Big Red Car here — brrr! It’s 30F here in the ATX. It’s not getting higher than 45F. How is that possible?
We need to do a better job of negotiating with Mothah Nature. Please Momma, a bit more heat, some of that global warming?
Speaking of negotiations…..
The Boss is very fond of saying that in life you don’t get what you deserve, you get what you negotiate which brings to mind the issue of how do YOU negotiate?
The Boss was reviewing all of his brilliant CEO client notebooks and the consensus is in — not very well.
This is appalling as the art of negotiating anything is a skill like putting — requires some planning and assessment but no real strength or coordination. Anyone can become a great negotiator if you will follow some very simple rules.
1. Remember that everything in life is negotiable.
2. Remember to negotiate.
3. Plan your negotiations before they start and anticipate the other guy’s interests and responses.
4. Take your time and don’t rush. Most negotiations are multi-touch exercises.
5. Give yourself a chance to get lucky.
6. Negotiate your side and let the other guy negotiate his.
That is the first chapter on negotiations and it is very easy indeed. Already, you’re a better negotiator. Right?
The Boss cannot stress enough the necessity to plan to negotiate. This is perhaps the greatest failing of negotiators, they fail to realize they are engaged in a negotiation and they fail to plan thereby creating undue stess as they try to think on their feet. Plan your work and work your plan — that’s what the Big Red Car always says.
Here are a couple of other thoughts:
1. Let’s say you are planning to negotiate. Identify the perfect outcome and the likely outcome and the walk away outcome. Know this before you even shake hands.
2. Any negotiation typically only has 3-4 really important points but the other guy may not know what yours are and you may not know what her’s are. Try to anticipate them but knw you are on a journey of discovery. When you discover what they are, wait to trade on those items.
3. Do not be afraid to set the goal posts at an initial starting point that gives yourself a chance to get lucky. Once buying a high rise office building, The Boss set out a ridiculously low offer and the seller accepted it. In the internal discussions prior to the negotiation, the team thought that offer was nuts. The deal got done at that number because The Boss had given himself a chance to get lucky.
4. Resist the temptation to negotiate what the other guy wants. Let them negotiate their own side. Let them articulate what they want. This is a “process” and even if you think you know what they want, the process must run its course. Do not negotiate with yourself.
In the months ahead, we will chat more about negotiations but if you want to get a head start go read: Chester Karass on negotiating. You will be glad you did.
Happy New Year, y’all — yes, it’s the Monday to end all Mondays but you are a business assassin. Rested and ready!
But, hey, what the Hell do I really know anyway? I’m just a Big Red Car! This year, 2015, is going to be YOUR year. Make it so!
Great post! I think the “plan your work and work you plan” is key component to removing the stress around negotiations.
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Planning in business for anything is the most overlooked element of success.
BRC
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what about strategy? do you throw a number out first and anchor around it?
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Not every negotiation is exclusively about the numbers even when the numbers are very important. Numbers also must be viewed with the perspective of the payment terms. I would pay you almost anything for something of immediate utility if I could pay you $1/week. No?
As to the strategy of numbers, I believe in trying to get lucky. You have to have a sense of the lowest you think you can get something for as well as the highest you would be willing to pay–your walk away price.
Conversely, you have to think about the lowest number you think the other party would consider and the highest they think you would ever pay.
In this set of brackets is the place where the deal is gong to get done. The brackets must overlap to make a deal.
I believe in trying to get lucky so I am never afraid to throw out a number. A low number if I am a buyer. A high number if I am a seller. It has worked brilliantly for me both ways.
You have to know something about value. You have to do some research and you have to plan.
Concessions on price should be very small and establish a pattern of small concessions. Never make a concession, even one that is not accepted, without getting a similar concession in return. You can make a small movement on the price and get a similar movement on the terms.
Once the dance music starts, keep moving and don’t stop even though it may be a 7-touch negotiation. Document everything and never let misunderstanding or confusion drive you backwards.
BRC
https://www.themusingsofthebigredcar.com
I would add that I’ve found it’s always important to have what I call “kickback” (like an engine misfiring?)
I will define kickback as the process where if someone offers a number and you think it’s a great number (they might even be overpaying) but you can’t accept the offer without coming up with some term in exchange so they don’t think that they left money on the table.
I had someone offer a nice price to buy a small property that I own (got lucky) and I know I am going to accept the offer. However I wrote back with 3 points that I wanted answers to in order for me to consider the offer. The idea was simply so they didn’t think they left money on the table as well as extracting some additional “gimmees” in the process. I didn’t phrase the counter with “only if” more like “would like to know if”.
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Of course, this is not your first rodeo so much of what you suggest is only possible because of the depth of your experience and your knowledge.
It is one of the reasons why seasoned business people are so much better at negotiations than young people.
Successful negotiations touch all the bases and don’t take any shortcuts particularly if you’re going to have to deal with the same person again in the future.
BRC
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I had to quote a price for something to someone that we both know.
I quoted the price and said “that’s the price, I can’t negotiate with you so I’ve given you my best price”. (And here is why).
I then told the person that not only will I make less money than with an arms length transaction, but having to give a fixed price had taken all the fun out of the process which normally stretched over several days, weeks, months and was almost as exciting as the money part of things. [1] One of the reasons that even if in the end the deal doesn’t happen the fun of the process puts me in a great frame of mind and I make it up on other things that I am working on.
[1] For example I’d rather have 5 deals for “x” than I would 1 5x deal.
I make money, doing negotiating. I get paid for it, I used to help people for free because it’s so much fun for me.
In general each and every situation is different because it’s a matter of knowing who you are dealing with and how they think (gathering intelligence) and most importantly interpreting signals that they give. So you know your next move(s).
When I negotiate it is typically by email (except when it’s not). As such I pay close attention to each and every word and the tone of the letter. I also make a judgement based on how quickly they get back to me or don’t combined with other info that I pick up. If I am on the phone I listen to their voice, how they speak, tone all of that. And the words.
Even though I have never read a single book on negotiating (and never will most likely) I can always tell when someone is doing something they have read (or been told) as opposed to something they have learned. I also take that into account. The idea is to flush someone out sometimes. I never reveal when I think someone is lying or call their bluff. I pretend as if I believe them (and I could go on in chapters on all of this).
In any case much of this is learned just like sports. And it becomes automatic not something that takes much thought just like you running around the court aren’t really thinking just reacting although you have an overall strategy or the coach might. (I don’t play sports so that is my take on it I might be wrong).
Most importantly the bottom line is not always (as you know) getting the lowest price. And it’s not “win win” or any of that bullshit. It’s a calculation based on the downside of a deal not working out. As such I tell people “the more you need what I am buying the less risk I can take the less you need it I can take more chances and be reckless because if we lose it isn’t a big deal”.
I also practice at this as well for fun (like you play ball) by trying to buy things that I have no intention of buying to learn more about human behavior. (In that case I can learn a great deal by being “reckless” like stress testing.)
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Negotiations are like a game and when approached in that manner without too much intellectual investment, one can learn immense information about another person.
I served on a lot of non-profit boards and I used to entertain myself by seeing what crazy stuff boardmembers who were not business people would come up with.
Having “throw away” negotiating points is a great way to obscure what is important to you while finding out exactly what is important to the other side.
BRC
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The only boards that I have served on were condo boards. In one meeting a doctor thought nobody needed to put a real estate for sale sign out front because “when I look for office space I just call my realtor and he does the work”.
In another different condo meeting after I became a “board member” (nobody wants to do these things as you know) I found out that they had never done a yearly audit of the finances and the developer was running the whole show (with an adjacent property that was splitting some expenses who knows how). I brought up the obvious point that we needed to do at least a yearly audit and even presented a firm that specialized in condos. The reaction that I got from the other “board” members (several doctors, a realtor, a wife of a doctor and even a newly minted lawyer) was “we’ve never done that before why do we need do do that???”. They just trusted that everything was kosher.
Meanwhile they spent all sorts of time on minutia like following “roberts rules of order” to a T.
Of course the audit is now done. Along with many other things. (Like giving us all the financials (with detail) in advance of the meeting the idiots used to sit there and review them in real time at the meeting (without any detail at all). I told the management company (run by the developer) I want this stuff in advance I don’t want to review it in real time. And so on.
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Having been a developer and having bought a lot of properties from developers who were in JVs with financial partners, all I can say is check, double check and re-check EVERYTHING.
I once bought a portfolio of industrial properties which closed in the first week of January — selling developer’s requirement. They took an entire year of legal, asset management and property management fees before the closing.
Their partner was the Church of England pension fund and when I pointed it out to the seller’s agent the CoE could not believe it.
Never, ever, ever trust a developer’s #s.
BRC
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In life you get what you negotiate. How good are you at negotiating?
https://themusingsofthebigredcar.com/you-only-get-what-you-negotiate/
BRC
https://www.themusingsofthebigredcar.com
Brilliant!