Sunday, August 24, 2008

Never Take the First Offer

Last week, amid lower oil prices, and a rising stock market, I got a boomerang slap from the rebounds of the shaky economy.  I came into work on Thursday morning to be informed that my consulting firm had been forced to take a 10% rate reduction from my client, and that was being passed to me in the form of a 10% pay cut.  As of this coming Monday.  

I informed my consulting firm that I wasn't going to take it, and since I knew they had previously offered my client a rate reduction without impact to their consultants, I informed them I needed to hear offers - that I would be flexible, but not 10% flexible.

So they countered me a 6% reduction, with a rate increase at the end of January that would make up some more of what I had lost.  I might not be back to my current rate at the end of January, but close.

My consulting firm has been reasonably straight shooters with me for the year I've been with them, so I gave them the benefit of the doubt and accepted that, with the caveat that this would not be permanent - that when things ease, they go back to the table with both the client and me.

But I wasn't willing to take the 10% without some negotiation, and it worked to my benefit.  I'm still not very happy, but a bit of a rate cut is better than a layoff.  

Why was I so willing to push back?  Because I believe the first offer on the table is never the one to take.  That there is always negotiating room in financial dealings.  Always.  It's why, before the bottom dropped out of the market we got the previous owner to come down over 7% of her asking price - things were slowing, but she could have bet on a spring uptick in the housing market in 2007.  Good that she didn't -  both for us and for her.

It's why I made the dealership where we bought my husband's car come back 5 - yes 5 - times before I agreed to a price (I am the haggler in our house).  

It's also why I managed to double my salary in under 3 years.  

I never take the first offer made.  I might take the second, or maybe the fifth,  but unless I feel that I'm getting a good deal, I walk away.

Negotiating is a skill that I think needs to be used more in our marketplace.  Americans are conditioned to view the sticker price as the price.  But negotiating has a place in the American economy, especially around big-ticket items, such as a salary, a home, or a car.

Smaller things can be negotiated too.  My husband and I have the best luck with small, local businesses - the folks who did our yard cleanup in the spring, the company that replaced our oil tanks.  I am having our heating oil tanks filled next week, and I fully plan to see if our current company will match the deals from other local businesses I've found.  See, I want to give our current company my business.  I like them.  But I am a price conscious consumer, and proud of it.

I don't negotiate on everything.  Food quality, local farmers....I don't go there.  If something is too costly, I don't buy it, but I certainly am not going to push someone with a tiny profit margin for 50 cents.  But when it comes to hundreds or thousands, I'm willing to negotiate a bit.  Even if it's just smiling and saying 'Is that the best offer you can make me?'.  Sometimes those 9 words save me significantly.  

I think more people don't negotiate because they believe it hurts someone.  It doesn't.  I can assure you companies want your business as much as you want their services.  Especially in this economy.  Having a long-term customer is more valuable, in many cases, than the cost of taking a few bucks off here and there.  And remember, the business can always say no.  I respect that. I might go elsewhere, but I still respect it.

So how can you negotiate?  Here's a few simple things that really work.

1. Ask: Is that the best you can do?
Those simple words open the negotiations, and put the next move in the other person's lap, without you having to ask for a specific  percent, or dollar amount.  In other words, you've clearly stated "I want a better deal" but without having to put your cards on the table.

2. When they come back to you: That's a little higher than I was thinking
Now you still haven't put a dollar amount on the table, but they know you want a better deal. This gives your negotiatee two options - to ask you what you want, or to make a second offer.  

3. $X is being offered.....
This is a great way to open a negotiation.  I know for a fact that three other local firms are offering heating oil at $3.50 a gallon near me as of this writing.  Our current oil company wants $3.67 a gallon.  If they are willing to meet, beat, or make me a counter, I'll work with them.  

4. I'm sorry, that's just too high
For this one, you have to be willing to walk.  I always, always, have a walking away amount in mind for large purchases.  With our home, the seller came in just $500.00 below our walking away price.  I'm glad she did, but we would have walked if she had not.  So don't toss this one out unless you know your bottom line.

5. Don't be afraid to walk away and come back
My in-laws did this with their home.  The price was too high, so they walked.  A month or two later, they came back.  The house was still sitting with no bites.  And they got their price.  You must know your market to do this, but it often pays off.  And if it doesn't, at least you didn't overpay.

Do I win every negotiation?  No.  Sometimes it takes 3 or more phone calls to different businesses, or rounds of negotiation to get to a place that everyone can live with.  Sometimes I give more than I would like to.  But never do I give more than I'm willing to.

You too, can negotiate.  It's easier than you think.  So the next time you are making a purchase, just ask "Is that the best you can do?"

See what happens.  You just might like the results. 

1 comment:

Hilary said...

We are in the middle of negotiations for a house. Long story short, the seller wants to net more than we think the house will appraise for.. so we made a final counter offer.

I have been tossing and turning over it all night but reading this post really gives me confidence. We offered her a good deal, she should take it but if the seller chooses not to we will walk away. Thanks for the boost!