Have you ever been sitting across the table from a person you were trying to make a deal with? Maybe you were negotiating a salary increase, buying a car at a dealership, or even trying to get a vendor at the local flea market to lower their asking price.
Whatever the circumstances are, we are regularly faced with negotiations throughout our lives. Some people choose to lean into these situations and try to maximize the outcome; others shy away, hoping to avoid conflict.
Whichever part of the spectrum you fall into, it’s important to recognize the importance of being able to negotiate.
Honing this skill is something we should all make a priority.
WHY BEING ABLE TO NEGOTIATE IS IMPORTANT
This might seem obvious to some, but negotiating is something that can provide incredible financial benefits over the course of your lifetime.
In a past article, I wrote about how much you can save by focusing your efforts on the biggest purchases in your life. By focusing on just three of the biggest areas (Home purchase, Child Education, and Wedding), you could potentially create a lifetime positive effect of close to $800,000! (Click here to find out how)
But you won’t be able to increase your chances of a great outcome if you aren’t able and willing to negotiate.
ANYONE CAN BECOME A GOOD NEGOTIATOR
Sometimes I hear people say that they could never be a good negotiator. Pardon me, but that’s B.S!
Negotiating is a skill that can be acquired and improved. Just like a basketball player needs to take thousands of shots each day in order to perfect their jump shot, we all need to practice in order to be a good negotiator.
The first time you try, you will probably fumble a bit. But after several tries, you’ll start to improve. And one day you’ll look back and realize that your former self wouldn’t stand a chance against the current you!
In the following sections, we’ll dive into the high-level concepts you need to keep in mind when going into any negotiation. And later, we’ll touch upon some specific tactics.
NEGOTIATING LIKE A PRO
Before you can break through your fear of negotiating, it’s good to understand why you are programmed to not enjoy it.
Humans are really good storytellers, whether we admit it or not.
When going into any situation, we tend to create stories of how things will play out. This can cause some serious problems.
As you walk into your manager’s office to ask for a raise, you begin to tell yourself a story: “If I ask for this raise, he/she will probably get really mad at me. Maybe they’ll even fire me for being so foolish. I should just forget about this and get back to work!”
And all of these thoughts have rushed through your brain before anything has actually taken place
We all battle this problem because a large percentage of our thoughts are negative, even if they are subliminal. This is because the limbic system in our brain is trained to see the danger in any situation and to avoid it, causing what is known as a negativity bias.
This was important thousands of years ago when our ancestors were roaming the Serengeti in search of food, and needed to protect themselves from wild animals. Not so much anymore. But we still create these stories, and our mind tells us there is a real “risk” of the person saying “no.”
Even if you are an otherwise positive person, subconsciously, your brain is calculating all of the potential outcomes and looking for ways to avoid risk.
The other potential downside of your Limbic System is what’s called the fight-or-flight response.
When faced with danger (or perceived danger), our limbic system kicks in and causes us to either fight back or make an attempt to get out of the situation (flight). So, if you’re in the heat of a negotiation and someone is being forceful, your natural response would be to avoid the conflict and get away from it.
This response manifests itself by you saying “yes” to whatever terms of the deal the other party is offering, thus ending the “conflict.”
The good thing is, for this same reason, most people are more willing to say yes than you might think.
For example, if you ask for a raise at work, because your manager will be going through this same conflict-avoidance thought process, they are more likely to give it to you than you think. As the saying goes: The squeaky wheel gets the grease!
PRACTICE MAKES PERFECT
The best way to overcome your fears of negotiating is to go out and engage in these “conflict” situations that have very little risk. You don’t want your first negotiation to be over something like your first home purchase. Begin with low-stakes scenarios like the Coffee Challenge.
The next time you buy a cup of coffee, no matter if it’s at a local mom-and-pop store, or at a chain like Starbucks, ask for a 10% discount.
You might be thinking, “What? Starbucks doesn’t give 10% discounts?”
Oh, but my friend, they do, including other large retailers like Macy’s.
My most recent experience with this was at Macy’s. I needed to buy a new belt because my old one was getting a bit raggedy.
I found a belt I liked, which was next to a large rack of belts on sale, but the one I liked wasn’t discounted. So, when I got up to the checkout person, I simply asked her if I could get a 20% discount on the belt.
Her first response was, “I’m sorry, but this item isn’t on sale.”
Politely, I asked, “Well, all of the other belts over there are on sale. Is there any way you can give me the same 20% discount?”
I could see the hesitation in her eyes, but then she agreed, and off I went with my new belt!
Every time you do this, your negotiation muscle (and courage) gets a little stronger. And even if she said “no,” I would have been in the same situation, paying full price.
INFORMATION IS POWER
The more information you have, the better.
I wrote about this in my past article, How To Ask For A Raise At Work. For things like coffee, you can just ask for a 10% discount. But for something like a salary increase, you need to understand what is in the realm of possibility.
You don’t want to ask for a six-figure salary when no one at your level has ever been paid more than $75,000.
When buying real estate, having as much information as possible can make the difference between getting an incredible deal and buying a lemon.
I remember one negotiation I was in where the seller’s agent told us the owner was looking to sell his property because he wanted to move to Florida. He was ready to hang up his jersey and ride off into the sunset.
This told me we had a motivated seller. I put in a low offer and they immediately offered to drop the price by $25,000, which represented a drop of over 9%. That’s a big chunk for the first round of negotiations.
NEVER NEGOTIATE AGAINST YOURSELF
I can’t stress this point enough.
When you are involved in a negotiation, it’s fine to think of areas that you might be willing to bend on, but that doesn’t mean you start the negotiation off with offering a concession. And you certainly don’t tell the other party more information than they need to know (See previous section).
This goes back to the early section about creating stories in your head. You might think they’ll balk at your initial offer, so you think of ways to get them to say “yes” by offering better terms before they’ve had a chance to respond.
DO. NOT. DO. THIS!
I am a planner by nature, so I’m always thinking of different ways each scenario will play out. I will also think about how I might react. This doesn’t mean I react before things have played out, though.
So, please, don’t negotiate against yourself!
NEGOTIATING DOESN’T HAVE TO BE A WIN-LOSE PROPOSITION
Being successful in negotiating doesn’t mean that you got the best absolute price and the other person got crushed. There is such a thing as a win-win, and I believe strongly in Karma.
This doesn’t mean that you have to negotiate against yourself.
If the person you are working with gives you a price on something that you think is amazing, take it. Maybe they think it’s a great price for them as well. And maybe that’s because they don’t have as much information as you do. It doesn’t make you a bad person because you didn’t do their homework for them.
But if you pound someone into the ground with strong-arm tactics, and they walk away with nothing to show for, I don’t believe this is what a successful negotiation looks like.
Negotiation isn’t about leaving a path of destruction in your wake.
I actually think that for most people negotiating is simply about getting what you deserve.
The majority of us aren’t involved in a high-stakes battle over millions of dollars, and also don’t practice enough to be at the level of those pros you read about. I think that for the majority of people, learning to negotiate is simply about getting what is fair for you. Think: Salary negotiation.
STYLE AND TACTICS
We’ve hit upon some very important high points for becoming a good negotiator, but what about some specific tactics?
There are different styles of negotiating. I’ve found that you don’t want to create an enemy by being nasty or trying to overpower the person you’re negotiating with. It’s better to present facts in a clear and straightforward manner, and do so in a way that is not condescending. You can even use an inquisitive tone to show you are interested in the other person’s opinion and thoughts.
“John Doe, we’ve been trying to get to an agreement on the price of this property for a bit. The facts are x, y, and z. If you were in my shoes, would you want to buy a property for $xxx if you knew about these issues?”
“I think it would make sense if x, y, and z took place. What are your thoughts?”
You can see that these are framed in a much less confrontational way.
LET THE OTHER SIDE START
If you are negotiating something and there isn’t already a starting price, you want to see if you can get the other side to show their hand first. Once again – information!
If I was asking for a raise at work, I wouldn’t just ask for a certain dollar amount. I’d present my case for why I deserve a raise, and then ask them if they agree and how much they are willing to give me. If it is a number that is too low, I’ll say why I think I deserve more. But if it’s a number much higher than I was expecting – Score!
LEARN TO BE QUIET
One of the more difficult parts of negotiating is learning when you need to speak and when you need to shut up.
People have a tendency to clarify and justify what they asked for. After making an offer, if there is any silence, the person who made a proposal will sometimes jump right into explaining why they think it’s the right thing, rambling on and on.
What you need to do is to make your offer, and then be quiet and wait for the other person’s response.
This has three benefits:
- You avoid divulging any unnecessary information that you shouldn’t. (Are you noticing a theme by now?)
- It shows you are confident in what you proposed and that you aren’t wavering.
- It puts the awkward pressure on the other person to respond, tapping into their fight-or-flight response, hopefully increasing the chances they say yes.
THE ART OF NEUROLINGUISTICS AND PROGRAMMING IN NEGOTIATING
This is an advanced topic, so I won’t spend too much time on it here. But if you feel your negotiating skills are already pretty strong, this could be the x-factor you’ve been looking for.
The general concept is that there is a real connection between the way our brains work, what we think, and the words we are either using or hearing. By tapping into this connection, you can increase the influence you have over outcomes when dealing with people.
A couple of places to do more research:
- Neuro-linguistic Programming
- BiggerPockets Podcast Episode with Michael Quarles – Absolutely worth the listen!
For the record, I have used some of these tactics in face-to-face meetings with real estate investors and have immediately gotten them to admit they are willing to drop their price by tens of thousands of dollars, all before I even put in an offer!
BE ABLE TO WALK AWAY FROM A BAD DEAL
The one ace-in-the-hole that you always have is that you can walk away from a bad deal.
This doesn’t mean shy away from negotiating. It means that if the other person just isn’t willing to budge, and you can’t get to a number that makes the negotiation a positive outcome for you, walk away. There is no investment that is too good to walk away from.
This is more in regards to something like a real estate or a car purchase.
If the cashier wasn’t willing to give me a 20% discount on the belt I wanted, I would have bought it anyways. Same goes for that morning cup of coffee.
I CHALLENGE YOU
As I mentioned in the beginning of this post, ANYONE can become a good negotiator. It just takes some learning and practice.
Tomorrow, when you are getting ready to get your coffee, buy a new belt, or any other purchase you will make, I challenge you to ask for a discount.
Just be careful. If you keep doing this, you might just start saving a bunch of money, and it might just become fun! 😉