son of a bitch or being fair. You just have to realize that "fair" is rarely what the other person has on offer--you're going to have to push a little in order to get it. You can do this while being a friendly, likeable person--generally, if you don't feel antagonism toward the other person, they won't feel it toward you. But one of the things I always tell myself (and I think I made this one up, I'm so proud!) is "If you take what you're given, you'll get what you deserve." Meaning don't be a chump--they can always go lower, fit you in the schedule, or find another of whatever it is you're looking for. Always. You just have to decide whether you feel like pushing for it.
posted by HotToddy at 10:33 AM on May 22, 2008
posted by HotToddy at 10:33 AM on May 22, 2008
i always liked the win-win philosophy when negotiating, which is that, a situation where both of you benefit is far superior than a situation where one or neither of you benefit.
posted by emptyinside at 1:59 PM on May 22, 2008
posted by emptyinside at 1:59 PM on May 22, 2008
Agree that going for a win-win solution is the best. I've found a couple of things that help me get to that point:
0- As much as possible, deal with people who have actual authority to make deals. Or at least know how much authority the person you are dealing with has. Like when you're buying a car- the salesman always has to get final approval from the boss.
1- Know the economics of the product in advance. Can you afford to pay a fair price? If not, you have to revisit your assumptions. This is hard to do with a lot of things, but getting a ballpark is usually good enough. If you know that every place up and down the block is renting for $1/sqf/month and some clown tries to tell you that the least he can do is $2, then you know the score.
2- Be willing to walk. Not talking about the negotiating tactic, just about keeping emotion out of it. If someone is trying to rip you off from the start, you KNOW that relationship isn't going to go well no matter what. Go somewhere else.
3- Be very sparing in your use of "negotiation tactics". Anyone selling for more than a week knows them all, and will see right through it.
4- Negotiate the small stuff first. Like if you are getting a new job- agree on hours, scheduling, vacation time and all of that before talking salary. It is way harder to ask for small stuff when you've just been given something big. And it's fairer to everyone, I think- you are negotiating based on the whole picture. And if the other person is doing that to you, remember that when it comes to the big thing. "Listen Bob, I can't give you a rock-bottom price when you need all these extras."
5- Be willing to fire customers if necessary. Some people are trying to wring every last dime out of you and taking advantage of your niceness. That is not your problem. If you are running your business fairly and certain clients don't respect the boundaries of your business, you don't need their money. You're probably losing other better business dealing with them.
6- And also know your limitations. If you are a detail oriented person, make sure you have someone around you who takes care of big picture stuff.
posted by gjc at 4:03 PM on May 22, 2008 [1 favorite]
0- As much as possible, deal with people who have actual authority to make deals. Or at least know how much authority the person you are dealing with has. Like when you're buying a car- the salesman always has to get final approval from the boss.
1- Know the economics of the product in advance. Can you afford to pay a fair price? If not, you have to revisit your assumptions. This is hard to do with a lot of things, but getting a ballpark is usually good enough. If you know that every place up and down the block is renting for $1/sqf/month and some clown tries to tell you that the least he can do is $2, then you know the score.
2- Be willing to walk. Not talking about the negotiating tactic, just about keeping emotion out of it. If someone is trying to rip you off from the start, you KNOW that relationship isn't going to go well no matter what. Go somewhere else.
3- Be very sparing in your use of "negotiation tactics". Anyone selling for more than a week knows them all, and will see right through it.
4- Negotiate the small stuff first. Like if you are getting a new job- agree on hours, scheduling, vacation time and all of that before talking salary. It is way harder to ask for small stuff when you've just been given something big. And it's fairer to everyone, I think- you are negotiating based on the whole picture. And if the other person is doing that to you, remember that when it comes to the big thing. "Listen Bob, I can't give you a rock-bottom price when you need all these extras."
5- Be willing to fire customers if necessary. Some people are trying to wring every last dime out of you and taking advantage of your niceness. That is not your problem. If you are running your business fairly and certain clients don't respect the boundaries of your business, you don't need their money. You're probably losing other better business dealing with them.
6- And also know your limitations. If you are a detail oriented person, make sure you have someone around you who takes care of big picture stuff.
posted by gjc at 4:03 PM on May 22, 2008 [1 favorite]
However, once you start doing business with someone, the only way to be fair is to try to get as much out of them as possible with no consideration of their interests whatsoever. Fair in life and fair in business are two different things.
I talked to a miller the other day. He told that he used to mill all the flour for a local bakery, until they got a new owner. The new owner "demanded" lower prices. The miller explained that that just wasn't feasible, that they already worked with volunteers and that milling is labor intensive work and that grains are not that cheap either. They really went out of their way to make the best flour possible for this bakery, but the bakery still wanted lower prices. The miller told them to go buy factory milled flour, they did and soon noticed that the quality was inferior, but by then the miller was fed up with them and did not want to sell to them anymore (see gjc's 5th point). Now they never win prices in contests anymore.
Of course you should try to get a fair deal, but in the end, often companies that are less "tough" do fare pretty well.
posted by davar at 11:36 AM on May 23, 2008
I talked to a miller the other day. He told that he used to mill all the flour for a local bakery, until they got a new owner. The new owner "demanded" lower prices. The miller explained that that just wasn't feasible, that they already worked with volunteers and that milling is labor intensive work and that grains are not that cheap either. They really went out of their way to make the best flour possible for this bakery, but the bakery still wanted lower prices. The miller told them to go buy factory milled flour, they did and soon noticed that the quality was inferior, but by then the miller was fed up with them and did not want to sell to them anymore (see gjc's 5th point). Now they never win prices in contests anymore.
Of course you should try to get a fair deal, but in the end, often companies that are less "tough" do fare pretty well.
posted by davar at 11:36 AM on May 23, 2008
I can empathize with you because I am very similar in both personality and situation. Here are some tips that have helped me. For me it is always getting started that is the toughest part and I find that if I launch into the negotiation with firm purpose I set the rigfht tone for my psychology. Staying strong is about techniques for me and here are acouple I use all the time.
1) Always "Flinch". Regardless I always start by saying something along the lines "Wow thats way more than my budget can afford". So the ball is immediately back in their court and psychologically they are thinking they have to come down.
2) Defer to a "greater power". You may be the boss but you have budgets and thats all you have to work with...right?
3) Let them know that their rate cards, discounts are not really relevent (though you appreciate what they are doing). Since you are writing the checks the only thing thats relevent is your budget and bank account and what you can afford to pay.
4) Always have other options so you can walk from a deal. You are happy for them if they can get those high prices from others but for right now you will have to pass on the deal.
5) I ask them to look me in the eye and tell me no one is getting a better deal than me. Some folks can do this but I try to avoid doing business with those types.
basically I find that the more I "objectify" the deal into the numbers the easier it is for me to negotiate. I now cut off conversations where people start to use emotional tactics of any kind as I know I don't do well in them. Not sure if this is good negotiating technique but it works for me and I feel happy with the deals I do. I am not the kind of guy who sweats getting the last pennies, as long as my business is moving forward fast that is what counts.
posted by Micklife at 8:09 PM on May 25, 2008
1) Always "Flinch". Regardless I always start by saying something along the lines "Wow thats way more than my budget can afford". So the ball is immediately back in their court and psychologically they are thinking they have to come down.
2) Defer to a "greater power". You may be the boss but you have budgets and thats all you have to work with...right?
3) Let them know that their rate cards, discounts are not really relevent (though you appreciate what they are doing). Since you are writing the checks the only thing thats relevent is your budget and bank account and what you can afford to pay.
4) Always have other options so you can walk from a deal. You are happy for them if they can get those high prices from others but for right now you will have to pass on the deal.
5) I ask them to look me in the eye and tell me no one is getting a better deal than me. Some folks can do this but I try to avoid doing business with those types.
basically I find that the more I "objectify" the deal into the numbers the easier it is for me to negotiate. I now cut off conversations where people start to use emotional tactics of any kind as I know I don't do well in them. Not sure if this is good negotiating technique but it works for me and I feel happy with the deals I do. I am not the kind of guy who sweats getting the last pennies, as long as my business is moving forward fast that is what counts.
posted by Micklife at 8:09 PM on May 25, 2008
I'd advise that you define "fair" in an objective way that benefits you and that you don't feel bad defending. Eg, office rent. The market average is $3 / square foot, so maybe that's "fair." Then, when someone tries to charge you $5 / sf, you have a way of knowing that this is not "fair."
posted by salvia at 11:56 PM on May 25, 2008
posted by salvia at 11:56 PM on May 25, 2008
This thread is closed to new comments.
I want the other person to make a "fair" deal.
A lot of people get screwed by this attitude because the other person doesn't feel the same way.
posted by mkultra at 8:01 AM on May 22, 2008 [1 favorite]