Everything in life is negotiable. Negotiations can be extremely difficult, but in my career as a negotiator, I’ve come to realize that there’s only 1 rule that really matters. It’s simple and every one should start using it right now to get what they deserve.
Apart from the IRS…
In my previous position at a Fortune 500 Oil & Gas company, as a supply chain professional, negotiation was my job. In a few years, I have negotiated over 150M$ worth of deals and I can say that I’ve learned a few things on the topic.
Several months ago, when my friend Fervent Finance wrote an article on how Anything is Negotiable and there has been some great feedback in the comments. Indeed, apart from what you owe to the IRS, everything else from your internet access to your next car can be negotiated.
So I knew I had to get a negotiation going and document it for you readers!
But most importantly, I wanted to share the #1 reason why negotiations work. There are thousands of techniques you can use, but they aren’t worth anything unless this 1 condition is met.
Why you can negotiate anything
When 2 parties negotiate, the basic principle is that they agree to make a compromise in order to reach an agreement. Put another way, the cost of making compromises is less than the cost of not doing the deal.
(maybe that’s worth reading a second time because this is very important)
Put this way, most things can actually be negotiated because NOT making a deal is always somewhat painful, if only because not reaching agreement would be a waste of time for both parties.
As a result, the easiest way to start a negotiation is to say “No”.
A simple disagreement. You do not agree with the price, you do not agree with the service, you do not agree with how long it takes to get it done. Whatever the reason, unless the person in front of you rejects you straight away with “I’m sorry, that’s just how it is”, you know you have an agreement to negotiate.
The easiest way to start a negotiation is to say “No”.
In particular dentist bills, which are good candidates for negotiation because:
- It’s generally known by the public to be expensive,
- Prices are difficult to compare,
- The industry tells you that you shouldn’t compromise on the cost of healthcare if you want the best,
- Your dentist knows you get FREE money from your employer in your HSA in addition to some pre-tax contributions, which makes it ‘cheaper’ money.
In short, your dentist is in a position of power to charge a premium.
So let’s see how it went and how much discount they eventually agreed on 🙂
There’s nothing like a free lunch
In August 2014, I went to see my dentist to get a free clean-up. The cleaning was free and in return they would make a diagnostic and recommendation if they would find anything. Of course, they did find a few things and offered a treatment that was fully covered by the insurance. Awesome. Everything was great until February this year.
A few months into the treatment, my dentist tells me I should now consider doing something about some cavities she had found earlier. For whatever reason, she found 8.
I could buy a plane ticket to Paris for that price
I start thinking that it’s been a while and maybe I need to listen to what they have to say.
First things first, I ask her how much she thinks it would cost. She checks with the insurance and tells me, as if it was no big deal, that it would probably be around 1300$ and hands me a pen to sign the treatment plan to ‘get this scheduled as soon as possible’.
Wow, wow, wow! Wait a minute!
What just happened? 1300$ for 8 fillings? I could buy a plane ticket to Paris for that price! And she’s expecting me to agree right away? Haha, let’s see how things went down.
Let the negotiation begin
First thing I said, of course, is that I can’t accept their proposal at that price (the “No”).
So I nicely explain that for such an amount, I will need time to think because really, I don’t have that kind of money. And I’ll also need a quote.
Because she did agree to generate a quote for me, at that point we have implicitly agreed that:
- I might go and do some research on how competitive this price is,
- There is a chance that I will not accept her proposal at that price.
Do your homework
Back to the office that afternoon, first thing I do is ask an older colleague for the price of fillings based on experience. She tells me that “yeah it’s expensive but it’s sounds reasonable”.
Crap. That’s not what I expected.
So I found 2 great resources online that actually give some indication of healthcare costs by ZIP code. There’s Fair Health Consumer and Health Care Blue Book. This is where the quote is so important because you can compare apples to apples with the normalized coding.
For example, the “Resin composite-2s, Posterior” is coded D2392 and was quoted at 254$, of which 88$ would be covered by the insurance and I’d pay the remaining 166$.
According to those 2 sites, the prices vary between 140$ and 255$. Good, I have some margin for negotiation.
1st Negotiation round – Next day – Over the phone
That is however, the price for 1 filling not for 8. Shouldn’t I get a discount for doing all of them? Doing 8 can’t be 8 times the cost of 1.
I call them up, explain that I’m still thinking about their quote and I’d like to see if they could extend a discount for doing them all together? Like a group discount? That’s a 2min conversation.
Two days later I receive an email where they extend to me a 300$ discount, which now brings my cost down to 1000$. A 25% discount for a 2min phone call. That’s better than Geico!
Of course, 1000$ is still a lot of money, so “I need to think about this a little longer”.
2nd Negotiation round – 2 months later – In person
Since I’m actually interested in doing this treatment, I go see them in person this time to explain how I need another discount. It goes like this:
“I would really like to do this treatment, but as you know I’m getting married this year and I don’t really have that kind of money right now. Could we do maybe the top 3 most important ones and do the rest for next year?”
Of course this isn’t their preferred solution so it’s now their turn to “think about it”.
No additional discount at this point.
3rd Negotiation round – 3 months later – In person
I go check in again to get an update on this quote. They do ask me again when I’ll do that and I explain again that I just don’t have the money. If they can give me the top3, I’ll check again. Otherwise, it will definitely have to be next year.
I guess they give up at that point. They’d much rather have some business than no business and they give me this crazy 75% discount, which brings the cost down to 250$!
Wow, wow, wow! Wait a minute!
What just happened? 250$ for 8 fillings? That’s 80% off the original quote. I can definitely agree to that 🙂
You get what you negotiate
You might have noticed that all those steps have one thing in common. A very simple common characteristics that helped drive the price down. It’s like poker: the stakes increase after each round.
First, the discount over the phone was due to a simple disagreement. Most people don’t feel comfortable in confrontational situations and the easiest way to defuse it is to give in. “You aren’t happy because you don’t like the color of the car?”, “No problem, let me see what I can do”.
It’s like poker: the stakes increase after each round
Second, the in-person visit adds stakes to the discussion. It is much more difficult to say “no” to someone you have standing in front of you than over email/phone. At the very least, they would have to agree to at least to think about the extra discount.
Third, the delayed response. In negotiations, time can be your best friend or your worse enemy. You need something urgent? You’re going to pay. But if you have time, you put the pressure on the other party to make a decision. At that stage, my dentist probably concluded that providing a heavily discounted service was less expensive than not having an agreement at all. At least they kept a happy customer.
The only rule that really matters in a negotiation is that there needs to be tension between the parties, there needs to be something at stake!
There is no negotiation without tension.
You aren’t seriously considering not buying that new couch? There is no tension for a potential lost sale. You wish to reduce the cost of your cable bill? You call the cancellation department, not the sales department.
I’m not telling you this story to brag about how successful this negotiation turned out to be. Honestly, I’ve been quite lucky with this one. No, I’m telling you this story because to manage your finances, you need to negotiate what you are paying for. It could be a car, a mortgage, a cable bill or all sorts of insurances. Investments returns compound over time but costs do as well. The first negotiation can be tough, but it is easier with time and you’ll eventually become good at it.
If you do not negotiate, you get what other people think you deserve. When you negotiate, you get a chance to tell them what you deserve.
Start with a “no”. It can go a long way.