Why I Negotiate Everything But NOT With Service Businesses

When it comes to negotiating, it’s easy to fall on either side of the spectrum. I know some people who try and negotiate everything they buy. And I know others that just the thought of it makes them cringe. In my opinion, negotiation is part of the game. I like doing it –but I don’t blindly do it at all times. It depends on the circumstances.

(I wasn’t always this way – I used to negotiate absolutely everything – but that has changed over time. I’ll explain why.)

Here’s when I think you should negotiate and when you shouldn’t:

Why I negotiate all products I buy:

Products are inanimate objects and a change in price doesn’t correlate to a change in value. Here’s what I mean by that:

Let’s say I’m looking to buy a purse for my girlfriend. If the original price is $1,300 and I negotiate it down to $1,100 — what’s changed?

Other than how thick my wallet is, nothing, really. It’s still the same purse. It’s not a worse purse just because I paid less for it. The product itself doesn’t have a direct relationship with the price it’s sold at.

In the end, I’m negotiating for a thing. If I pay less, I’m still leaving with the same exact “thing” everyone else leaves with.

Let me give you another example:

I just moved to Miami from NYC and I’m currently apartment shopping here. When I go tour this place tomorrow, the real estate agent will give me a monthly rent of $4,000, for example.

Again, if I am able to reduce it to $3,000/month after negotiating with them — I will have saved $12,000 for the year. But, most importantly, it won’t come with any attached negative repercussions.

The apartment is still the same apartment whether I pay 3 or 4 grand. It will have the same bedrooms. The same kitchen. It will be on the same floor… I will just pay less for it.

And that’s why I negotiate as much as I can when it comes to products.

Is negotiating… good and fair?

I honestly love to negotiate. It’s really not even about the money that I save –even tho it’s obviously an added benefit.

I just have a passion for it –and I’ve seen that many entrepreneurs do too. I just enjoy the thrill of the hunt, the mental debate, the persuasion, even the emotional battle.

For example, I’ve always thought of a price tag as a “starting point” of a negotiation. It’s what the other part wants for it, not what they’ll accept for it. Big difference.

It’s a game. Can I go outside of my comfort zone, ask for a better price, and get away with it?

But… And this is a big but… 

I only do this with products and objects. I do not negotiate services (although I used to).

Why I do NOT negotiate with service businesses, anymore:

When it comes to services, this is a completely different story.

Why?

When you are paying someone to perform a service, you are not buying an inanimate product. You’re partnering with someone –a human being–and things get more complex. 

If you negotiate to pay less for a service, something has to give. Something else will be reduced along with the price.

It’s usually the quality of the service you get in return. But it also can be the speed of delivery or even the customer service and how responsive they are.

Just last year I commissioned a painting for my place in NYC. When the artist quoted me a price, I could’ve negotiated. And sure, I probably would’ve saved a few hundred bucks. But the result would not have been anywhere close to what it was.

Another negotiation example:

Let’s say you need to hire an accountant to file your taxes. His rate is $10,000 for this particular project, but you offer him $5,000.

For whatever reason, he decides to take it and you leave his office with a huge smile on your face. You just saved $5,000 –cool, right?

More than likely, however, he won’t go the extra mile for you. He’ll take longer to finish the project. He won’t respond quickly when you email him. And he won’t be there when you need to make a last minute change.

Maybe that even makes your tax savings smaller — so how much did you really save here?

Put yourself in their perspective:

If you run a service-based business, think about how you deal with people trying to negotiate your prices.

Where will you invest more of your time: on the client who’s paying you $100 or the one paying you $50…for the same service?

It’s human nature (and makes business sense) to make sure the largest sources of revenue are taken care of first.

So I apply that to myself as well. If I’m doing business with someone for a particular service, I don’t negotiate. If I don’t think it’s worth the value I’ll get, I don’t take it. And if I do, I move forward with it.

At the same time, if I accepted your price, I now can hold you to a higher standard. There’s no excuse to provide the value we agreed on.

You set the price. I didn’t. So I can expect the quality, customer service, speed and all these other elements to be at the level we agreed upon.

Negotiate for certain things, but not everything

1. I try to get a better deal when it comes to products because the price I pay doesn’t affect the value of what I get. The object –an iPhone, an apartment, a TV– is still the same. All that changed was how much it cost me.
2. But services are a different story. If you push for a price reduction, you’ll more than likely receive less of another variable –quality, customer service, speed, etc. Take the deal or don’t, but be very mindful when you negotiate.