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I define negotiation as the civilized process by which adults hit each other with clubs in a non uh uh uh what’s the word uh non Litigious environment?

Most of my experience lies on the financial side of negotiation. I wrote I used to do some speaking in college for recent graduates about negotiating your salary. I’ve coached a few of my colleagues and friends on negotiating their salary, humble brag, uh, because I want to. Uh I’ve helped one of my friends increase her annual salary by thirty thousand dollars over the last two years, and it involved us sending three emails across those two years. And I think it’s because again, I think this actually came from a listener question. I keep wanting to call them reader questions. A listener question about negotiation and leaving money on the table. And I think that one thing that people don’t recognize, whether it’s negotiating your salary as a full-time employee. We’re negotiating compensation as a consultant or a contractor or a freelancer is the number that you’re charging is not the only number in play. There’s actually three numbers in play, and you need to be aware of these three numbers to successfully negotiate. The first number is a value. This is the highest number in the spectrum. This is what the person hiring you and paying you money Puts the value of your work at. So it might be, you know, John Q, SaaS owner, is hiring you, Nick, and they’re like, oh man, A-B testing, like I value this at $10,000 a month because, you know, I earn $1,000 an hour and I don’t want to have to invest the time. And doing it myself. So it’s valuable to me at this level to hire you. That’s figure number one. Figure number two is the price. That’s the amount of money you’re charging. So that might be the salary you’re negotiating. Hey, I want $80,000 a year to do this. Or it’s hey, it’s three thousand dollars a month for my productized service. The third number is the cost, and that’s how much it costs you as the service provider to fulfill. What you’re promising to deliver. I’m not quite sure how cost figures into, well, actually, no, I do know. Cost figures in the employee spectrum. In terms of cost of living, if your cost of living is $5,000 a month and you’re negotiating a salary of $4,000 a month, you’re going to have a bad time because suddenly bad time. Suddenly, yeah, okay, great. I’m making $4,000 and spending $5,000. I cannot bail this boat out fast enough. But negotiation is successful when you’re aware of those three numbers and suddenly you’re able to say, like, okay, I can see the value here is higher than the price. So, I’ll be able to scope my price up so it’s more in line with the value. Or, oh, the price they’re offering is less than the cost. This isn’t a project I could work on. How can I raise the perceived value of my work so that I? Could then raise the price. But really, it’s those three levers that are in this relationship that you could affect and change Whether you’re negotiating as an employee or negotiating as a contractor or a consultant or a freelancer, that lets you maximize the amount of money you’re making and avoid leaving money on the table.

There’s a great concept called BATNA. Are you familiar with BATNA?

Yes, yeah, the best alternative to a negotiated agreement. It’s basically what you will do if you cannot negotiate an agreement. Let’s say you are applying for a job and you say, I refuse to accept less than $60,000. Well, if you have $10 in your bank account and rent is due in a week, what’s your alternative to negotiating an agreement? Well, A shitty one. Like you don’t have an alternative plan to follow up on. So it’s important to consider your batna when you’re negotiating anything because If this project goes south, if the negotiation does not work out well for you, what are you going to do instead? Is it, I’m going to go do some consulting? Oh, I have three months of savings. Oh, I have 16 more interviews scheduled over the next two weeks. I don’t really give a fig if I get this job or not. I’m feel fine to be aggressive. But understanding what your batna is Is incredibly important, I think, for any aspect of the negotiation process, since it lets you go nuclear on a client. If you show up and you’re like, okay, great, this is how I work together, this is what I expect. And the client’s like, no, we want you to do A, B, and C. And you’re like, well, no, I don’t do A, B, and C. If you have a waiting list as a consultant, or if you have a solid pipeline, or enough other clients, you could say, hey, you know what? I value this conversation. It does not feel like I’m. I’m a fit for your needs. We are not going to be able to work together. Your BATNA is: I’m going to walk away and work with my other clients. If you’re not in that privileged position of having a strong pipeline or money in the bank or existing clients, you have a weaker BATNA. Which means you aren’t able to negotiate as aggressively, or you can negotiate as aggressively, but if they push back, you can’t as easily walk away from the deal.

Yeah, and I think that’s an incredibly important part: that if you’re able to give the perception that you are in conversation with other parties or that you are wanted, you are in demand, you value your time. Well, that lets you project forward this perception of authority, which makes it harder for people to push back. So if you show up to a meeting Whether you’re attempting to be hired as a full-time employee or attempting to pick up a consulting contract, and you’re like, okay, great. Like, we’ve got 30 minutes. I have another call with another prospect after this. And I have five questions I’d like to ask to see if we’re going to be able to work together. Whoa, you’ve just like dropped a Nuclear bomb of hey, I know my shit, and I have a lot of other options, so I’m interviewing you, you aren’t interviewing me. One of the best when I was still doing full-time employment as an employee, one of the best tactics I started using was preparing a list of 5 to 15 questions that I would be asking the interviewing board whenever I went in to interview for a job. And it completely flipped the script on them. Because the power dynamic there is set up so you come in, they ask you questions, you answer, you leave, they make a decision. But what happens when you start asking questions of them is you get to engage in a dialogue. You get to learn more about their business and you put yourself on an equal footing with them as a peer. So often I’d walk into a job negotiate or a job interview or a job negotiation. I’ll say, like, well, tell me more about the processes here. Why do we do it this way? Why this and not that? The same types of questions I ask as a consultant when I’m interviewing a prospect. And it forces us to focus not on Am I qualified for this job? Is my value high enough? But is your problem expensive enough for you to want to pay for me to solve that problem for you? So I highly recommend Brennan Dunn refers to it as a Socratic questioning method. Adopting that, whether you’re going in for a full-time employee position or you are talking to prospects as a consultant, have questions at the ready. So, you’re able to ask them these questions, learn more about their problem, and then identify: well, okay, this is where the value is. Since often you might go in for a position, they’re like, Yeah, we got $40,000, that’s all we could afford for it. Well, There’s always money in a company. There’s money in some budget somewhere. If you’re able to ask questions and help them understand, well, hey, this problem, you think this is only costing you like $20,000 a year. It’s actually costing you $200,000 a year. And based on my experience, I’m going to be able to help you solve that. But my salary requirement starts at $150,000. How do we move forward? You suddenly handed them this exploding, ticking time bomb of, like, oh God, you’re losing money, and you’re the only one who could defuse it. That puts you in such a position of power, but you only get there. By being willing to ask questions about their business and not take the more passive role in that negotiation scenario.

Yes, entirely. Yeah. Yeah, you want to make yourself be a safe bet and you want to make yourself the valuable option or provide the most value as possible for The prospect or the client that you’re talking with. And yeah, the exact scenario you describe, if you’re able to come in and say, like, well, hey, your budget is X, but. I’m going to be, I cost twice as much that, but I’m going to make you cash flow positive on this investment in X days. For a smart business owner, that’s a no-brainer. Like, yeah, it’s more than they were expecting to pay, but Okay, this is a safe bet. And even if it doesn’t work out, I mean, there’s no guarantees that it will work out. At least you’re able to come in to flash back to a previous episode, come back in or come in as that expert and say, Look, I’ve worked on projects like this before. I understand the contingencies that are involved here, and this is my projection on how the project will move forward. I can’t guarantee that it’s going to look this way, but I am very confident that within 13 days, we will be cash flow positive. And that’s a very attractive position to put yourself in for a prospect.

Entirely. I’m just popping back to the Questions that the listener asked to see what else we should touch on here. There’s one question that they asked: how much money do you leave on the table by not negotiating properly? And that’s That’s a hard question to answer in specific because you’re both not all I wish my friend Keaton was here since he’d be able to explain this a lot better than I can, but since he has a PhD in economics, but Not all information in the negotiation process is public. So you’re both dealing with private information. The employer has a range of what they’re willing to pay for something. You have a range that you’re willing to accept if You propose a number, and that, like, let’s say you’re willing to pay between $10 and $20 for a burger from Kumas Corner. And I’m willing to sell you a burger for between $8 and $12 from Kuma’s Corner. Well, you’d be willing to pay up to 15, and I’d be willing to sell it for as low as 8. But if we both propose 10, well, we’re both happy and we both walk away from the deal saying, Okay, great, you bought a burger, I made money, we’re happy. Are we leaving money on the table there because you would have theoretically paid more or I would have theoretically paid less or sold it for less? I don’t know. I think because there’s hidden information involved there, it’s hard to know how much money you leave on the table by not negotiating properly. That said, and this draws on my experience negotiating and coaching people and negotiating for day jobs, so it’s biased in that direction. That said, The things you can do that will help you improve your ability to negotiate will be looking at market data wherever possible, looking at job boards, looking at Indeed, looking at glass doors, seeing for similar positions in your metro area or similar metro areas. What do people make for doing that work? Since when you show up for that job interview or when you show up for any sort of negotiation, if you’re able to present market data that backs up your ask for a higher amount of money, it’s that much more powerful. It’s a difference between saying, Nick, I would like $10,000. Or Nick, I would like $10,000 because the average salary for the average payment for a three-month engagement for A-B testing is this. I have a pedigree that looks like this. And I’m confident that we’ll be able to see these metrics in the next three months. Because you’re able to offer justification for the increase you’re asking for. It’s that much more likely to be accepted versus the counterpoint of, I would like more money because, please, and doing research, seeing, like, well, what do people pay out there for? A-B testing or outreach consultants or any sort of consultant. Understanding how much your colleagues are charging lets you figure out: well, do you want to price yourself at market, below market, or above market? There’s a strategic advantage to each one of those, depending on what your goal is as a Business, but you can’t make that decision until you understand what the market looks like. And then, well, are you leaving money on the table by not negotiating properly? I don’t know, maybe. But as long as you’re looking and seeing what the market data looks like, as long as you have a best alternative to a negotiated agreement in mind, as long as you have a number in mind where you’re like, no, fuck this, I’m going to flip the table and walk. Well, then it’s hard for you to leave money on the table. Could you always get more money? I’m a firm believer that, yes, yes, you can. Like, when we think about the salaries that companies pay employees, like maybe you’re getting paid $80,000 a year, you work at a 20-person company. They probably pay $80,000 a year for water that people throw away. Like, or they pay $80,000 a year for the copy machine that everybody hates. If you were like, excuse me, Mr. or Mrs. CEO, I’d like a 10% raise on my starting salary to start at $88,000. Is that $8,000 make or break for them? No, it’s a rounding hour. They lose that much money watering the fake plastic plants every month. To you, it could be the difference of a lifestyle where you’re like, eh, it’s good, or a lifestyle where you’re like, woo, I take two vacations to Hawaii a year. So I think you should always be willing to ask for more money because especially when you get to that point in the negotiation process where you’re brass tax, let’s talk cash. You both are so far down that process of negotiation that, well, for you to walk away would cost the company so much, and for the company to walk away would cost the company so much. So, by making that ask and saying, Well, hey, great. I’m so happy to provide value. We’re in agreement that I’d be bringing this to the company. My salary requirement is higher than your offer. Let’s start the conversation at this number. Well, the worst thing that happens is you negotiate down to the number they originally offered. They aren’t going to flip the table and walk away. They are going to say, like, okay, like, how do we find the budget for this? How do we make sure this works? Maybe you accept a number slightly lower than you intended. But higher than they originally offered, and everybody’s happy.

I have a funny story I want to tell. It was my third day job. And I was India. I had wanted to work for this company in Eugene for years. And I was interviewing with the chief marketing officer. And she was like, okay, we’ve got a pretty standard system we go through. Let me ask you a couple of questions just to get you into the system. What’s your current salary? And I’m like, I’m declining to answer that question. And she just was like, what? And I’m like, yeah, I don’t think what I’m currently earning. you know, makes sense or needs to reflect on this interview process. I’d much rather figure out how I could provide value to the company and then we discuss fair compensation. And she’s like, well, there’s a box here. I need to put a number in. I’m like, put one in. If we need to put a number in, let’s put the number one. Sure, my current salary is a dollar. But it was because I adopted that tactic because I wanted to focus the conversation on the value I’d be able to provide as an employee. And have us reach consensus on that before we talked about salary. Because if I said, hey, I’m making $48,000 a year, I guarantee they would have come back and said, we’re so excited to have you as an employee, Kai. We’re going to pay you. $52,000 a year. And it would have been a pittance of a raise. But instead, by saying, hey, you know what? I’m declining to answer that question. Let’s focus on the value. I was able to negotiate a much higher starting salary for myself than I would have otherwise.

This is all we know on negotiating. Choose your own adventure. Be lucky. Have fun.