Negotiation: a key skill for life

Welcome to the letter this week. Following last week’s topic on How to increase your income as a millennial, there is another skill I wanted to include in that letter but realized it would work better as a separate topic. That skill is negotiation.

Negotiation can apply to all the steps laid out in last week’s letter, but to me it’s also a meta-skill that can apply in many areas of life.

I’ve been fortunate to be involved in negotiations with a number of global companies over my career regarding pay, legal terms, contracts, project deliverables and more. My goal this week is to share a few things I’ve learned about negotiating and how it can benefit anyone.

Uncomfortable conversations

I’ll start with one of my all-time favorite quotes:

This idea is powerful and has helped me in relationships, work, finances and in today’s topic: negotiation.

Negotiation is one of those uncomfortable conversations that can bring you better success financially. Although it can be uncomfortable, I have found the benefits of good negotiation far outweigh any momentary discomfort.

Also, it is often not nearly as uncomfortable as it seems.

To start, it helps to define negotiation.

Defining negotiation

Oxford defines negotiation as: a discussion aimed at reaching an agreement.

By this definition, negotiations occur in everyday life. Already, it’s less daunting.

This means that if you are willing to have a discussion with someone to reach an agreement, you are already on the path to negotiate. Simple enough.

Within this discussion, I’ve listed a few tips here that can help simplify the process.

Tip 1: Make the ask

The number one thing I have learned about negotiation: people don’t receive because they don’t ask.

This goes directly back to the Tim Ferriss quote. People often avoid asking for their desired outcome because they are afraid or imagine the conversation being too uncomfortable.

Here’s an example of how this can help you financially. If you tried my LinkedIn job application process under strategy 1 in How to increase your income as a millennial, you might have found that similar jobs available in the market offer higher pay. In this case, you now have data that can help you determine a desired outcome for your current pay.

If you choose, the next step in that process can be to approach your current employer with a request for a pay increase, now that you know your desired result and are prepared to ask for it.

When you know your desired outcome, don’t be afraid to ask for it.

Tip 2: Don’t throw out the first number

The old saying is negotiation is: whoever speaks first loses. Here is why that is often true.

You will go into a negotiation with a desired outcome. In our example, that’s a specific number for a pay increase. In any negotiation, you and the other party have both a desired outcome and an outcome you will accept.

By giving the first number in a negotiation, you set the ceiling for the outcome.

If you ask outright for a 10% pay increase, the result will be capped at 10%, regardless of what your employer is capable of offering. The outcome only has the potential to meet your request or to go down from there.

Instead, if you allow your employer to offer the first number, three things can happen:

• They offer you a higher number than your ask. You get your desired outcome and more.

• They make an offer at or below your desired outcome. This allows you the opportunity to counteroffer to test the flexibility.

  • In my job, we used to role play a negotiation scenario with our new salespeople where we intentionally set our acceptable result extremely high. If the sales trainee negotiated well, they would get an outcome much higher than they expected. However, if they threw out the first number or didn’t test the flexibility, we revealed how much they left on the table by not following the process.

  • Counteroffering should be done tactfully. Something along the lines of, “I appreciate that offer. My target was 15% (it’s ok to shoot high here). Is there any potential to reach that?”

• They refuse to make any offer. It is not your desired outcome, but it helps you make a more informed decision on your next step, whether you stay with your employer or seek employment elsewhere.

Tip 3: State your why

Everyone wants more money and of course, there is only so much to go around. When you make an ask, whether for a pay increase or anything else, you can differentiate yourself by preparing your why.

In our pay raise example, consider this: rather than asking because you found out there are similar jobs offering more money, think of what may win over your employer.

Observe these two approaches. These are real examples of requests I have received over the years.

• “I need a raise because of inflation and cost of living. I know peers of mine that earn more and I need to be paid more competitively.”

• “I appreciate the 5 years I’ve spent here and the skills I’ve gained in that time. I’ve recently had conversations with a few other firms about open job opportunities. I am not actively looking to leave, but I have been made aware that similar roles are willing to offer higher pay. I wanted to bring this to you as my employer to find out whether we can work out a win-win scenario that brings my pay closer to the market and supports my commitment to this company.”

Which one helps the other person want you to win?

This can apply to anything: if you are buying a car, explain to the salesperson how you are more willing to bring them future business or referrals when they are willing to work with you on price, rather than just asking for a discount outright.

If you can prepare your case beforehand and show how it can be beneficial to both parties long-term, people will be much more interested in agreeing to help you achieve your desired result.

Tip 4: Be a human

It’s not uncommon that someone begins a negotiation by being overly formal or even threatening. It can sometimes work, but it does not put the other party in a state where they want to help you.

On the flipside, being willing to state your why and being transparent about your situation will allow you to have a more reasonable conversation with the other party. There is a time to be firm, but 80% of success in negotiating comes from being willing to make the ask and having a good why.

Conclusion

If you feel stuck financially and have started to explore options to increase your income, negotiating well can help you find success along the way.

You can get creative on what you negotiate on. Often, the rules of life are not as fixed as they seem. At any step of your journey towards financial independence, you can ask yourself, “Can this step be negotiated?” Sometimes the answer will be no. But if you start looking, you will find more opportunity.

By willing to have this uncomfortable conversation from time to time, you can create more opportunity for yourself.