How to Trade Your Way to a Better Deal Without Moving Your Price | Ep 977

0:00Over my career, acquiring and scaling businesses for acquisition.com, I've done a lot of deals. A lot of these things I didn't actually learn from books. I learned them from mentors and actually seeing them do it and learning it like in the streets, in the real world. Most itty-bitty tactics like don't actually drive the needle. There's three contexts that you're going to use each of these skills with. The first is with employees and this goes both ways. If you're an employee trying to negotiate with an employer, then that applies. The second is going to be vendors. Now this also applies if you're a vendor who's dealing with customers.

0:29And then third, you've got what I would consider partners. This is when you do deals, M &A, things like that, investment. So these are kind of the three big vectors that all of this stuff applies to. So if you're like, I'm not sure if this will work for me, you for sure, even if you don't have a business, you are an employee. And if you are an employee and you don't want to use that, you certainly have vendors that come to your house and do things for you. Like this is the fruit of life. You have to negotiate and you get what you negotiate, not what you deserve. That may sound not fair, but it's also the truth.

0:57I learned this from a different mentor. They call it MISOs, but basically multiple equivalent simultaneous offers. So what does that mean? That means that I present offer A, offer B, and offer C, or just offer A and B. It doesn't really matter. You can have two offers. You can have three offers. And each of these have different prices and terms associated with them. And so what happens is when you make multiple equivalent offers, it's like embedding reciprocity. It's like, hey, I'm trying to be reasonable. I just want to figure out what works best for you because all three of these work for me, but which one's better?

1:27This is a way of actually teasing out what someone else's priorities are if they're not willing to tell you. Because a lot of times you want to hold your card close and not say, what are the things that are most valuable to you? Now, over time, you build some trust, you build some rapport, and you will be able to share. Because ideally, something that's important to you is not important to them. And they give you this one. And something that's important to them that's not important to you, you give to them. And that's fundamentally a good negotiation. And one of the big things that I misunderstood in the beginning is that I assumed negotiation was a zero-sum game.

1:49And it's never a zero-sum game. Because you're a different person. You have different needs. You're always going to have some things that will be more important to you than other people. And in that situation, it's like you want to just interlock the things that matter most to each person. That's where it becomes a positive sum game. Both parties are better off from basically giving and taking in places that are less meaningful to them and more meaningful to the other person. Journal of Personality and Socialistology showed that presenting multiple equivalent offers simultaneously increases the likelihood of finding mutually beneficial solutions.

2:17This approach demonstrates flexibility while also maintaining your core interest because you're the one who's presenting all the offers. It's almost like a reverse assumed close. Hey, I'll do any of these three things. And you just pick the one that works for you. And then the thing is, they're picking any of these I said already worked for me. Let me give you a real-world example. So let's say option A is lower monthly fee with a longer commitment. Option B is a higher monthly fee but has premium support. And then option C is kind of like a pay-as-you-go with slightly higher rates but maximum flexibility.

2:48So all three options will give you similar overall value, but you might look at them and be like, I just want to know which one meets your needs better. From their answers, you'll be able to understand their motivations. Now, let me tell you some knowledge from the street. If someone gives you multiple offers, if you're on the other side of the table, what I like to do is say, I like the best part of this one, and I like the best part of this one, and I like the best part of this one, and why don't we make an offer that is the best of all three? And I learned this from my friend Sharon. Guy's done more deals than anyone I know.

3:20I was like, ooh, that's good. So the flip side is you could ask someone, hey, can you give me two or three versions of what this deal might look like? And then they come up with their versions of the deals. And then you say, great, I like this piece. How about we do option D? And what's nice about this is it also shows some active listening for you. You countering with something like this or even taking two of the three components, two of those components might be meaningful for you and not for them. Again, because they put them in the different deals. You might find out that you can get more of the things that you want just by asking.

3:46So, number four, reciprocity. Now, reciprocity is key in all sorts of persuasion. And I'll say this one caveat that I believe. Reciprocity only matters in cultures where reciprocity matters. There are cultures where reciprocity is not nearly as important. This is where sometimes when cultures mix, people take advantage of systems because that's not as important in the culture they came from. And so the culture where the person is giving first in order because they expect something back, the other culture will just take advantage and be like, look at this idiot. He just gave me some free stuff.

4:17And so you have to make sure that basically you're within a culture or society that reciprocity is the norm. But if it is the norm, there's huge amounts of things that you can use from a persuasion perspective. So the beauty with how we structure reciprocity is that people are more sensitive to the fact that they gave something and you give something. What's more difficult is ascribing the relative value. So let me give you an extreme example. Let's say that I take someone's order from the counter and I bring it to the table where we're both eating lunch. The person might say thank you for doing that.

4:48If I then said, hey, can you pick me up and drop me off from the airport tomorrow? I mean, I did get you your lunch yesterday. The thing is that it poses, it looks like, it smells like reciprocity, but the value of those two concessions are wildly different. And so the idea is that we're trying to trade concessions in a way that is still advantageous to us. What I like to do in terms of my thinking, like the example that I gave in terms of multiple simultaneous offers, which is why I think this works well post that, is that I try and break each of my things into as many different pieces as possible so I can trade more times.

5:18So like this house example that I gave you earlier, if I have$15 million but this thing is going to be financed, can I go cash or financed? I can do closing period. I can say it's a 90-day close or a 30-day close. That's going to be significantly more valuable. I could say furniture versus not. But there's other terms that we can basically weave into the deal that I'm not going to play all those cards at once. Now, this one is a real estate tax. This is much more straightforward. But a transaction like this, it's like you want to think, what are all the variables? We want to use all the value equation variables.

5:48Speed. How can I deliver this faster? How can I do it slower? We've got the actual price, obviously. On top of that, we have the risk associated. So who's going to be taking on more risk in this situation? and what are the different types of risk that someone's taking on. Then we have ease. How can we make this easier or harder for the other person? For each of these components, you want to take whatever you're offering, whether it's an employee or whether it's a vendor or whether it's a deal. I want to look through each of these lenses and think, how can I have more variables at my disposal so that when it comes to the horse trading, I can make a small concession in ease and they only have two variables and I've got five.

6:26And when I have five, I can give without changing my price and say, hey, I'll do 15 with ease. They'll come down from 17 to 16. And I say, cool, I'll do 15 with ease and risk. And then they come down from 16 to 15.5. And I say, cool, I'll do 15 with ease, risk, and speed. And so when we do it like that, then all of a sudden it's like, I'm still keeping the reciprocity, but I just have more arrows in my quiver. When you're sitting down at the table, you want to think through all of these different variables that you have at your disposal. For me, I have this big deal sheet that has 80 different things that I can change about a deal so that when I go into the conversation, I have so many things that I can move flexibly to make my offers more compelling without the unstated assumptions that people all have because they're assuming the deal just has these two things and everything else is the way they want.

7:18And for you, you have 80 other variables that you're like, oh, I can change this one, I can change this one, I can change this one, and that allows you to stay in reciprocity with the other person. That ultimately gets you a better deal long term. So as we're thinking through this, If we sit down at a table and we have one or multiple other offers that we think are really compelling and interesting, and we use that as our psychological power so we can anchor super high and we anchor low in terms of our counters, right? Anchor high in terms of our initial, anchor low in terms of our counter offers.

7:46And then we have multiple simultaneous offers that are either presented to us or that we can present to somebody else using more variables. and then horse trade with reciprocity so we can stay in the pocket but still more or less stay at the same initial offer, then we're probably going to increase the likelihood that we get a good deal done. Number five is framing. I would say this is most important, especially for employees and vendors, less so for partnership type or like M &A type stuff. But it can probably also be important here too. But I'll just give more use cases in these two right now.

8:14So if we're talking about framing, then how we position something is going to matter a lot. So if I'm an employee selling to an employer, which is fundamentally what you're doing, I would probably say something to the extent of we want to make investments in these places. And I see me coming in as an investment, not a cost. And ideally, if we frame this as how am I going to get a return on this investment, then I'm no longer a cost center in the business at all because I'm just a percentage commission, essentially, on what I'm bringing in the business. If I'm a vendor to the same degree, I'm going to try and frame something as an investment.

8:46I'm going to frame it based on return, not based on overhead. On the flip side, you always want to reframe the other way, which is you want to reframe this as cost, you want to reframe this as overhead, so that ultimately you have more basically negotiating power because you're pushing them down, they're aching themselves up. A lot of times people don't even understand framing, and so they'll just accept the frame that you present. So rather than saying, hey, this is going to cost you$5 ,000, we just say like for$5 ,000 investment, you can see$15 ,000 in maintenance cost savings. That's very different than this is going to cost$5 ,000.

9:13If that's the reality, then it's going to be far more compelling and far more likely the person's going to accept your offer, even though functionally it's the exact same thing. I was talking to a few home services businesses that do kind of construction stuff. And so I talked to a pool guy, I talked to a patio guy, I talked to an awnings guy who did like awnings on top of patios. And I said, do you have any data that shows resale value of homes that have awnings versus not? Or do you have any data on resale value of the specific neighborhoods that you're going to go into of pool versus not pool?

9:40If someone knows they spend$100 ,000 on a pool and adds$100 ,000 to their house, I'm like, the pool's free, except you get to enjoy the pool the whole time. So we shouldn't even be talking about that because you're really just taking it from one pocket and putting it to another. You're the one who gets to keep the pool. I don't keep the pool. It's all for you. So the idea here is how we frame it. If you're going into these things that's going to cost you$100 ,000, that's a very different frame than your house is currently worth a million. The other houses that are selling at 1.2 all have pools.

10:05It's going to cost you$100 ,000 for the pool, but you're going to add$200 ,000 in home value. What are we talking about? It's a very different conversation. So tactically, when you're in one of these situations, we want to have the data to support our argument for whatever our framing is. And typically, it's going to be some sort of return, especially if it's a monetary thing, right? We want to frame it in terms of what the item is. And so the strongest business is going to say, look at the other 10 houses that sold in this neighborhood. Look at however many deals that have been done. They all have these components.

10:30The ones that didn't suffer this sort of loss. And you know what? Maybe it's not a one-to-one ratio. It costs you$100 ,000, and the houses with pools, it's an extra$50 ,000. Okay, let's not frame it as$100 ,000. We can frame it as half off, but you also get to enjoy the pool for that whole time. And so if you think you're going to sell this in however many years, do you want to enjoy it and barely pay much at all over that period of time? Probably. Rock and roll.