The Psychological Power That Wins Every Negotiation Before You Sit Down | Ep 981

**Alex Hormozi** (0:00)
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 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 gonna 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. The second is gonna 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 want to use that, you certainly have vendors that come to your house and do things for you, like 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 Srirant Sarvatsa. 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. 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 ten, so I'm only dealing with tens. 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 now negotiating to buy a home. It's something that Leila 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 of the 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. When I was selling Jim Munch 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 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, the same idea. How can I get multiple offers from people wanting to buy my business? And 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 got other businesses I'm looking at. So no matter what, all of this is won before you sit down at the table. 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, 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 counter offer. If you can beat the offer, beat it. If you can't, no worries, we don't want 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 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 1025