SPI 540: How to Negotiate ANYTHING with Guest Host Mike Lander

SPI 540: How to Negotiate ANYTHING with Guest Host Mike Lander

Pat Flynn: You know what I’ve realized? I realized that I’ve been hogging the mic here. I’ve been on the mic for 500 plus episodes here on the podcast. And yeah, I share some airspace with some of the guests here every once in a while. But I’ve come to realize that there are so many talented, amazing teachers and storytellers within our community. And I wanted to pull some special members from the SPI Pro community to do something a little bit different here today. Typically, on Fridays, we publish a follow-up Friday episode. That’s a follow-up to the previously published episode on Wednesday. And I go a little bit deeper. But again, it’s usually just me. But I wanted to see what would happen if we shared the mic a little bit, and we had members of the community come on on Friday to share and teach a workshop to you.

Pat Flynn: So today, we have the absolute pleasure of bringing SPI Pro community member, Mike Lander, on the podcast today to teach us a little workshop on how to negotiate literally anything better. So, Mike, in fact, you might recognize him from the AskPat podcast. He was recently on the AskPat podcast. He helps people negotiate. He helps businesses get better deals and especially with procurement professionals. And here is Mike, because he’s going to teach you how to do this and he’s awesome. And he’s from the UK and he’s just amazing. And I hope that you’ll enjoy this.

Speaker 2: Welcome to the Smart Passive Income Podcast, where it’s all about working hard now so you can sit back and reap the benefits later. And now, your guest host. He asked his wife to marry him on their second date, and that was over 15 years ago. Mike Lander.

Mike Lander: Hey, thanks so much for inviting me to be part of this teaching Friday series, Pat. I’m delighted to be here. So a bit about me. I was a corporate worker until the age of 36. I acquired my first company in 2006, raised over $9 million of debt. I built a consultancy company in my past to $24 million of revenue, 120 consultants, over 5 million pound net profit. So a very successful business. And I also had the pleasure of acquiring a school and building a special needs school from scratch to 45 pupils and over a hundred staff. At one point, I thought I was a master of the universe, couldn’t do anything wrong. But of course, that’s absolutely not true. And I learned lots of really, really important lessons and probably as importantly, much more humility about I’ve messed up really badly a number of times, and then finally emerged scarred but alive and a much better person for it.

Mike Lander: But for this episode in particular, what’s really important for you as a listener is the following. I’m an ex-procurement director, so I was a buyer. I’ve bought over $600 million worth of goods and services and negotiated hundreds of deals. I was a partner at one of Europe’s largest procurement consultancies. And now, what I do is I work with suppliers, people like you, so sell side, as an advisor and practitioner on all things about negotiation and procurement when you’re dealing with your clients. You can find out more about me at piscari.com, P-I-S-C-A-R-I.com, or Mike Lander, L-A-N-D-E-R, on LinkedIn. What am I going to cover in this session? The main thing is I’m going to give you a simple-to-apply step-by-step guide to negotiate anything and get a better outcome every single time. I’m also going to give you tips and examples about when is a step-by-step negotiation guide critical, who goes first when negotiating price, and some of the common negotiating mistakes and how to avoid them.

Mike Lander: Towards the end of the session, I’ll tell you more about my Higgle Negotiation Workbook, which gives you all the templates and instructions outlined in this training session. You can buy this at higgle, H-I-G-G-L-E.piscari.com. That’s higgle.piscari.com. Let’s start with an example of what happens when negotiations go really badly wrong. So this story is about when the Boston Red Sox lost one of their star players, Jon Lester. Now, as you probably know, I’m from the UK. I know nothing about American baseball. However, the story is fascinating from a negotiation perspective. It was possibly the most important negotiation of the year to die-hard Boston Red Sox fans. The team completely botched their opening offer in renegotiations with its star pitch, Jon Lester. By tossing out a random low ball 70 million dollar over four year deal, the Sox offended Lester. This ultimately drove him into the arms of the Chicago Cubs and their six year, $155 million deal.

Mike Lander: The lesson here is preparation and understanding your counterparty’s goals and desires are critical in negotiations. So as this is a training episode, I thought I’d give you a little known fact about training. There’s something called the Ebbinghaus Forgetting Curve. And that theory states this: circuit 80% of most learning is lost within four to five days after training. However, regular reviews and action post-training increases retention significantly. So what I’d like you to do is this: as soon as you can after listening, sit down and write down your thoughts and learnings. Then take just one thing from this training and apply it in the next three days. Then put a reminder in your calendar for five days’ time. Go back to your notes and review them and then take one more action. I’ve got a great quote, which I love, which is “Tell me, and I forget. Teach me, and I may remember. Involve me, and I learn,” by Benjamin Franklin.

Mike Lander: So hopefully that will help you embed some of the learning out of this lesson. So to warm up, let’s make sure everyone’s on the same page. What is a negotiation? So I’ve got a bit of a quote, which is a bit laborious, but it will illustrate the point. And then I’ve got some symbolic points. “A series of interactions, i.e. discussions, emails, contract markups, between two or more parties aimed at reaching agreement that satisfies sufficiently the interest of all parties, usually based on objective criteria.” My word, there’s lots of words there. So why don’t we unpack that? So what is a negotiation? Well, there’s more than one party involved clearly, could be two, could be three parties, could be more. There are personal and business agendas at play. People are staking out their positions, i.e. their demands and people’s real interests.

Mike Lander: And by interests, I mean the motivations that sit behind people’s demands. Those interests are often hidden. And yeah, the negotiation can be transactional, i.e. low stakes, or much more strategic, i.e. high stakes. So let me give you an example. Examples are always great to illustrate the point. So what is a transactional negotiation? Let’s say you see a genie’s lamp in a bazaar. The vendor wants $50 for it. You like it, but you are absolutely outraged by the price and you offer $30. The vendor’s shocked and says, “It’s worth at least 45.” You walk away. They chase you down the street. You settle at $40. Clearly, you don’t need a framework or templates to negotiate this. However, here’s another example. You’ve picked for a big deal with a big brand. You’ve been told you are shortlisted and it’s worth a hundred thousand dollars per annum.

Mike Lander: You’ve also been told to negotiate with procurement to get the deal done. You’ve looked at the buyer on LinkedIn, and they’ve got 20 years of buying experience. And they’ve been trained in negotiation at some of the best places in the world. You definitely do need a framework and templates to negotiate this. So hopefully, you can see kind of the two extreme examples there. Let’s get straight into the step by step guide to negotiating better deals every time. So there are four simple steps I’ve got. Step one, the context and the goals. Write down the context of the negotiation and write down your goals and your counterparty’s goals on a bit of paper. Yes, you are guessing at your counterparty’s goals, but it’s a starting point. Then write down what are your criteria for a great deal? How would you judge if the deal you negotiate is a great deal? And then what’s your BATNA?

Mike Lander: Look it up online. A very, very well researched piece of work by a guy called William Ury, and I think Roger Fisher. BATNA, best alternative to a negotiated agreement. So I call that kind of like, that’s the first step. And then the second step is draw down the ideal time scales to complete the deal and the big milestones. So write out the time scales. Is it one month, two months, three months, four months? And then what are the milestones during that period? Step three, brainstorm all the negotiation variables and your ideal outcomes, plus your least acceptable outcome. Because it’s always more than just price. So you take all the variables and then you work out what’s your best outcome for that variable, and what’s your least acceptable outcome for that variable? Remember, at this point, you’ve not sat at the negotiating table and you’ve done three steps. Step four is engage with the counterparty, keep track of all the issues and concerns, address their issues.

Mike Lander: And then you might have to go around step 1, 2, 3, and 4 again, as you iterate. So in summary again, let me explain. Step one, what’s the context? What are your goals? What are their goals? What’s your criteria for a good deal? And what’s your BATNA? Step two, draw out the time scales and what the milestones are. Step three, brainstorm all the negotiation variables and your ideal outcome plus your least acceptable outcomes. And then step four, engage with your counterparty, keep track of all the issues, address them, and then come to an agreement. Let me give you an example of how it works. So step one, what’s the context? You’ve pitched a big deal to X, Y, Z Co., and they love it. Your goals, you want a three year contract at $150,000 per annum. Their goals, we’re guessing, but we think they want a 12 month deal, $120,000 with a six month break clause.

Mike Lander: What objective criteria could we use to agree a deal? Well, how about mutually agreed KPIs with bonuses? And what’s your BATNA? This is really important. When you are selling as a small to medium sized company, having a strong pipeline gives you the strength to walk away from bad deals. A weak pipeline means you’ve got to accept what’s in front of you, because you’ve got to pay the bills. Build a strong pipeline as a supplier is your best BATNA. Step two, time scales. So you want to close the negotiation within 10 weeks. Milestones, well, you think there’s probably commercial terms finalized as a milestone, terms and conditions marked up, another milestone, having an executed agreement, the final milestone. Now, we’re into step three. What are the variables and outcomes? Well, there’s price. And let’s say on price, your best outcome is $150,000. Your least acceptable outcome is $120,000, but there’s also other variables. There’s contract length. There’s KPIs. There’ll be others. And then step four, engage. Sit at the negotiating table and lay out your thinking. Issues, track their concerns and make sure they are addressed.

Mike Lander: So you can see there, very simple, four step process that you can go through in your own time to prepare ready for a more successful negotiation. These step by step instructions, examples, and templates, they’re all included in our Higgle Workbook, which you can buy. Again, just to give you the reference, it’s higgle.piscari.com. So I’d like to give you a quick piece of really valuable advice. I often get asked, “Who goes first when negotiating price?” There’s loads of research on this. Look online. But this is how it goes. When a seller makes the first offer, the final settlement price tends to be higher than when the buyer makes the first offer. Second point, more aggressive or extreme first offers lead to a better outcome for the person who made the offer. And thirdly, this works unless your counterparty has much more information than you. So basically, key messages, as the seller, you make the first offer on price, anchor high. So anchoring in negotiation is a key term. Again, look it up online. Go first with your price, anchor the price high.

Mike Lander: And then you’ll find that your counterparty negotiates around the anchor, but be careful. With very knowledgeable buyers, the anchor price has to be very realistic because they know their market. So let’s just talk about some of the biggest and most common negotiating mistakes and how you can avoid them. So mistake one, personalities getting in the way of the deal. And that’s really about the inability to separate the people from the problem. How do you avoid this? Take emotions out of the negotiation. Mistake two, viewing the negotiation as a fixed pie to be divided rather than an opportunity to increase the size of the pie. So how do you avoid this? Well, ask what else they need help with that’s within your sphere of expertise? So asking the why question all the time to try and expand the size of the pie.

Mike Lander: Mistake three, lack of preparation. How do you avoid this? Well, prepare thoroughly. Use a step by step process and templates. Mistake four, lack of objective criteria on which to base agreements. This is really, really common and where most negotiations go unstuck. How do you avoid it? Share your view of the objective criteria before you really start negotiations and agree those objective criteria. Mistake five, believing you have to make a decision in the room. You simply don’t. So avoid this by, set some ground rules at the start by making time out to reflect on what’s been discussed. So you have some timeout rules that said, “I want to walk away, sit and reflect, and I’ll come back to you.”

Mike Lander: So let’s finish with, there are three key messages I’d like to leave you with. Number one, leave emotions at the door when negotiating. Number two, anyone can 10X their negotiations if you prepare really well.

Mike Lander: And number three, great preparation requires a step by step guide and templates, just like the Higgle Framework. I really hope this has been interesting, practical, and most of all, enjoyable to listen to. And remember, as soon as you can after listening, write down what you’ve learned in your journal. Then take one thing and apply it within the next three days. And put a reminder in your calendar for five days’ time to go back to your notes and then take another action. Thanks very much for listening, and happy higgling.

Pat Flynn: All right, our first teaching Friday episode. And I want to know what you think. Let me know on Twitter or on Instagram @patflynn on both of those places, Twitter or Instagram. If you like these, we’re definitely going to do more. We’re going to feature members of SPI Pro and potentially others. There’s just so much talent that we’re finding within the community that we wanted to bring people on and have them teach you as well because we got to share the microphone, share the love and we can all learn together. So hope you enjoy that. Thank you so much, and I look forward to seeing you in the next episode. Cheers. Thanks for listening to the Smart Passive Income Podcast at smartpassiveincome.com. I’m your host, Pat Flynn. Our senior producer is Sara Jane Hess, our series producer is David Grabowski, and our executive producer is Matt Gartland. Sound editing by Duncan Brown. The Smart Passive Income Podcast is a production of SPI Media. We’ll catch you in the next session.