Because everything is negotiable

What does every tech founder/entrepreneur want?

To receive a call from the Gates and Zuckerberg’s of the world which says,

“Hey, how you doing? Good? Listen, I want to buy your company.”

If you’re lucky enough to get that call, then you should know this — everything is negotiable.

Sabeer Bhatia, the founder of Hotmail was one such lucky guy. After 12 months of launching Hotmail, he got a call from Bill Gates.

Sabeer, a CA transplant from Bangalore, India had learned the value of haggling and bargaining (which sophisticated people call negotiation) in vegetable markets.

Microsoft flew Sabeer to Seattle and shut him in a conference room with a team of 12 negotiators.

They offered him $160 million for Hotmail. Sabeer refused. He countered with $700 million.

I don’t know what was going on in his mind and if that number even made sense. But one thing Sabeer said was this — “After all, in India, we haggle for everything from onions onwards.”

Hearing his offer, the negotiators screamed at him, insulted him, and stormed out of the room. They did everything short of assaulting him physically.

He didn’t budge. the negotiations were called off and he went home. His investors told him he shouldn’t expect more than $200 million. But Microsoft finally came back and coughed up $400 million to acquire Hotmail.

As Bob Compton said in his book [Blogging Through India](https://www.amzn.com/dp/1425978088), “Bill Gates’ eye teeth were floating in tea with that deal.”

To add to that, Sabeer said, shortly afterward, that if he’d waited a bit and gone for an IPO, he’d probably have $10 billion!

If there’s one thing you learn when growing up in India, it’s this — everything in life is negotiable.

Doesn’t matter if it’s your phone bill, the price of vegetables, the insurance, or the price of your car.

But the reason more people in the West don’t do it is that it a hit on your ego. Negotiation or haggling for something shows two things about you (not really, but that’s what you tell yourself):

• It tells people I cannot afford this

• I’d have to face embarrassment and rejection

So to strike a hard bargain, you need to keep your ego in check.

One of the best experiments I learned from Tim Ferris is to ask for 10% off at a coffee shop.

Nobody expects customers to ask that. And you’d probably be rejected. But that’s practice. Andy Seth once did this with high schoolers and the results were surprising — kids who asked for discounts at a coffee shop had such a self-esteem boost that they asked, “What’s next?”

Once we get comfortable asking what we want, all of a sudden, a new world of possibilities opens up. Plus, it’s good to prepare with these small experiments because none of us can go without negotiation — either in business or in life.

This way, when it comes to haggling for something with a lot more zeroes at the end, you’ll be comfortable and not budge, like Sabeer (you know, just in case Bill Gates gives you a call).

And remember, what’s the “market price” anyway? According to Economics 101, the market price is what you’re willing to pay for something and what somebody is willing to sell it for.

You don’t have to purchase anything at face value.

I’m not a master negotiator at all, but here are certain tricks of the trade I’ve observed as a kid born and brought up in India which works quite well.

There’s No Negotiation Without This

When it comes to negotiation, there’s one thing you cannot avoid — a BATNA

Always always have a BATNA. What’s that? Best Alternative To a Negotiated Agreement.

In other words, it’s your plan Z. If nothing works out, you have no problem walking out.

Having your BATNA with you is emotional support. When you feel things are going south, it can help you calm down and think, “It’s alright, I can walk away.”

If you can’t walk away, you have no leverage. Without leverage, there’s no negotiation.

If you don’t have it, then you’ll go through an emotional roller-coaster as soon as things heat up or don’t go according to your plan.

I found the best and one of the simplest examples of BATNAs in William Ury’s [Getting Past No](https://www.amzn.com/dp/0553371312/):

• If you’re negotiating for a raise, your BATNA can be a job with another company

• If you’re negotiating with a store owner, your BATNA can be another store down the street that is giving you a better deal

• If two nations are negotiating, the BATNA can be going to an International Tribunal.

As you can guess, using your BATNA costs you the relationship with that person in a lot of cases which is why you’re negotiating in the first place.

Once you identify your BATNA, do two more things:

• Boost it: For instance, when you’re getting a raise, don’t just say you can get another job, actually apply and get tangible job offers.

• Decide of you should negotiate at all: If your BATNA is really good, why negotiate at all? Negotiation consumes time and money — it’s better to avoid it if the BATNA is better than anything else you can get by negotiating.

Be Kind

At the end of the day, you’re here to do business. Whether you’re haggling for a vegetable at the farmer’s market or with a client, always be kind to them.

There’s no use in getting angry or shouting at them. This can be avoided if you’ve really thought about your BATNA or your leverage.

Use the Power of Bundling (or Unbundling)

I’ve been on the selling side of SaaS products. As salespeople, we bundle products and features together to raise the prices.

You see this with most SaaS companies. There’s usually a Free, Premium, and Enterprise plan. The reason we do this is that it’s easier to negotiate the entire package than individual items. When you play with the package, clients don’t nit-pick and question the value of every item/feature you sell.

If you’re on the buy side, try to unbundle and negotiate things separately. Since getting to the value of all the ingredients is difficult when they’re packaged together, you need to break them.

So, unbundle if you’re buying, bundle if you’re selling.

How to Get What You Want Before You Even Start

When the seller tells you a price, cringe and say “too high.”

You can also say something like “We’re not on the same plane here” or if it’s less professional, “Are you for real?”

Most salespeople will budge and lower the price so you can finally start talking.

Bob Compton writes in his book, “Don’t even start negotiating until the salesman has scratched through the initial price and lowered it at least twice. I found that simply staring in silence [at the pad of paper] for a long time would result in the vendor in cutting the price”

Go to the Balcony

Things can quickly get emotional in negotiations. And people react a lot without thinking.

Consider this example given by William Ury,

Husband: (thinking he is focused on the problem): Honey, we’ve got to do something about the house. It’s a mess. Wife (perceiving this as a personal attack): You don’t lift a finger! You don’t even do things you promise. Last night - Husband (interrupting): I know. I know. It’s just that - Wife (not listening): — you said you’d take out eh garbage. I had to do it this morning. Husband (trying to return to the problem): Don’t get defensive. I was just trying to point out that we’re both - Wife (not listening): And it was your turn to take the kids to school. Husband (reacting): Come on! I told you I had a breakfast meeting this morning. Wife (beginning to shout): Oh, so your time is more important than mine is it? I have a job too! I’m sick and tired of playing second fiddle in this band. Husband (beginning to shout): Give me a break! Who’s paying most of the bills around here?

You see, neither the husband’s interest in a clean house nor the wife’s interest in getting help is advanced with this exchange — all because of reactions.

There are three kinds of emotional reactions you should beware of:

• Giving in: You always feel guilty because you feel you could’ve had more

• Striking back: Basically “fighting fire with fire”

• Breaking off: You just break off the relationship with the person/company/client.

The solution? Go to the balcony, metaphorically. Distance yourself from your emotions and natural impulses.

Excuse yourself to make a phone call, go to the washroom, break for lunch, anything.

Take every opportunity you get to recollect yourself and keep your eyes on the prize.

The Takeaway

There’s one last thing I’ve learned about negotiating — you only get good with practice. Making deals and getting what you want is an art.

So try to think of three things you can negotiate right now. Your phone bill, credit card fees, cable connection, price of vegetables, or a latte at Starbucks.

Then pick up the phone or go out and do it.

Finally, let me know how it went!

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