Some "gurus" will tell you that there is always a "win-win" outcome you should pursue. Others advise you to see the person across the table as an adversary. Throw out that formulaic junk.
If you can’t cut a deal, you won’t succeed. You make most of your money when you finalize a contract. Whether you’re negotiating a land purchase or an employment offer, the money is made when the deal is done. When you leave money on the table, you’re *not* getting it back later.
We’ve all accepted job offers with low base salaries because we were duped by the usual bogus assurances…”we’ll bump up your salary in six months…” “we’ll cover the rest in bonuses….” Getting it in writing doesn’t help. There’s a million ways to sleaze out of a contract, and your employer’s legal team is a tad better financed than yours.
Get the money on the front end. There are loads of books on negotiation so I’m not going to waste time here, except to say this: people are tied to corporate America because they can’t cut a better deal for themselves. Cutting a better deal comes down to two things that can be taught (strategy and leverage) and one thing that can’t (guts).
“The strategy of the deal” is not as complicated as the negotiation gurus would have you believe. The most important negotiation tool is leverage. Leverage is just a wank word that translates into common sense as “you are only as powerful as your options.” The more options you have, the stronger your position. There is an art to realizing when you have leverage and when you don’t – the terrain is constantly shifting.
To get the best possible deal, you have to be able to walk away. Having options allows you to win the best possible terms. The kicker is that most of the time, both parties in a deal are mutually dependent and cannot walk away without a price. That’s where strategy comes in – knowing how to get the most you can based on the leverage you have.
Some would argue you can accomplish this by bluffing. That’s true, but it requires real gamesmanship to pull off. Bluffing is a tactic better saved for penny ante card games. In negotiation, you gamble only if the cost of losing is one you (and your family) can live with. I have a less conventional take on negotiation: I believe you get the most by playing the hand you’ve been dealt and not playing games.
Some “gurus” will tell you that there is always a “win-win” outcome you should pursue. Others advise you to see the person across the table as an adversary looking out for their own best interest at the expense of your own. Following the “adversarial” way of thinking, you should always bid higher than what you are willing to settle for, with the assumption being that the other person has a number in mind somewhere in the middle. They’ll wait for you to come down and meet them halfway.
Throw out that formulaic junk. The only rule of negotiation is that each situation is different. Sometimes there is a win-win outcome; sometimes there is only one prize and no way to fairly divide it. Sometimes it’s better to give a little more than you planned, even when your leverage is strong, in the interests of future business. Lording your (often temporary) advantage over a business partner can backfire.
If they key to winning negotiations is having options, it’s time to develop those options. Sometimes you have to settle a bad deal, start from scratch, and try to improve your position in life. Once you develop marketable, cash-generating assets, you’ll find that negotiating is a lot easier.
But you don’t have to wait to put these tactics to work. Whenever we have a valuable skill, we can use these techniques to achieve a market value for that skill. There are times when we are a hot commodity – perhaps we have a technical skill that is in demand, or we find ourselves in an industry that is taking off. That’s when we need to make our move and get the best job offer we can. Boosting incoming revenues is a key to getting off the corporate treadmill. Down the road, it is preferable that we have more revenue sources than wages, since wages are taxed more heavily than investment income. But a more aggressively salary is a good start. We can also use these tactics to get the job skills we need. Skills pave the way.
Behind a winning deal is basic trust in our gut instincts. I went through a decade of mistakes in business before I finally started trusting what my gut was telling me all along. I thought there was something mysterious about business. I didn’t go with my instincts because I figured that I was too inexperienced. End result: I ended up in bed with the wrong people. You know in our gut when you’re dealing with sketchy individuals and “too good to be true” proposals. But when you don’t have a lot of experience, the tendency is to go along. Never “go along.” Business, in the end, is simply human relationships. Sometimes these relationships are enabled by technology, but it’s still people dealing with people. The good sense you learned navigating the streets and the playground is exactly what you need in a “sophisticated” business context.
Success in business is simply combining relationships with some kind of industry-specific know-how or trade that gives you an edge. Combine that with deal-making skills and you’re off. I emphasize negotiation for two reasons: one, you need those skills to get the best salary, and two, you need them even more when you launch your own ventures. I’ve seen so many businesses fail because people set up shop with the wrong partners, or sold off too much control to investors. How we negotiate the ownership of a venture has a lot to do with its ultimate success.
My favorite deal-making strategy of all: mix bread-and-butter “keep the lights on” deals with “speculative” (high-incentive) deals. When there is no cash coming in, you have to stay practical: do a bread-and-butter deal (or job) that will keep the bills paid. But once that’s in place, you are now in the position to take a chance. So the next deal might be one with “high upside.” Since you can afford to take no money upfront, you can structure the deal in terms of incentives. In the world of deal-making, the less cash you need upfront, the more you can get in the payout. This makes sense – by taking less cash, you are minimizing the risk for your partner. Your profits will be greater if things work out, but your partner can live with that because you are contributing your “sweat” for nothing.
So close a baseline deal to keep creditors at bay, but after that, roll the dice. This way, you can strike high upside deals without having to bluff or expose yourself. There are many different ways you can structure deals to take advantage of this “bread and butter plus incentives” philosophy. You saw a lot of this in the dotcom era. I worked with several technical firms that built web sites in exchange for stock options. You can still do deals this way, though not every company is willing to give up equity for services. You can also use this approach as a salesperson, starting with a high base salary but moving to pure commission once cash starts flowing.
When I started my own business in the summer of 2000, I had enough money from real estate that I was able to strike a high incentive deal with a technology staffing firm. We built their web site at no charge in exchange for a percentage of all job placements made from the resumes that came in. On paper, it was a fantastic deal, but market circumstances changed. We still made close to $50,000 from the deals off that site – far better compensation than we would have gotten if we had done a traditional fee-for-services arrangement. Compared to our ultimate time investment, the deal was not a huge success, but it was surely worth the dice roll.
People with something to fall back on are not only able to take on high incentive deals – they are also much better equipped to handle the setbacks of pink slip culture. I know a salesperson who was fired recently. I called him an hour after it happened and he actually sounded happy. Ever since his early 20s, he has been putting his commission checks into real estate. It’s a lot easier to handle pink slips when you own ten rental properties.
I have another colleague who bills out on technical projects at $150 an hour. She works hard to keep her skills current and it pays off on every level. She is one of those rare businesspeople who speaks her mind (even in front of her clients) without fearing the consequences. People sense that she is free to walk away, and they treat her with more respect as a result.
The stronger your financial position gets, the more leverage on corporate America you have. At some point, you don’t have to work at all (or for six months, or a year, etc). The greatest power in the world is the power to walk away. From that point on, you can negotiate terms that will not only get your side ventures rolling, but make your career more enjoyable (and lucrative). Yes, there’s more to life than getting paid. But there are few things sweeter than getting paid what you’re worth.
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