by Norm Brodsky
At first, the shipping company’s owner didn’t get it. He hired a lawyer who threatened to take me to court. I cal ed the lawyer and made what I said was a onetime offer to settle the case for $3,500. I knew that I was in control. After al , I could always pay the ful $6,500, without incurring any additional expenses. Meanwhile, the shipping company had lost a good customer and run up a legal bil . We eventual y settled for the $3,500—and both walked away a little unhappy.
The Bottom Line
Point One: Listening is the most important part of any negotiation. Make sure you hear what is real y being said.
Point Two: Go in with no preconceptions, and always assume that the other side is smarter than you.
Point Three: Develop the habit of questioning what you see on the surface and digging to find out what’s real y going on.
Point Four: In an adversarial negotiation, the best deal is one that leaves both sides a little unhappy.
CHAPTER SEVEN
It Begins with a Sale
As I mentioned in the introduction, my father had various expressions that encapsulated his business philosophy and shaped mine. They were al great, but there was one in particular that became my al -time favorite and had the biggest impact on my approach to business: “You don’t ask, you don’t get.” Therein lies the secret to becoming a good salesperson.
Let me tel you a story. A few years ago, my wife, Elaine, and I attended a big dinner at which Al Gore—who was stil vice president then—was the guest of honor. There must have been a couple thousand people in the banquet hal , most of whom had come in hopes of meeting Gore. We had, too, but we were sitting at a table way off to one side, separated from the vice president by several hundred other guests and a contingent of security guards and Secret Service agents. After we finished the main course, I stood up from the table. “Where are you going?” Elaine asked.
“I’m going to speak to the vice president,” I said.
Now understand, there was no objective reason to believe I’d be able to get anywhere near the man. I had no better claim to his time than 1,999
other people, and the Secret Service wasn’t letting anybody through. But I didn’t think about the odds of succeeding. If I had, I probably wouldn’t have tried. I was just going by my father’s precept: you don’t ask, you don’t get.
I walked up to the vice president’s table. A security guard stopped me. “You can’t go there,” he said.
“Al’s a friend,” I said. “I just want to say hel o.” At that moment, the vice president looked over at me. I waved, and he waved back. “See, he’s waving at me,” I said. The guard turned around, saw Gore waving, and let me in.
I sat down next to the vice president and began to chat with him, at which point Elaine and my friend Erwin walked up to the guard. I said, “Mr.
Vice President, that’s my wife and a close friend of ours. Would you mind letting them in, too?”
He cal ed out to the security guard, “Those two people are OK.” So we al talked to the vice president for a few minutes, then shook his hand and left. Meanwhile, there were dozens of other couples lining up to see him, but the guard wouldn’t al ow any of them through.
I do that sort of thing al the time. A lot of people think it takes nerve, but nerve doesn’t enter the picture. You need nerve only when you’re afraid of being rejected. I have no fears and no expectations in those situations. My attitude is, I’l give it a shot and see what happens. If I get what I want, great. If not, wel , I can laugh, and smile, and walk away. The secret is an attitude, a philosophy that’s summed up in that expression, “You don’t ask, you don’t get.” It took me a long time to understand exactly what the phrase meant. Eventual y, I figured out that it was al about losing your fear of asking. You realize that you’l never get anything unless you ask for it, and so you might as wel try. In the process, you accept the fact that you’re going to get turned down fairly often. The surprise is that you get turned down a lot less frequently than you’d ever imagine.
So I developed certain habits that proved extremely valuable when I final y went into business. Among other things, my father’s principle helped me become a pretty good salesperson, since I wasn’t afraid of getting no for an answer. You always hear that salespeople have to overcome their fear of rejection, but the concept of rejection didn’t enter my mind. Even in doing cold-cal ing, I never felt as though I’d been rejected when I failed to make a sale. I’d just think, “That didn’t work. I’l have to try something else.” A no was nothing more than an opportunity that didn’t happen. I didn’t take it personal y, and I didn’t get upset.
That’s a tremendous advantage in business. I learned that, with such a mind-set, you can get more sales and negotiate better deals because you don’t stop asking. You don’t restrict yourself. Yes, you’re polite. You listen careful y. You try not to offend people by being overly aggressive. On the other hand, you don’t back off. You’re wil ing to keep going until the other party balks—which is the only way to be sure you’ve gone far enough.
What’s more, you’re not shy about enlisting other people to help you build your business. You have no qualms about going to friends, associates, suppliers, whoever, and asking for referrals and leads. Of course, you then have a responsibility to do the same for them, so you have to be a little careful. You don’t want to recommend people to a customer unless you have confidence that they’l do a good job. But I have great confidence in a lot of my col eagues, and they’ve always delivered for me. My three biggest customers have come from a person I exchanged leads with.
It’s real y my father I have to thank, however. He was the one who inculcated in me the habits and lessons that have al owed me to thrive in business.
What Business Are You ReallyIn?
Of course, there’s a little bit more to sel ing than simply asking for the sale, as important as that may be. There’s also the need to figure out what exactly you have that people might want to buy. That means figuring out what business you are real y in, which isn’t always obvious on the surface.
My friend Mike once told me a story that il ustrates the point beautiful y. He grew up on the south shore of Long Island, where his father owned a fish restaurant. The fish came from a company owned by a guy named Fred, who supplied numerous restaurants in the region. One day Mike was talking to Fred about his business. “You want to know why I’m successful?” Fred asked.
“Because you sel to a lot of restaurants?” Mike replied.
“No,” Fred said, “because I know what business I’m in.”
“You’re in the fish business,” Mike said.
“Not exactly,” said Fred. “I’m real y in the banking business. I make loans to restaurants in the form of fish. You see, a restaurant is a seasonal business. Like any good banker, I know when my customers are short of cash, and I know when they’re busy. I carry them during the slow periods and col ect after they’ve had a big week. They pay me not only for the fish but for the credit I extend to them. I build the cost of the credit into my price.”
Unconventional as Fred’s perspective on his business may seem, his experience is not unique. Companies often become successful for reasons that aren’t obvious at first glance, and smart entrepreneurs understand that. They know they have to think differently about the business in order to distinguish themselves from their competitors. It’s part of the process you go through to define your niche. Once you’ve determined what business you’re real y in, you can use that knowledge to build a solid customer base in even the most competitive markets.
My records storage business is a case in point. When I started it back in 1991, I thought I was getting into a typical service business. As I noted earlier, my strategy was to offer competitive prices and to bring customers in by promising great service, state-of-the-art technology, and easy access to our warehouse. At the time, there were very few records storage companies that could provide al three of those benefits.
I thought we had a dy
namite pitch, but it turned out to be a dud. We quickly discovered that our technology and location weren’t as important to customers as I thought. They cared mainly about getting a box back when they needed it. Where we stored it and how we kept track of it were our concerns, not theirs. As for service, who doesn’t promise great service? Until you’ve been in business for a while, moreover, you can’t offer testimonials or any other proof that your service is different from anybody else’s.
So we weren’t able to move people with the three levers we’d been counting on. On top of that, we found that most potential customers were already signed up to long-term contracts, and those contracts included a standard provision under which the customers would be charged a socal ed removal fee for every box they permanently removed from the storage company. In effect, customers agreed up front to pay a substantial bounty if they ever decided to switch suppliers. I had great confidence in our service, but those were huge obstacles. We couldn’t get potential customers to pay attention to us, I realized, unless we could offer them a way out of their contracts and a significantly lower price.
Now, normal y I don’t like competing on price. It’s a dangerous game. For openers, low price can connote poor quality. People wonder whether you can real y provide the benefits you’re promising and, if so, for how long. Competitors wil use your pricing against you, tel ing customers you’re fly-by-night and can’t survive. In fact, you may not be able to survive if your gross margins are too thin. By the time you realize that, it may be too late.
If customers have come to you only because you’re cheap, they’re likely to leave when you raise prices.
On the other hand, I have no qualms about offering a lower price than my competitors do if my costs are lower as wel . Not that I’d ever compete strictly on price—I’d also sel the quality of my service—but I don’t mind using a lower price to get my foot in the door, provided I have the kind of gross margins I need to be successful. So how could I get better gross margins than my competitors in the records storage business? I realized I had to look at the business differently. I had to ask myself, “What business am I real y in?”
The answer came to me out of the blue: real estate. We weren’t just storing records; we were renting space in our warehouse to boxes. And how do you get more rent out of a building? By fitting more rental spaces into it. If we could accommodate more boxes per square foot than our competitors, we could charge less per box and stil have better gross margins. So we found a warehouse with very high ceilings and put up racks that al owed us to make ful use of the space.
Meanwhile, I kept trying to think like a real estate person. I asked myself what I’d do if I had a brand-new office building in a cold market. How would I attract tenants? For one thing, I might offer rent concessions. If tenants signed a five-year lease, I might give them six months free. Or suppose a prospective tenant had a year left on its lease in another building. I might pay off the lease or offer the tenant a year’s free rent in my place. And what if the tenant had good credit but was short on cash? I might agree to build out the space and increase the rent to cover the cost of the build-out.
Those were al tactics I could use in the records storage business, I realized. I could treat the removal fees like build-out costs, for example. If a customer wanted to switch to us, I might work out a deal whereby we’d cover the removal fees at the other storage company and make it up later by charging higher rates per box. We started applying those techniques, and the business grew like crazy. Our competitors went wild. They told customers, “Brodsky’s nuts. He can’t survive. He won’t be around in two years.”
My response was to bring the customers to my warehouse. I’d say, “You’re probably wondering how we can offer you lower prices than anyone else.” They’d nod. “Wel , look at the height of our ceilings,” I’d say. “We get more than 150,000 boxes per 10,000 square feet. Our competitors get 40,000 or 50,000. Our warehouse holds three or four times as much as theirs. So I’m real y overcharging you.”
The customers would laugh and ask for a price break. I’d laugh and say, “No, that’s what we have to charge—because we provide so many other services....” Then I’d go on from there.
Thinking differently about our business turned out to be the key to our success. Just like Fred, the fish distributor, we thrived because we’d figured out what business we were real y in. Less than ten years later we had one of the largest independent records storage companies in the country. Of course, success brings its own problems. Many of our competitors eventual y adopted the same approach—building bigger warehouses, paying removal fees up front. We’d had our own little niche, defined by the way we looked at the business, and now it was gone. We and our competitors were al in the real estate business together.
Ask Norm
Dear Norm:
My partner, Jon, and I have a two-year-old technology start-up. Our problem is that neither one of us is a salesperson. Jon is an engineer, and I’m a systems analyst. I’d rather have dental surgery without Novocain than go out and sell. So we need a salesperson, but I’m worried about hiring someone who will give away the store. We offer a one-year, complete-satisfaction-or-your-money-back guarantee. If we wind up buying too much back, we’ll go out of business. With our reputation at stake, we can’t afford to go the gold-chains-red-sports-car route. How can we make sure we get the right type of salesperson?
Eric
Dear Eric:
You need to begin by recognizing that you are, in fact, the best salesperson for your product. You know it better than anyone else, and you have a passion for it. You probably have trouble making the initial contact with prospective customers. Fine. Hire someone to do that for you. Look for a personable individual who is good at cold-cal ing, turning up leads, and identifying prospects—and who can deal with the hardest part of sel ing, namely, rejection. Let that person bring you prospects who are pre qualified and ready to buy. You’l become the closer. That way, you’l have control over their expectations.
—Norm
A Niche in Time
That sort of thing is not unusual. Niches come and go, and—contrary to popular belief—most companies don’t start out in one. You general y discover the niche after you’ve launched the company, not before. It’s not uncommon, in fact, to find that the business you wind up in is not the business you thought you were going into—because you never know for sure how to make money in any business until you’ve actual y tried it. I’m talking about rol ing up your sleeves, heading into the market, and beginning to sel . Once you do that, funny things start to happen. You run into unexpected obstacles. You stumble across surprising opportunities. You may discover that your original plan was so far off, you have to come up with an entirely new approach.
That’s pretty much what happened to me with my first business, Perfect Courier. When I started out in 1979, I thought I was going into the messenger service business. It was a highly competitive industry at the time, with between 300 and 400 messenger companies in New York City alone. I quickly discovered that the only way I could count on making sales was to come in at a cheap price. The problem was, we couldn’t survive by competing on price, and I didn’t want to be in a low-margin business anyway. I realized I had to either find another path or get out.
Then, one day, I was pitching our service to the manager of a big advertising agency cal ed Scali McCabe Sloves, who wasn’t very receptive.
“We’re real y happy with the people we use now,” he said. “What can you do for us that they can’t do?”
“What problems do you have?” I asked.
“The only problem we have is in our accounting department,” he said. “The bil ing is a nightmare.”
“How’s that?” I asked.
“We have a heck of a time matching up the customers with the deliveries.”
Like many professional-service firms, Scali McCabe charged the cost of a pickup or a delivery back to the customer on whose behalf it was made. Whenever peop
le from the agency cal ed for a messenger, they were supposed to give the dispatcher an account code to note on the delivery ticket. The messenger company then bundled the tickets together and included them with the bil it sent to the agency every week. It was up to the agency’s accounting department to sort out the tickets and figure out the total charges for each account.
I asked to meet with the people in the accounting department, who were delighted to tel me about the system and al the headaches it engendered. I said, “Look, we can solve this problem for you. We’ve got a brand-new IBM-32 computer. Give me fifty of these delivery tickets, any fifty, and I’l show you what we can do.”
Those were al truthful statements. We had, in fact, acquired an IBM-32 computer. But whether we could use it to solve the charge-back problem, I had no idea. Remember, this was before the microcomputer revolution. We couldn’t just go out and buy the appropriate software. When we wanted our IBM-32 to perform a specific function, we had to have programs written especial y for us. The programmers I spoke to about this particular matter weren’t so sure they could produce what we needed. Nevertheless, I was determined to come up with a solution. I gave the fifty tickets to the best typist in our office and told her to create a bil from them, with the individual charges grouped according to the agency’s account codes. We must have done twenty versions before we got it just right. Then I took it to Scali McCabe’s accounting people.