Financial negotiating skills

risksNegotiation skills are a must-have for success in life. Some may think they do not know how to negotiate but the truth is – we negotiate daily without even realising it. The child who convinces her mother to permit her to stay up longer to watch a favourite TV programme is already developing her negotiation skills. In personal finance, negotiation skills are critically essential. Many of us know rich people who would always negotiate any price given to them. They didn’t adopt negotiation when they became rich, on the contrary they became rich because they negotiate habitually. Many of us despise the small amounts to be saved by negotiation but like we always say in this column, “little drops of water make a mighty ocean”. This reminds me of a CNN advert in which the financial correspondent, Richard Quest ‘reprimands’ a lady for not appreciating the value of a penny.

Negotiating helps us to get a reduction in our expenses (or growth in our revenue) and increases the disposable income we have to save, invest or improve our quality of life. We should negotiate at least three things – amount paid (or received), value (what the amount covers) and payment schedule. Negotiating the amount paid puts extra money directly into our savings. Negotiating value, puts money in indirectly.

Whilst we do not reduce the amount of money we part with, because the amount has been stretched to cover additional items, we save money on future expenses. If for instance we’re negotiating the price of a laptop; the vendor might be unwilling to reduce its price but may agree to give you a laptop bag free of charge. So whilst we did not reduce the money we parted with initially, we eliminate the future expense of buying a bag for the laptop. We get more value for the money spent. Negotiating payment schedule turns a heavy single lump-sum payment into smaller installments which we can easily muster without having to borrow. This way we get what we want to purchase but on a more friendly payment schedule. All negotiated arrangements should be documented. If a school gives you a discount for sending three children there; they need to issue a fresh bill that reflects the negotiated fees – nothing should be left as verbal. Payment schedules (especially long ones) should be followed by an agreement that details what happens in the event of payment failure on the part of the buyer and other unforeseen events like the death of either party.

Before negotiating, we need to do our homework; do a market survey first. What is available elsewhere? This way we can confidently stand by whatever discount we are demanding. Negotiation should be win-win for all parties. A survey of prices from other similar product/service providers helps determine what should be acceptable to the person we are negotiating with. Telling the other party their competitor’s prices during a negotiation process helps you to get their consent much faster. We also need to know our own BATNA (best alternative to a negotiated agreement) before commencing the negotiation, this set the perimeters of compromise. Obtaining a win-win situation (especially in long term relationships) is the best way to sustain the gains of a negotiation. Otherwise the “losing” party would soon back out of the negotiated conditions and seek to restore the status quo.

Everything can be negotiated. Let’s make negotiation our first reaction to any price quotation. Take for instance Comprehensive Insurance, how many of us negotiate the no-claim discount that the Insurer offers us after years of paying premiums and not claiming a kobo? How many of us who borrow from banks attempt to negotiate the interest rates and fees? How many of us try to increase the value we get for the money we pay for goods and services? However, some companies do not empower their staff to negotiate e.g. telecoms companies; but they have created a solution to this situation by developing various service packages. So if we complain about the package we’re using, the Customer Service Officer would readily offer us a different package – which gives us the same result as direct negotiation would have. Negotiation increases our disposable income and gets us more value for money spent. Always look out for opportunities to negotiate.

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