The lesson that we can try to apply to the business and investment setting is to try to see the other party’s point of view and negotiate knowing their position. When I first started in public accounting after college I was enthusiastic to show my clients how to do their bookkeeping or accounting “properly”. When clients would bring in their records at the end of the year, I would patiently show them how to do good accounting to make their records “better”. What I discovered the following year was that their records were now an attempt to follow my rules, which they did not really understand. The result was a record system that now neither they nor I could understand. After one or two years I realized part of my training as an accountant was to help me figure out other accounting systems. Rather than try to teach my clients accounting, I needed to learn to understand their systems.
So how does this apply to how we do business? When we are doing business deals we should try to see the other person’s problems so that we can better negotiate our deals. Let’s say, for example, you have a store that sells many products, including widgets. You sell about 200 widgets per month and need to order some from your supplier. Widgets cost you about $20 each to buy so you only want to buy one month’s supply at a time. Your supplier says that if you only buy 200 units he will have to charge you $30 each. If you want to pay $20 each you will have to buy 1000 units. What do you do? Looking at your supplier’s problem you realize that he has a minimum set-up cost in time and materials every time he sets up to make a production run. This helps you to come up with arguments to help you negotiate. You can promise to buy 1000 units in the next five months if he will sell them to you for $20, giving him the option of doing the full run of 1000 and holding the inventory himself. Or you might tell him you have been a steady customer for several years and plan to continue to be a customer, showing him that you understand his problem and here is why he should give you the lower price. The point is, you see he has a problem and try to find a way that you both can be happy.
Whether buying a house, making an investment, or making a business decision, try to see what the other person’s problems are and see if you can make a proposal that solves some of his concerns. Many times you can accomplish this just with the words or attitude with which you negotiate, showing that you understand the problems, giving up no real cost to yourself. Looking at an issue from the opposing point of view can almost always help you to do better deals.
Loren L McCann, CPA, MS (Tax)