sparks
ELECTRICAL NEWS
february
2014
4
contractors’ corner
Working knowledge by Terry McKenzie-Hoy
An introduction to the art of negotiation
See? The ball is back in the buyer’s court.
Do you also see how the buyer responds to
the seller’s first offer?“Three thousand, two
hundred dollars?”
By emphasising the much‘harder’number
“three thousand, two hundred”rather than
“thirty-two hundred”, he makes the seller
think it’s a lot of money.
The buyer quickly turns the emotion with
his offer of“fifteen hundred”knowing that it
won’t be accepted. He then starts with the
use of the word‘thousands’again instead of
‘hundreds’; but now there is no negotiation...
they just trade numbers.
I tell this tale because I often see contrac-
tors being very unskilled at negotiations.
They want the highest price, the client wants
the lowest.
In negotiation, the buyer is the person
wanting the work done; the seller is the
contractor who is selling services at a price
to be negotiated. There are three things you
can negotiate on: Price, delivery and quality.
Before you start on price, ask about when
the work is required and how long the work
would take. If the client wants your crew
to work at night, on weekends, and in all
weather conditions, you can agree on this
before you get to the price.
As the seller, you can now aimhigh. If the
buyer wants it all at the same price and is in
a hurry, you can use the level of urgency to
your advantage and trade up.
But let’s say the buyer has no time frame –
if the buyer wants the price lower, youmust
be the last one to indicate any price. Bite your
tongue, chew your cheeks if youmust but
never ever be the first to name a price.
When the buyer finally gives his desired
price, it may be higher than you wanted (in
which case you can raise it slightly) or, if it’s
lower, you can just sigh deeply and say:“No,
sorry, let’s just leave it.”
What else can you negotiate?Well, if the
buyer sticks to a low desired price, negotiate
on payment terms that will improve your
cash flow. You can even ask for payment in
cash, for the buyer to obtain the materials
or pay a bonus for a contract completed on
time.
One final thing: Aim as high as you can.
There’s no such thing as a‘fair price’. Contrac-
tors get ripped off all the time. If the price
gets to a figure that is much higher than you
expected, then respect the luck. There will be
bad luck, too.
So, aimhigh.
YOU’VE seen it on AmericanTV.... in the pro-
grammes where somebody from some organisa-
tion wants to sell something and the other wants
to (or pretends to want to) buy something. The
conversation goes something like this:
Buyer:“So, what do you want for this?”
Seller:“Ahh... I was thinking... say thirty-two
hundred.”
Buyer:“Three thousand, two hundred dollars? I
tell you what, I’ll take it for fifteen hundred.”
Seller:“Fifteen hundred? Make it three thousand...”
Buyer:“The most I can go is two thousand. Cash.”
And the scenewinds out until they agree on a
figure and the deal is done.
We are supposed to see that some sort of ne-
gotiation has taken place. Has it? Not really.What
has happened is that the one party has steadily
lowered the pricewhile the other has raised it until
the twomeet. So, it’s not really a negotiation. But
there is a lot to be learned from this interaction.
See how the buyer starts by asking for a price:“So,
what do you want for this?” Note that he doesn’t
ask,“Howmuch is this?”or“What’s the price?”
Can you see that both of these questions put the
seller in an implied position of power?
By asking,“So, what do you want for this?”the
buyer puts the seller in a position of needing to
do a deal. The seller responds with:“Ahh... I was
thinking... say thirty-two hundred...”
The seller’s use of“thirty-two hundred”softens
the‘emotion’of his need and while he says he has
thought about it, he actually hasn’t. If he had, he
would have refused to name a price or he would
have prompted the buyer to give him a price or
he would have been vague about it.
A better reply would have been:“Howmuch
do I want?Well, I’ve been thinking…‘as much as
possible’would be my first reaction but you’re the
expert – you buy these things all the time. What is
it worth to you?”
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