Alex Hormozi - How to get what you want every time
The speaker shares five negotiation tactics learned from real-world experience and mentors, not books. These tactics apply to employees, vendors, and partners in various business contexts. The first tactic is understanding BATNA (Best Alternative to a Negotiated Agreement), which provides leverage by knowing your alternatives. This concept is supported by research from Harvard and London Business School, showing that negotiators with strong alternatives set higher aspirations and achieve better outcomes. The speaker illustrates this with a personal example of negotiating a house purchase, emphasizing the power of not needing the deal.
The second tactic is anchoring, where the first number set in a negotiation influences the entire process. The speaker advises setting a high anchor to shift negotiation increments favorably. The third tactic involves presenting multiple equivalent simultaneous offers (MESOs) to understand the other party's priorities and find mutually beneficial solutions. This approach is backed by research from the Journal of Personality and Social Psychology. The fourth tactic is reciprocity, which is effective in cultures where it is valued. The speaker suggests breaking down offers into multiple components to trade concessions advantageously. Finally, framing is crucial, especially for employees and vendors, to position offers as investments rather than costs, enhancing perceived value and negotiation power.
Key Points:
- Understand and leverage BATNA to gain negotiation power.
- Use anchoring to set favorable negotiation terms.
- Present multiple equivalent offers to uncover priorities.
- Utilize reciprocity in cultures where it is valued.
- Frame offers as investments to enhance perceived value.
Details:
1. 🚀 Introduction to Strategic Negotiation
- The speaker has extensive experience in acquiring and scaling businesses for acquisition.com.
- Five effective negotiation tactics are highlighted based on real-world experience rather than theoretical knowledge.
- Insights were gained from mentors and practical, real-world applications rather than books.
- The tactics to be discussed include anchoring offers, understanding leverage, establishing walk-away points, managing emotional responses, and creating win-win scenarios.
2. 🔍 The Power of BATNA
- Most small tactics don't actually drive significant results, but the five tactics discussed have successfully closed deals and improved negotiating positions.
- The three contexts for applying these negotiation skills are with employees (both as an employee and as an employer), with vendors (both as a vendor and as a customer), and with partners (in situations like mergers and acquisitions or investments).
- Even if you do not own a business, these negotiation strategies are applicable as everyone negotiates either as an employee or in personal vendor interactions.
- The principle emphasized is that outcomes are determined by negotiation skills rather than deservingness.
- Concrete examples of applying BATNA include negotiating a higher salary as an employee by knowing alternative job offers, or as a business owner, having alternative vendors to ensure better terms.
- In mergers or acquisitions, having alternative partners or investment options can dramatically improve the negotiating position and final agreement terms.
3. 📈 Real-World Negotiation Tactics
- Understanding and establishing a strong BATNA (Best Alternative to a Negotiated Agreement) can significantly enhance leverage in negotiations. Studies from Harvard Business School and London Business School indicate that negotiators aware of their alternatives tend to set higher aspirations and achieve better outcomes.
- Practical application of BATNA includes real estate negotiations where knowing the lack of competition and having a satisfactory current situation provides strong leverage.
- In sales scenarios, owning viable, profitable businesses offers leverage by allowing the option not to sell, thus negotiating from a stronger position.
- When seeking employment, having a competing job offer can strengthen negotiation positions with current employers.
- For vendor negotiations, obtaining multiple bids before making a decision can provide educational insights and leverage for better terms.
- In partnerships and business acquisitions, having multiple offers or options allows for stronger negotiating positions, reducing dependency on any single deal.
- Anchoring in negotiations, the first number set, can significantly influence the negotiation process. A low anchor might risk leaving money on the table, while a high anchor can set favorable expectations.
- A psychological tactic involves reassuring the counterpart after a quick agreement, suggesting no better deal would have been possible, thereby maintaining goodwill and satisfaction.
4. 🎯 Mastering Anchoring Techniques
- Anchoring involves setting a high initial offer to influence negotiation dynamics, as people tend to adjust insufficiently from this starting point, according to Daniel Kahneman's research.
- An example from the construction industry shows that a high anchor, such as a $100,000 offer, can significantly shift negotiation increments.
- In real estate, starting with a $15 million offer and incrementally adjusting with favorable terms, such as $15.25 million with additional benefits, illustrates strategic anchoring.
- Negotiation dynamics can be altered by changing terms, such as offering cash or including furnishings, even if the price seems less favorable.
- Using Multiple Equivalent Simultaneous Offers (MESOs), as supported by the Journal of Personality and Social Psychology, increases the chances of finding mutually beneficial solutions by presenting different options with varied terms.
- A practical MESO example involves offering a range of plans, like a lower fee with a longer commitment or a higher fee with premium support, allowing the other party to choose based on priorities.
- Combining favorable elements from multiple offers can create a more advantageous deal, underscoring the importance of understanding and leveraging negotiation elements effectively.
5. 🤝 Crafting Multiple Offers and Reciprocity
- Asking for multiple deal versions allows you to select and combine elements that are meaningful to you, potentially getting more of what you want.
- Reciprocity is effective in persuasion, but its impact varies by culture; in cultures where it's the norm, it can be leveraged for better negotiation outcomes.
- The perceived value of reciprocal actions can differ widely, so it's important to align concessions in a way that remains advantageous.
- Breaking deals into multiple pieces allows for more negotiation flexibility, as more variables enable better 'horse trading.'
- Example given: In real estate, using variables such as financing options, closing period, and inclusion of furniture can enhance negotiation flexibility.
- Consider all possible variables in a deal, like speed, price, risk, and ease, to offer more compelling propositions.
- Having a comprehensive list of variables, such as an 80-item deal sheet, enhances negotiation power by providing more flexibility.
- Multiple simultaneous offers can be used strategically to anchor high or low and create psychological leverage.
- Using more variables in negotiations allows for effective reciprocity-based horse trading.