Perhaps the most stressful part of any deal is the negotiation process that leads to a signature on the dotted line. Whether you are the buyer or seller, skillful negotiating is an art that must be mastered to assure fairness and satisfaction. And that means no one has to go home a loser.
Occasionally, I'll start a negotiation by saying, "I don't want to overpay …" Then I continue "… but I don't want to underpay either."
Many times when I've used that line, it invariably gets thrown back in my face later — at which time I say, "Gee, I'm glad you remember me saying that. It just proves nothing gets by you, so you must also have heard me say, 'I don't want to overpay either.' "
I've had a lot of experience in this area, and I'm happy to share a few negotiations strategies and examples.
Successful negotiations start with superior information. There's a reason car dealers win in negotiations. They know exactly how much they paid for the car they're trying to sell, and also how much your trade-in is worth. Few ordinary car buyers take the time to learn those two critical numbers.
Then the dealer throws in variables like options and financing charges that help disguise the dealership's true profit margin. The result is that only the most sophisticated customers know how to cut a deal without cutting their own throats.
Be willing to get up from the table and say no. Once, I acted as an agent for a first-round pro football draft choice. Two teams were vying for my client's talent — the Toronto Argonauts of the Canadian Football League and the Baltimore Colts in the National Football League. I was in face-to-face negotiations with the owner of the Toronto team, who was trying to force me to make a decision before I left and talked to Baltimore. I felt pressured but said no. My client ended up signing with Baltimore for more money and winning a Super Bowl.
Always let the other person speak first. Western Union wanted to purchase the ticker invented by Thomas Edison, who was unable to name a price. Edison asked for a couple of days to consider it. His wife suggested he ask for $20,000, which seemed exorbitant to Edison. When Edison returned to the Western Union office, he was asked to name his price, but he just stood there speechless.
The Western Union official broke the silence and said, "Well, how about $100,000?"
Negotiation is not just about winning, it's about win-win. In his book "What They Don't Teach You at Harvard Business School," Mark McCormack explained how he tries to make negotiations a win-win for both sides so there are no hard feelings.
He wrote: "I find it helpful to try to figure out in advance where the other person would like to end up — at what point he will do the deal and still feel like he's coming away with something. This is different from 'how far will he go?' A lot of times you can push someone to the wall, and you still reach an agreement, but his resentment will come back to haunt you in a million ways."
Agreements prevent disagreements. Every now and then, you will enter into a handshake agreement where "your word is enough." Maybe yours is, but the other party's usually isn't.
I had a handshake deal with someone I hired who agreed that he would not seek another job for two years. After a year, a better offer came along, and he was gone. He said he remembered our deal was for only one year. I couldn't prove him wrong. Now when I make a deal, I follow it up with an immediate letter stating our arrangement.
Discover your inner child in negotiations. Herb Cohen wrote the bible of negotiations: "You Can Negotiate Anything." I had him speak a few years ago to a group I was mentoring, and he asked, "Who are the most successful negotiators who seem to get what they want?" His answer was children.
First, they aim high. They understand if you expect more, you get more. Second, they recognize that "no" is a starting point and not final. Third, they form coalitions, starting with their mother. If she says no, then they move on to Dad. Grandparents are next. Finally, children are tenacious and persistent. They wear you down.
Mackay's Moral: You don't get what you want. You get what you negotiate.
Contact Mpls. businessman Harvey Mackay at harvey@mackay.com.
