I’ve never been good at negotiation – I mean negotiating a price – and neither has Christine. But I put the negotiating puzzle together this week. This story could save you thousands of dollars. These two simple tips I stumbled upon this week saved my family $50,000 to $100,000 dollars. And that was by accident. Imagine what they could save you if you intentionally applied them to your life.
If you’ve been reading this blog for a while you know that my wife – Christine – is an online bookseller and she dreams of opening a ‘brick and mortar’ store.
She has been researching retail real estate for 18 months and she found that retail space was too expensive for a book business. For the asking price, she couldn’t be profitable, so she suspended plans to build a retail store and focused on growing her online business.
A few weeks ago she received an unexpected email from a property owner stating that he was ready to cut an aggressive deal.
She sent him an email saying she was only willing to pay about 1/3 of asking.
A week later he accepted her offer. She negotiated a 2/3 discount. It took 18 months.
Now what did we learn about negotiating?
- Don’t hurry. If you rush into a decision you will probably pay too much. Most of negotiating is – who wants it more. Whoever wants it more is going to have to give more to get it.
- Negotiating isn’t about honesty – it’s about the marketplace. I was confused by this for years, and the truth hit me this week. Here is how I used to think about negotiating:
The seller should name the lowest price she is willing to take. Anything less is dishonest. I believed this about cars, houses, or anything negotiated. I thought the negotiating process was an underhanded scam. If I could ignorantly pay more than someone else, it was unfair and I took it personal.
Now turn that idea on its head…
If the seller thought the same way, he would believe that I should name the highest price I am willing to pay. Anything less would be unethical and dishonest. Why should he leave any money on the table?
I learned as a small child that asking for more than I needed was dishonest. But this thinking is a trap. Your guilty feelings put you into a position where you consistently pay too much and ask for too little.
But the truth is – it isn’t about need at all. You only negotiate for items you want, not items you need.
I’m sorry for this generalization – but women tend to fall into this trap easier than men. I think it’s because they are taught different values as children. Women are generally far more self-sacrificing than men. Suzi Orman just did a seminar on PBS about how women give too much and ask for too little.
This is how it works in a free society:
Let’s say a property owner needs $2,000 per month to break even. She could make a profit if she only asked for $4,000. In my old value system it would have been unethical to ask for more than $4,000.
But let’s say she asks for $10,000 per month. She has every right to ask for it, but no right to get it. And if someone willingly gives her $10,000 per month – that’s what the space is worth!
However, if no one pays her $10,000 per month she will lose $2,000 per month which gives her an incentive to lower the price.
So it’s important to wait and see if something doesn’t sell for the asking price.
This isn’t about honesty. It’s about freedom. You are free to ask whatever price you wish and I am free to choose to pay it or not. It is that simple. If the seller is charging a fair market price someone will buy it. If the seller isn’t, it won’t sell and he will have to drop the price or hold the item. Any other system would violate the free will of both the buyer and the seller.
So the next time you are complaining about the cost of anything, the best thing to do is stop buying it. I don’t mean basic food, water, and shelter. I mean everything else. Is college too expensive? Don’t buy it. Is gas too expensive? Sell your car and take the bus. Is a nicer house too expensive? Don’t buy it.
And you know what…if we stopped thinking we needed all these things, we wouldn’t need them. They are only expensive because we all believe we need them, which means the seller can raise the price at will. The only recourse you have is to stop buying it.
Here is a thought I use to help me through negotiations…
I don’t need anything. I just want things from other people.
Think about it a minute – it applies to everything and it works.