You will, at some point, find yourself in a negotiation when you’re running a small business. Someone will want a discount or better payment terms. You’ll go looking for office space or a storefront. Sometimes you’re negotiating to keep more of your money. Other times you’re negotiating to get the other person to give up their money and give you a better deal. Sometimes you’re not negotiating about money at all. It could be a customer who needs you to deliver a rush job. You may ask your vendors for better payment terms. Here is a truth you need to know: The person who cares the least has the upper hand in any relationship, business or personal. Another way to say it is the person who cares the least has the best position in any negotiation.
Think about it, if you desperately need whatever the other person has, you’re going to give whatever they ask so you can have it. You’ll cut your prices to get a sale if your cash flow is in the toilet. You’ll pay a higher price to buy something you think you’ve got to have. When you’re needy, the other person holds all the cards. They have the advantage because you care more than they do.
On the other hand, if you don’t have to have the deal, or the job, or the thing you’re trying to get, and if you can say “NO” and walk away, you’re the one with the power. Of course, if you say “no” you may lose the deal or lose the sale. But when you’ve got something the other person wants you’ve got a negotiating advantage. When you say “NO” the other person has to respond with a better offer or they won’t get the deal. And when you’re willing to walk away from a deal or making a sale you’ll usually negotiate a better deal. You’re the one making the decision whether to accept or reject the offer. You’re not holding your breath hoping and praying they agree with you. You have the attitude that if you end up saying “NO” you’ll just move on to the next opportunity or prospect.
Let me give you a couple of examples of the power of NO that happened to me in my business recently.
We gave a proposal for a big kitchen refinishing job to a prospect five years ago. She never did the work. We didn’t think much about it. We don’t get every job we bid on. But then we get a call last year from the same woman. She says she’s ready to do her kitchen and now wants the laundry and two bathrooms done. We give her another proposal. Of course the price is higher. She mentions that she wants the price from five years ago. We smile and say, everything costs more now. We can’t do the work for that price.
Almost a year has passed and she’s really ready to do this project. She still wants us to honor the price from five years ago. We go back through our proposal and offer her what amounts to a 5% discount. She still wants us to come down more. And her husband finds another company who will supposedly do the job for 25% less than our current proposal–coincidentally this figure is our price from five years ago.
We called and politely said that they should have the other company do the work. We can’t cut our price that much.
We were looking over a job for a Realtor who was flipping a house. He started talking about how he wanted to hire us for multiple jobs like this in the future and that we should give him a discount for this job. We responded that the price we offer is based on our labor costs more than materials. We work as fast as we can, but we don’t cut corners to save cost. And because of that we don’t give discounts.
We said, “Here’s the deal. Our schedule is full for the next 3 months. But we will work your project in and get it finished so you can sell your house quickly.” After he got our proposal he negotiated with us about our payment terms, but he accepted our price.
These are two examples of the power of NO. And in the second example you can see a bonus strategy. You can say “NO” and then offer to negotiate about something not related to price. We refused to lower our price but were willing to negotiate getting his project done quickly.
You negotiate far more than you might think. Any time you want something different than someone else you’ll be negotiating. When you can reach an agreement and both of you walk away satisfied, that’s a good thing. Compromise isn’t a bad thing unless you’re the one doing all if it all the time. And when you’re an entrepreneur running a small business you’ll find opportunities to negotiate. Just keep in mind, the person who cares the least is the one who will call the shots. If you can say “NO” you’ll be in a stronger position and have less risk of being taken advantage of.
There’s a postscript for example 1: Our prospect called and says she really wants us to do the work. We gave her a price, but we were still considerably higher than the other guys. She’s going to hire us to do the work. She did earn a discount by negotiating, and we don’t usually give discounts. But we had to be willing to say “NO” when the price she wanted would have taken away our ability to make a profit.