First of all, the obligatory why am I posting this here? Primarily because I don’t think anyone else would appreciate it. Because the way that personal finance/jobs subreddits have told people how to negotiate is basically all wrong, blue-pill as fuck, and entirely emotional. And they’re attached to it. Whenever I try to broach the subject in those, arguably more relevant, subreddits I just get shouted down. So fuck them. Second, I’d prefer the information to be disproportionately in your hands. If you’re not interested in an in-depth review of negotiation strategy, just don’t read this. This is going to be long. If you don’t want to read something long, just don’t read this.

You probably read things like this before if you’ve browsed personal finance or jobs subreddits before. “The first person to say a number loses.” Or “Always counter with 15% more.”

Those people are fucking idiots. I’ve taken negotiation courses, I do a lot of negotiation with suppliers for a living, and everybody whose opinions are worth being paid for (i.e. not some random guy) says these approaches are total horseshit. The idea of waiting for the other party to say a number or countering no matter what the number is belies a lack of information on your part. If you’re afraid to say a number it’s because you don’t have one. If you always counter 15% no matter what you don’t know if their offer is fair. You’re playing poker without looking at your hand, which is just dumb. But hey, I'm also just some guy on the internet to you. So if you think I'm full of crap and want to keep negotiating like an emotional, ignorant wreck go for it.

For the purposes of this post I’ll be referring primarily to the example of buying a car. Because that’s a meaningful negotiation that most people will undertake at least a few times in their life.

1: What is Negotiation?

Negotiation is what two parties do when their wants and needs overlap by a non-zero amount and thus there is the potential for a mutually beneficial arrangement. The most important thing to know is the most obvious: If there is no possibility for a mutually beneficial arrangement, there will not be a negotiation. At least, when one or both of the parties discovers that there can be no benefit.

A useful term for the overlap between each party’s wants and needs is “the negotiation channel” because any movement outside that area can’t result in a deal being reached. Cue terrible MSPaint art: https://imgur.com/a/ABKFneq

2: Information Before Negotiation

Get ready for the first Negotiation Redpill that people have a hard time swallowing: There’s not a lot of skill involved. Sure, it’s something you can get better at. If you asked me five years ago I’d say negotiation was 90% information, 10% skill. I’ve become slightly more flexible but I still think it’s around 80%/20% and caps out there.

In an overwhelming number of cases, the party in the negotiation that has the most information will be able to achieve a deal closer to their best deal and to the other party’s worst possible deal. So when people get outfoxed in a negotiation and later find out they got a “bad deal” I don’t like to call that “negotiation failure” because generally it’s not. Strictly speaking, it’s usually an information failure. The party that got screwed didn’t do their research.

Information is valuable in negotiation. And if you look at strong negotiation tactics a lot of them actually revolve around getting the other party to divulge more information. Look at what constitutes “skill” for poker players. Knowing the odds off the top of your head? Information. Maintaining composure so that opponents don’t know what your hand is? Information. Being able to read opponents and figure out what their hand is? Information. We’ll get into that a bit with our car example at the end. Here is the information generally available:

Buyer’s Worst Deal: You need to know this to even begin negotiating. How can you negotiate if you don’t know what sort of deal you couldn’t possibly accept? If the seller knows this, you’re in trouble. It anchors the deal closer to your worst deal. You can’t control this in the short term or the long term.

Seller’s Worst Deal: Same as above but flip the roles.

Dependence on Agreement Being Reached: This dictates how close to their minimum each party is willing to go in the negotiation to get a deal. The higher dependence, the closer they’ll be willing to cut. You can control this in the short term by not negotiating with your best offer. Think about it. You have four offers on the table for something you need. Your dependence on your best offer is very high. If they walk away you’re stuck with a worse deal. Meanwhile your dependence on your worst deal is very low. You should negotiate with them first because you have stronger leverage and less to lose. Try and make their deal the best deal, then move on to the new “worst deal” until nobody will budge. At no point are you dependent when negotiating and at no point are you risking your best deal. You can’t control dependence in the long term (if you need a product, you need it eventually from someone).

Urgency: This dictates how quickly the parties need to come to a deal. You can control this in the long term with superior organization and planning. However, you can also control it in the short term by arriving at a temporary or stop-gap solution to buy you time to negotiate something better long term. For instance, to decrease your urgency when looking for a new car (suppose your last car was totaled) by leasing a car for a month.

Knowledge of the Length of the Relationship: This dictates whether the two parties have an incentive to act in each other’s best interests at all. If it’s a well the seller is going to keep coming back to every month, they want you to get a deal worth keeping. If they make the same amount of money the second you drive off the lot (car sales are the PERFECT example) they don’t really have that incentive there so much. Their only incentive beyond profiting is protecting their reputation and maybe getting you to come back in a few years for another car.

Knowledge of the Product/Service: The seller has you here. They sell this and only this for a living. You don’t. They can talk to the factory. You can’t. They get paid to learn more about it. You don’t. Over the very long term you can balance this out ever so slightly with research but you’ll probably still never come close to them. Knowledge of the product is a huge advantage in negotiation.

Knowledge of Substitutes: Maybe you don’t need a car. Maybe you can commute via train or carpool. The salesman won’t be as knowledgeable about this as you, will he?

Negotiating Power: If you have the power to unilaterally blow up a deal you have more negotiating power. You can tell the car salesman to go to Hell. He can’t tell you that. His manager probably wouldn’t let him.

3: Persuasion Before Negotiation

Persuasion is underrated. Sometimes it works. I’ve had scenarios with vendors where I’ve managed to get them to agree to my first offer (After initial reluctance) merely by persuading them.

“Look, your pricing takes into account administrative costs and sales costs. But I’m a cheap customer. I won’t call you unless there’s a problem, you don’t have to visit me, you don’t have to buy me lunch, and I’ll work with you to fix stuff on our end. Ask any of my vendors and they’ll tell you it’s true. Because I’m a cheaper customer you can afford to give me this price that you couldn’t afford to give other people and you’ll make the profit from economies of scale due to the additional volume and knowledge curve. This deal makes sense.”

Does that usually work? No. Does it sometimes work? Yes. Is it worth a shot? Definitely. Costs me nothing. For our car example it might look something like this.

“I think 10k is a fair price. If you meet that, I’ll buy the car and I’ll be sure to refer my friends and family to you, Mr. Salesman, by name.”

4: Negotiation

As I mentioned above, start with the vendor (or in our car example ,dealer) who gave you the worst offer and work your way down. Starting with your best offer is a huge mistake. If your best offer tells you to go screw yourself, your price has actually gone up. Meanwhile if your worst offer tells you to go screw yourself you’ve lost nothing. In 80% of cases in my work, I do not negotiate with my best offer. And when I do negotiate with my best offer it is always phrased as “If you will do this for me, then I will do this for you.” Trying to barter things of lesser value to me for things of greater value to me. I’ll never say to my best offer “You need to do 10% better or else.” Because I don’t have an or else. Profits over pride, every time.

Try not to divulge information and try to get information about the other party’s position. Find ways that you can help the other party that cost you nothing but always, always ask for something specific in return. Never say “What will you do for this?” say “If you did this I would be willing to do this.”

I might offer to be a reference for a new vendor if they gave me something I wanted in exchange. Costs me nothing, but could potentially be of value to them. But I would love to explore this possibility in our car example because there are actually a lot of things you can offer a car salesman that cost you nothing but could help him. The salesman wants to sell the car for more money because he’s not gambling with house money. He’s playing with his own chips. If he drops a thousand dollars off the price for you, that came out of his commission. But salesmen also frequently have commission structures whereby they’re incentivized to sell more cars per month. They’ll earn a bonus for each car the more cars they sell.

“If you come down to my price, I will come in tomorrow, cut you a check, and drive off with the car.” You’re doing two things here. First of all you’re showing him you’re not wasting his time by playing a game of “how low can you go?” Second, you’re offering him something tangible (a time savings and a quicker turn around) in exchange for what you’re asking for. I only use this if it’s true. If you turn around and get a lower price from another dealer and hang the other one out to dry, you’ve saved 500 dollars, but if your word means nothing that is actually a serious handicap in negotiations going forward. In my professional career I never lie to vendors. Ever. Food for thought. So I only make this move if I think I’m nearing the bottom of the barrel and I’m just trying to squeeze out a tiny bit more.

“I’ll refer you to my friends and family and ask for you by name for future purchases.” I mentioned it before, but it’s a good one. Having your family buy cars from the same dealership also gives you strong herd protection. Better yet, if you have one person in your family who is very good at negotiating buy all the cars for everyone in your family (this is what I did for my family) you’re enhancing their negotiating power and they’ll be able to get a better deal. The dealership I’ve negotiated most with knows me by this point. They know I represent not just one but six car buyers at least one of whom will be buying a car in a given year. They know I can unilaterally move that business elsewhere if I’m not happy. Good thing I’m happy. My car got totaled six months back. I got the same manufacturer, model, and year with 20k fewer miles for 22% less than the insurance check. Part of that was because of the research I did and the skills I had, but at least 30% of it was because of the increased negotiation power I have by representing an entire family of car buyers.

Conversely, think about things they could do for you that cost them nothing but give you value.

5: General Tips

Options. Always get as many options from as many different sources/vendors/dealers as possible. This gives you more opportunities to get knowledge and also more opportunities for negotiation.

Give yourself multiple trenches to fight in. Have a list of things you’re willing to give up. Have a list of things you’d take as consolation prizes.

Say a fucking number. Don’t leave them guessing. If they need to be 10% lower tell them they need to be 10% lower. Don’t say “Well, what’s the best you can do?” because you’re signaling that you’ll take the best they can do. This also forces you to have your numbers ready and be prepared, which pays dividends. Specific numbers are also better than round, vague numbers. “10,153 dollars” tells the salesman there’s authority. You calculated that. Better still if you can explain how you arrived at it. “Ten thousand-ish dollars” tells the salesman “9,000 dollars”.

Don’t make threats you aren’t willing to execute on. It drags out the negotiation process. The point of threats is to save everybody time. If the other party knows that I never make idle threats, then when I do make a threat they know to back off. If they have to wait for me to actually execute the threat (because who knows if I’m lying this time) all we’ve done is wasted valuable time.

Don’t yell or lose your temper. This is a personal preference. Your negotiation should be fact-based and dispassionate. You’re not deciding that their price is too high, you’re just telling them the fact that their price is too high. Getting emotional won’t work against someone who’s good at what they do. People are also willing to work with you more if you’re not an asshole.

Don’t fucking ask to see the manager. For the love of God. The manager got to where he is now because he’s better at it than the guy you were talking to already! If it’s a slow day and he’s bored they’re probably going to have a wager as to how hard he can screw you.

Know your fucking minimum. Do not accept a deal that is worse than your minimum. If you go into a salary negotiation saying “My minimum is 55k” and accept 50k then that wasn’t really your minimum, was it? Or you accepted a deal worse than your minimum, which is just stupid. Don’t lie to yourself about your minimum and don’t sacrifice your minimum once you have it.

Watch out for subtle attempts to get information. Let’s use our car salesman example. I’ll provide things a car salesman might say/ask and the translation:

“So, what do you do for a living?” (Establishing dependence. Do you need a car to commute?)

“So, what has you looking for a car?” (Establishing urgency. If your car was totaled and you’ve only got two weeks that insurance will pay for your rental, that’s more urgent than just browsing for a new car)

“Has anything caught your interest yet?” (Establishing dependence. He’s trying to figure out if you’ve been to other dealers)

“Got a husband/wife?” (Establishing your negotiation power. Can you make a decision and write a check today or do you have to consult with someone else?)

If a salesman knows you haven’t looked elsewhere, you have urgency, and dependency, he’s going to do his best to sell you an awful deal on the spot. Your only option to get a better deal, probably, is to literally walk out, get in your car, and drive away by that point because there’s just an enormous information disadvantage.

Car salesmen have a lot of subtle tricks to capitalize on your emotions as well. Does this one sound familiar? “Let’s take it for a spin.” You get in the car. “Go ahead and adjust the mirrors and the seat to make yourself comfortable.”

That is calculated. By having you adjust the car to your “settings” they’re trying to get you to view the car as yours already which makes it easier to sell it to you. Generally, the best way to protect yourself is to try and arrive at a price before test driving or even looking at the car. Just say you’ve already test driven them and don’t need to do so again.

Free donuts/coffee? They learned this trick from literal cults who gave away flowers before asking for a donation. When someone gives you something for free it becomes psychologically more difficult for you to refuse their requests. You feel you owe them. “But I’m smarter than everyone else! Those car salesmen can’t fool me!” said every car buyer who got ripped off by a salesman. Just don’t eat the fucking donuts or drink the coffee til after you’ve bought your car. They’re stale anyway.