Negotiating Principles

Negotiating is a matter of following principles. All the principles apply almost all the time all along the process, whether you’re negotiating to buy a new car, selling your home, negotiating with your teenage daughter to do chores, or trying to pick up a piece of used furniture at a house sale. Just as you can jump on or off a carousel, choosing any horse you like, you can jump on or off the 18 negotiating principles at any time during the process. The important thing to remember is to follow all the principles, all the time. America is not generally regarded as a negotiating culture, so in the beginning you will sometimes feel awkward following the 18 Principles. You’ll quickly become so comfortable that applying them will become second nature. Perhaps these will seem almost too simple and even obvious to you at first, because most of you probably know a handful of them, but the power of the principles lies in the way they work together when they are all applied.

PRINCIPLE #1 Never Play Games. Be straightforward.

Honesty is always the best policy. Never lie. Never play “good guy/bad guy” games. You don’t have to reveal everything that is asked of you. It’s better to say, “I won’t tell you that,” than to make up something that isn’t true. If you deceive the other party during negotiating, and they find out about it, you will destroy the trust needed for a healthy transaction. Follow the principles, yes, but always be truthful.

PRINCIPLE #2 Everything is Always Negotiable, All the Time

If someone tells you “it’s not negotiable,” ignore it. It is negotiable. Believe it or not, it is possible to negotiate price in retail stores like J.C. Penney and Sears, just by asking the floor person if you can speak to a manager who has the authority to lower a price, or if he can find someone who can give you a “special price.” With home and car buying, negotiate everything: interest rates on loans, delivery time, options, insurance costs, etc. So remember: everything is negotiable.

PRINCIPLE #3 The More “Rounds” of Negotiating the Better

Most Americans find this hardest to understand and practice. We tend to want to get it done and get it over with, because, let’s be frank, negotiating is often an unpleasant experience. Resist the urge to make one offer. Your “final” offer should be your third, fourth, or even tenth offer. In fact, try to avoid making fewer than three or four offers and counter-offers, even at garage sales. The more rounds you have, the better off both parties will be, because each round is a sophisticated form of communication, where you are able to find out more about what’s important to the seller, and reveal what’s important to you, the buyer (or vice versa). By staying calm and using courteous language, you will rarely offend anybody by asking several times for a lower price, receiving a counter-offer (even if it’s “No, I can’t do that.”), then asking again. Ironically, you may be told that “negotiations are over” by sellers, yet they will still entertain additional offers if you wait a few hours or days and approach them again for another “round.” The more rounds, the better.

PRINCIPLE #4 They Buy More with Funny Money

Cash in your pocket is “real.” Plastic in your wallet is not real; it’s funny money. If you take your family out to nice restaurant, pulling out four or five twenty dollar bills is more painful than pulling out a Visa card. Therefore, in negotiations, you’re likely to avoid making mistakes and you will pay lower prices if you can pay cash, and likewise, you’re more likely to receive a higher price when selling if you are able to take credit. Always be cautious about finalizing a deal that involves risking your own credit. Nowadays, most people buy large ticket items like homes with credit, but there are frugal types who buy cars and even houses with cash. They rarely overspend. If at all possible, buy with cash. If you only spend the money you have on hand you’ll spend less, and you’ll be in a stronger financial position in the future.

PRINCIPLE #5 Shock and Relief

If you have to deliver bad news during a negotiation, try using the “shock and relief” method. That is, present a hypothetical bad situation that is much worse than the actual bad situation. For example, when you want your son to do chores, you might ask, “What if I told you that instead of going outside to play baseball with your friends, today you have to clean your room, vacuum the family room, and paint the garage?” He is shocked. Then you say, “Well, today is your lucky day. All you have to do is clean up your room and then you can go out and play!” He feels relief, cleans his room with enthusiasm, and enjoys the rest of his day playing. Try it at home, just like in the example.

PRINCIPLE #6 Chip Away and Be Patient

Negotiations that happen in one fell swoop only occur in the movies. You’ll find that you’ll be more successful if you ask for a series of small concessions. Landlords, for example, might be happy to give you small concessions like extra parking spaces, a bigger garbage dumpster for the price of a small one, or the use of an extra office room. This is especially important when negotiating terms which, like leases, are a matter of paying for things repeatedly over time. Chipping away, of course, is also easier if you are already conscious of having more than one or two “rounds” (See Principle #3). Grind it out. Be patient. Chip away. The best negotiations are statues hewn from marble over time, not hastily-assembled houses of cards.

PRINCIPLE #7 Ask and You Shall Receive

Many of you have heard this principle before, but you’ve hesitated to put it into practice because of a kind of general fear of rejection. There was a man who was petrified of offering a lower price when he went to garage sales. He was afraid of offending the seller. He didn’t realize that many sellers are relieved to just have any offer, even a low one. If you think about it, the only way to even find out if a low offer is acceptable to a buyer is to make a low offer. Then a friend advised him, “At the next garage sale, just for the sake of the exercise, offer exactly half the price on the tag.” He came home a week later, the proud owner of a heavy duty, 40-year-old car jack, exclaiming, “It worked! He had $10 on the jack, and I offered him five. He didn’t bat an eyelash; he took $5!” And since he was in all likelihood the only car mechanic at that housesale, the car jack would probably have gone unsold. $5 was better than nothing for that particular seller. Conversely, when you’re selling a car, a home, or a product for your business, remember that you can’t get a high price if you don’t ask for one. You can always lower your price during later “rounds.” Remember, there is no harm in asking–for a low price when you’re buying, and a high price when you’re selling.

PRINCIPLE #8 Loose Lips Sink Ships

There is nothing that ethically requires you to tell the other guy more information than he needs to know. Don’t give the seller (or buyer, as the case may be), more information than is necessary to complete the negotiations. This will protect you from the most savvy negotiators (especially unethical ones), who are looking for any bit of information that might give them leverage. For example, it’s not good for a homeseller to know that you have to buy a house before a certain date because you’ve had a business transfer. It’s not good for a car salesman to know that you totalled your car and your the insurance company is paying for your new one. Information is valuable, and it is worth real money if you keep it close to your vest.

PRINCIPLE #9 Bring in Your Own Bad Guy

A common tactic for unsavory negotiators is to “bring in a bad guy.” Bad guys are usually lawyers. A landlord threatens a tenant with legal action if his demands are not met immediately. A CEO threatens to sue a middle level manager of another company. The idea is to scare you into submission. The only way to counter such a tactic is to bring in your own bad guy. At the first sign (which is often a letter from a lawyer), always give a calm, almost casual response: “Look, I don’t want to argue legal matters with you. I’m not a lawyer. In fact, I never handle legal matters myself. Have your lawyer call my lawyer and they can straighten it out.” The amazing thing about bringing in your own bad guy is that in most cases the whole situation will normally fade away. This is because lawyers are expensive, and if your opponent is bluffing or simply trying to intimidate you, he will let the matter rest rather than racking up legal fees that he may never recoup. The next time the person who threatened you with a bad guy calls, and you’ve brought in your own bad guy, you’ll find that his tone is friendlier and more reasonable. (In this case, your bad guy–your lawyer–is a good guy!)

PRINCIPLE #10 Find the Decision Maker

The decision maker is the person who can close the negotiations with a final “yes.” Car dealers are infamous for not giving their salesmen the power to “close” a deal; instead, the “decision maker” is the sales manager in a back office. When buying a car, always assume that the salesman is an impotent go-between. Try to have him bring your offers to the sales manager as soon as possible. And don’t assume you know who the decision maker is. For big ticket items like real estate, just because the husband is doing all the talking doesn’t mean that his wife doesn’t have the final say. Savvy businessmen delegate final-decision-making to coworkers or boards or advisors. At the outset, don’t be shy about asking: “Who is the decision maker for this transaction? Who has the final say?”

PRINCIPLE #11 Avoid Being the Decision Maker

As a corollary to Principle #10, you’re in a much better position if you are the negotiator, but not the person who has the final say. It would seem otherwise: to be the decision maker might boost your ego, but it puts you in the position of being able to screw up big time. On the other hand, if you can’t make the final deal, but you can negotiate (chip away!) and receive concessions over multiple rounds, you can only help your family or your company. What if you ARE, in fact, the decision maker? Delegate the final say to someone you trust. Avoid entering into important negotiations without making sure beforehand that your spouse or one or more trusted advisors will be available to “sign off” on your final decision. Avoid the “final round” without consulting your advisors first. Very few things can’t wait for a few hours or even a few days or weeks while you check with advisors. Approach advisors according to expertise.

PRINCIPLE #12 Just Say No

Don’t ever be afraid to say “no” to lowball offers or to negotiators who are rushing you to a decision. That funny feeling in your stomach that tells you something is wrong? Don’t ignore it. Say no. Ask for another round. Ask for another concession. No is your best friend in negotiations because it protects you from making big mistakes. If you don’t want to sell your house for a low price, say no to the low offer (and make a counter-offer!). Usually, in the multitude of negotiating books and courses, the idea that “No Is Your Buddy” is presented first. “No” works much better if you are already committed to patiently chipping away over many rounds, and you have already delegated your final “yes” to another person. At some point, if you really want to finish the negotiations for a real benefit, you or your decision maker will have to say yes. You’ll be better off if there were several big “no’s” beforehand, with a “little yes” here and there to small concessions. Sometimes you’ll never get to “yes.” That’s okay. It’s better to say no and walk away than to say yes and regret it.

PRINCIPLE #13 Give Non-Monetary, Face-Saving Concessions

So now you’re chipping away, looking to conduct multiple rounds, saying no, delegating to a trusted decision maker, and asking high when selling and asking low when buying. The more important the negotiations, the more likely it will be that you are dealing with a person who also knows the art of negotiating and is, in fact, not the decision maker. For this principle, saving face means giving the other side concessions that don’t cost you money (or other things you value) and allows him to look good in front of HIS decision maker. For example, let the car salesmen know that you have lots of sisters and brothers and lots of Catholic friends with big families who need minivans and that you are often asked to help these relatives and friends buy vehicles. Let him know that you don’t care one iota about the color of cars that you buy. The salesman (very truthfully, keep in mind) goes to his sales manager and says, “Boss, this guys wants another $1000 off and a better rate on his financing, and I think we should give it to him because he’ll steer his friends and relatives to us. And, he’s willing to take that ugly brown minivan off our lot that nobody else wants!” Color doesn’t cost you money as a concession, and neither does the fact that your social network is worth possible future sales to the dealership. Use your innate creativity to discover non-monetary and face-saving concessions. Even say boldly to middlemen, “Here’s something you can tell your manager that will help complete this transaction.”

PRINCIPLE #14 The Other Side Should Benefit

This has also been described as the “win-win” principle. In short, both sides should receive a benefit from the transaction. The idea is not to rip-off the other guy. The idea is to find out what he needs, and if you can, give it to him in exchange for what you need. You will find that what the other guy needs is not necessarily what you anticipate. Ask questions. Does he need a quick sale to make a quota? Does he want a long-term business relationship? On-time payments? Extra delivery time? To keep his workers busy at his company, even at a lower profit? Money from the sale to pay off a creditor? Try to find out. This information will come out almost naturally during multiple rounds of negotiating. The car salesman needs to make a decent commission to feed his family, after all, and if he does a good job, he has earned the chance to sell you or someone you know another car down the road with your referral. Be willing to give a seller a higher profit in exchange for better service, better delivery, better payment terms, less time spent on your part, and so on.

PRINCIPLE #15 Control the Paperwork

There’s something about putting it down on paper that makes things “real” for people. If you’re the one writing things down, your odds of doing well increase. Be extra wary of situations where the other side brings in the paperwork. Read it carefully, be ready to “cross things out,” which is a way of changing the paperwork. Reject paperwork that you are not comfortable with, or bring it to a lawyer or expert advisor who can explain it to you.

PRINCIPLE #16 Control the Agenda

This is related. If it’s the kind of negotiation that requires formal meetings across a table, bring your own written agenda. Agendas, simply because they are written down, can control or influence when you bring up certain parts of the agreement, and help you remember what is important. Even if the other side brings a written agenda, you’ll be ready to pull out your own, and even come up with a “hybrid” agenda, which itself becomes part of the chipping away and multiple rounds described above. Unsavory negotiators will “hide” important items in the middle of their agendas, or couch them between otherwise unimportant items, or even leave out critical details.

PRINCIPLE #17 Below the Tip of the Iceberg

It’s common knowledge that the Titanic sank because of the damage the iceberg did to its hull below the surface. There is always something below the tip of the iceberg–always. And it will haunt you if you don’t investigate before you agree to terms. If the price of the house you want to buy seems unusually low, there has to be reason, and it’s your responsibility to do your homework and find out what that reason is. If it smells fishy, it probably is, and you must find out what is causing the stink. Listen to the little warning voice in your head. Pray for guidance. Woman’s intuition is helpful. Think it through. Talk it over with an advisor. Do research on the Internet. Go to the library. Call an expert. Do your homework! Your savvy will grow and become more finely honed if you go into every situation assuming that there is something you don’t understand that is below the surface, waiting to sink your ship.

PRINCIPLE #18 Standing on Principle Costs You Money

No one is saying you shouldn’t stand on principle, just that you should keep in mind that if you do, you’ll probably lose money. Some things are worth losing money over. Do not deal with shady or dishonest people, even if their prices are lower. Do not lie or cheat to achieve any goal, financial or otherwise. It is better to be poor and go to heaven than rich and go to hell. The preceding negotiating skills can be used to find compromises that please both sides in situations that are morally neutral. Sometimes, these skills can save you from losing your shirt, enabling you to resist the well-intentioned but mistaken friend who urges, “But it’s the principle! You can’t let him get away with it! Sue!” If you do take legal action, you might lose a lot of money, and receive no benefit for your family, your company, or society at large. You may even cause harm. Remember the many stories of men who lost multi-million dollar companies because they were too stubborn to compromise “on principle” with another hard-headed businessman over minor disputes that were relatively unimportant. Compromise and move on. Sometimes we have to swallow hard when the boss does or says something we don’t agree with because we want to keep our jobs. That’s okay–just start looking for another job and another boss in your spare time. But maybe it’s worth getting fired, too, and losing some money in the short run. These kinds of decisions require prudence on your part, and will depend on your individual circumstances. Base your decisions on unchanging principles of morality. Don’t kid yourself that you won’t be paying a price, financial or otherwise. Principle–moral principle–often requires sacrifice.

FINAL COMMENTS

Thanks for taking this short course on negotiating. We hope it helps you and your family be good stewards of the blessings God has given you. We suggest you review it every year or so, or even, try to teach it to somebody else.

People often contact us with stories of how this little course has helped them save hundreds, even thousands of dollars. A handful of our Negotiating Course “graduates” have even donated part of their windfall to show their gratitude. How cool is that?

http://www.catholicity.com/commentary/macfarlane/negotiating.html

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