Welcome to The Game w/ Alex Hormozi, hosted by entrepreneur, founder, investor, author, public speaker, and content creator Alex Hormozi. On this podcast you’ll hear how to get more customers, make more profit per customer, how to keep them longer, and the many failures and lessons Alex has learned and will learn on his path from $100M to $1B in net worth.Wanna scale your business? Click here.Follow Alex Hormozi’s Socials:LinkedIn | Instagram | Facebook | YouTube | Twitter | Acquisition Mentioned in this episode:Get access to the free $100M Scaling Roadmap at www.acquisition.com/roadmap
Chapter 1: What are the five brutally effective negotiation tactics?
Over my career acquiring and scaling businesses for acquisition.com, I've done a lot of deals. I want to put the five most brutally effective tactics that I know in one video for you. A lot of these things I didn't actually learn from books. I learned them from mentors and actually seeing them do it and learning it like in the streets, in the real world.
Most itty bitty tactics like don't actually drive the needle, but these five actually have gotten deals done and improve my situation or standing in the deal. So let's dive in. There's three contexts that you're going to use each of these skills with. The first is with employees, and this goes both ways. If you're an employee trying to negotiate with an employer, then that applies.
Chapter 2: How can negotiation tactics be applied in different contexts?
The second is going to be vendors. Now, this also applies if you're a vendor who's dealing with customers. And then third, you've got what I would consider partners. This is when you do deals, M&A, things like that, investment. So these are kind of the three big vectors that all of this stuff applies to. So if you're like, I'm not sure if this will work for me,
You for sure, even if you don't have a business, you are an employee, and if you are an employee and you don't wanna use that, you certainly have vendors that come to your house and do things for you. This is the fruit of life. You have to negotiate, and you get what you negotiate, not what you deserve. That may sound not fair, but it's also the truth.
Number one, this is actually from a Harvard Business School thing that I learned from Sharan Sarvata. It's called BATNA. Now, I didn't know the fancy term for it, but it means best alternative to a negotiated agreement. So what does this really mean? Research has shown that having strong BATNA, basically a strong alternative, gives you significant leverage in negotiations.
Negotiation is all about leverage. London Business School did a study and they found that negotiators who know their alternatives set higher aspirations so they ask for more, they make more aggressive first offers, and they negotiate ultimately better outcomes. So your BATNA serves as almost like an anchor, a counter anchor that you have in the back of your mind of what you're negotiating with.
Chapter 3: What is BATNA and why is it important in negotiations?
It's kind of like a source of power. It's a decision standard that you only accept deals that are better than your best alternative. You can think about this in any setting. So if you're with a girl and you know that you can only date tens, if a seven comes along, you're like, Well, my alternative is a 10, so I'm only dealing with 10s.
If someone says, hey, I'll be willing to buy all of your inventory for 10 bucks a piece, and somebody else comes along and says, I'll do it for nine, instead of just saying no, you're like, I'll do it for 10.50, or I'll do it for 11. You can edge them up, but if you know that it's not gonna matter, then it doesn't matter. So I'll tell you something that recently happened.
I'm right now negotiating to buy a home. It's something that Layla wants and it's aggressive. We already have a home that we like a lot. I really like the house we have. My best alternative to buying this house is doing nothing and just enjoying the home that I already have.
They're in a terrible position because right now I know that they haven't had anyone else who's bid on the property because it's aggressively priced, I'll put it that way. It's them versus me and it's who wants it less. The reason bad is so important, because you're like, okay, I get that. How do I have a best alternative to a negotiated agreement?
You win negotiations, and I'm starting with this one, because I think it's all five of this, or six or ones that I'm going to show you are going to be so important. But this one is probably the greatest source of psychological power. And you do this before you sit down to the table. Me going to look at these homes, I know I don't have to buy the homes.
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Chapter 4: How does having alternatives influence negotiation outcomes?
When I was selling gym launch and prestige labs, I was like, I can just keep the businesses, and they'll just keep making me money. I don't need to sell them. And from negotiating for that position, you only want to sell when you don't want to sell. You want to buy when you don't want to buy because you have something else.
If you're looking for jobs as an employee, you want to negotiate when you already have another offer. So if you're going to your existing employer, get another offer and then negotiate with that. You can only do that so many times before you start losing goodwill. So you have to make sure that you're balancing that well.
If you're dealing with a vendor, then you're like, okay, I'm going to get multiple bids before I'm going to decide to work with you because these are what I'm considering. You'll get so educated from actually negotiating four, five, six of these vendor agreements that you'll learn other terms that other people include that you can use, which is a later strategy that I'll explain.
Getting multiple offers before you sit down increases your bet. So for sure, don't take the first offer because even if you have first offer within the negotiation with one guy, but then you have that offer compared to all the other offers you're ultimately going to get to do the work. On the vendor side, it's reversed. What's my best alternative? What are my other customers?
If I've got 20 other customers, I've got people banging on the door, it's a supply-demand thing. So I've got more demand for my services than I have supply. And so if you don't want it, don't worry, I've got another customer behind you. And so this is the leverage that we go back and forth in negotiations. And then finally, with partnerships, it's the same idea.
How can I get multiple offers from people wanting to buy my business? And to the same degree for me, if I'm trying to buy a business, then I want to not have to buy the business because I've got other businesses I'm looking at. So no matter what, all of this is won before you sit down at the table.
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Chapter 5: Why is it crucial to negotiate from a position of strength?
Right now, if you sit down and you need this deal and you have no other offers, all the little tactics that you can try, sure, you can try to do it, but the thing is that it's just trying to win at poker only on bluffing. It's a bad position to be in. I would rather have pocket aces. If you have other offers, there's two different ways of thinking about this.
So one is you can be overt about it and say, listen, this is the counteroffer. If you can beat the offer, beat it. If you can't, no worries, we don't want you to waste time. The other way is that you just have it in the back of your mind and then you just see what you can get. Because the thing is, somebody else is giving you a $10 offer.
If you say, hey, I've got a $10 offer, maybe this person will just beat it by $10.25. But if you have the confidence that you know you're going to sell the inventory no matter what for a profit, shoot for $11. Shoot for $12. Shoot for $15. Like you can shoot way higher because you know your plan B is not bad.
And so when you show it, they're just going to basically marginally edge it versus you having the confidence to basically swing big. Real quick, if you are a business owner and you are not growing as fast as you'd like, I'd like to give you a free gift.
So my team and I put together the $100 million Scaling Roadmap, which is basically 200 hours of us looking over all the portfolio companies we've had and what stages of growth they went through, and more importantly, where they got stuck and how they got past it.
And so we broke it into these 10 stages, and we made this little kind of quiz thing where if you put in your business information, it'll tell you where you're at, and the most important part for you, what to do for each of the functions of the business across product, marketing, sales, customer success, recruiting, IT, human resources, and finance.
And so no matter what you're struggling with, someone else has already struggled with it and solved it. And so I'd like to give you this thing absolutely free. You can go to acquisition.com forward slash roadmap, plug in your business information, And if you want us to actually help you de-contrain the business and you're trying to scale, we'd love to help you out on the Thank You Bay Juniors.
Book a call with my team and we will look into business, see if we can help. And if we can, we'll invite you out to Vegas and we'll do this in person live. So if that's cool, hit the link. Otherwise, enjoy the rest of the video. Now, the second is a big one. And a lot of negotiation books and courses and stuff talk about this. And people are like, hey, I'm not trying to anchor here.
It doesn't matter if you say I'm not trying to anchor here. It's an anchor. An anchor is the first number that is set in a negotiation. If you're like, hey, what do you think you'd be willing to do this for? And someone's like, ah, I was thinking I could maybe do it for $2,000. That's now the anchor. You want to get less than that? And you were like, shoot, I was hoping for $500.
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Chapter 6: What role does anchoring play in negotiations?
Real quick, guys, I have a special, special gift for you for being loyal listeners of the podcast. Layla and I spent probably an entire quarter putting together our scaling roadmap. It's breaking scaling into 10 stages and across all eight functions of the business.
So you've got marketing, you've got sales, you've got product, you've got customer success, you've got IT, you've got recruiting, you've got HR, you've got finance. And we show the problems that emerge at every level of scale and how to graduate to the next level. It's all free and you can get it personalized to you. So it's about 30-ish pages for each of the stages.
Once you answer the questions, it will tell you exactly where you're at and what you need to do to grow. It's about 14 hours of stuff, but it's narrowed down so that you only have to watch the part that's relevant to you, which will probably be about 90 minutes. And so if that's at all interesting, you can go to acquisition.com forward slash roadmap, R-O-A-D map, roadmap.
which is technically a worse second offer than my first offer. But the thing is that I moved the number up. And a lot of people are always way too fixated on the price and not enough on the terms. One is we anchor with our original price and also in the increments that we move in. This was something that took me actually a while to figure out. And so let me tell you a story about this one.
So one of my partners at my gym, way back in the day, I learned this from him. We had to get this big custom front desk built. So it had like multiple cutouts. We had multiple salespeople. Big, impressive thing. You get a custom built. The guy came out, they built this whole thing.
He was like, hey, when we went to do like the final inspection, we noticed that they had kind of like nicked a corner of it just from moving it around or whatever happened, right? It was a small nick, but it was noticeable. My partner goes to the guy and he says, hey, how much would it cost you to replace this?
And the guy, of course, because he doesn't want to rebuild the whole thing, he's, oh, my God, it would be a huge deal for us to have to, like, just this little thing. We'd have to go back to this job. We'd have to do this stuff. It would probably cost us $1,500 just to replace that. And he says, that sounds like a pretty good place to start it for a discount. Nasty.
I was like, oh, I'm gonna use that. If there's ever someone who messes something up, instead of saying, hey, what can you knock off the price, ask them what the big inconvenience would be for them, ascribe a price to it, and then they have a hard time backing down from that because they just said that's how much it would cost them to fix it.
Then you should probably discount us by that much because that was the size of the mess up. So you get them bidding for themselves and then you flip it. So number three, I learned this from a different mentor. They call it MISOs, but basically multiple equivalent simultaneous offers. So what does that mean? That means that I present offer A, offer B,
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Chapter 7: How can you effectively counter-offer in a negotiation?
And then option C is kind of like a pay as you go with slightly higher rates, but maximum flexibility, right? So all three options will give you similar overall value, but you might look at them and be like, I just want to know which one meets your needs better. From their answers, you'll be able to understand their motivations. Now, let me tell you some knowledge from the street.
If someone gives you multiple offers, if you're on the other side of the table, what I like to do is say, I like the best part of this one, and I like the best part of this one, and I like the best part of this one, and why don't we make an offer that is the best of all three? And I learned this from my friend Sharon. Guy's done more deals than anyone I know. I was like, ooh, that's good.
So the flip side is you could ask someone, hey, can you give me two or three versions of what this deal might look like? And then they come up with their versions of the deals. And then you say, great, I like this piece. How about we do option D? And what's nice about this is it also shows some active listing for you.
You countering with something like this or even taking two of the three components, two of those components might be meaningful for you and not for them. Again, because they put them in the different deals. You might find out that you can get more of the things that you want just by asking. So, number four, reciprocity.
Now, reciprocity is key in all sorts of persuasion, and I'll say this one caveat that I believe. Reciprocity only matters in cultures where reciprocity matters. There are cultures where reciprocity is not nearly as important. This is where sometimes when cultures mix, people take advantage of systems because that's not as important in the culture they came from.
And so the culture where the person is giving first in order, because they expect something back, the other culture will just take advantage. and be like, look at this idiot. He just gave me some free stuff. And so you have to make sure that basically you're within a culture or society that reciprocity is the norm.
But if it is the norm, there's huge amounts of things that you can use from a persuasion perspective. So the beauty with how we structure reciprocity is that people are more sensitive to the fact that they gave something and you give something. What's more difficult is ascribing the relative value. So let me give you an extreme example.
Let's say that I take someone's order from the counter and I bring it to the table where we're both eating lunch. The person might say, thank you for doing that. If I then said, hey, can you pick me up and drop me off from the airport tomorrow? I mean, I did get you your lunch yesterday.
The thing is that it poses, it looks like, it smells like reciprocity, but the value of those two concessions are wildly different. And so the idea is that we're trying to trade concessions in a way that is still advantageous to us.
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Chapter 8: What common mistakes do negotiators make?
We've got the actual price, obviously. On top of that, we have the risk associated. So who's going to be taking on more risk in this situation? And what are the different types of risk that someone's taking on? Then we have ease. How can we make this easier or harder for the other person?
For each of these components, you want to take whatever you're offering, whether it's an employee or whether it's a vendor or whether it's a deal, I want to look through each of these lenses and think, how can I have more variables at my disposal so that when it comes to the horse trading, I can make a small concession in ease and they only have two variables and I've got five.
And when I have five, I can give without changing my price and say, hey, I'll do 15 with ease. They'll come down from 17 to 16. And I say, cool, I'll do 15 with ease and risk. And then they come down from 16 to 15.5. And I say, cool, I'll do 15 with ease, risk, and speed.
And so when we do it like that, then all of a sudden it's like, I'm still keeping the reciprocity, but I just have more arrows in my quiver. When you're sitting down at the table, you want to think through all of these different variables that you have at your disposal.
For me, I have this big deal sheet that has 80 different things that I can change about a deal, so that when I go into the conversation, I have so many things that I can move
flexibly to make my offers more compelling without the unstated assumptions that people all have because things they're assuming the deal just says these two things then everything else is the way they want and for you you have 80 other variables you're like oh I can change this one I can change this one I can change this one and that allows you to stay in reciprocity with the other person that ultimately gets you a better deal long term so as we're thinking through this it's if we sit down at the table and we have
one or multiple other offers that we think are really compelling and interesting. And we use that as our psychological power so we can anchor super high and we anchor low in terms of our counters, right? Anchor high in terms of our initial, anchor low in terms of our counter offers.
And then we have multiple simultaneous offers that are either presented to us or that we can present to somebody else using more variables. And then horse trade with reciprocity so we can stay in the pocket but still more or less stay at the same initial offer, then we're probably going to increase the likelihood that we get a good deal done. Number five, is framing.
I would say this is most important, especially for employees and vendors, less so for partnership type or like M&A type stuff. But it can probably also be important here too, but I'll just give more use cases in these two right now. So if we're talking about framing, then how we position something is going to matter a lot.
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