How to Be a Great Negotiator

You don’t have to be tough. You don’t have to clever. You don’t have to be ruthless. You must understand that in the long run the most important things you negotiate – the things that will make you wealthy and improve your life – are not transactions but relationships.

With that in mind here are some tips

  • Figure out what value it has to you – what dollar range you would give it if the shoe were on the other foot. Never deviate from that range.
  • Make a judgment about the person you are making a deal with. Don’t negotiate with people you don’t trust.
  • Always get the other person to make the first offer.
  • Knowing beforehand what you think is fair, be nice but absolutely immovable.
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10 Dumb Ways to Start a Business (and Waste a Ton of Money at the Same Time)

Entrepreneurship is based on selling. You test the market with a product you think will sell well. If it does, you keep selling. If it doesn’t, you try something else.

This approach lent its name to my best-seller: Ready, Fire, Aim. The main idea is that to start and grow a small business you must develop a pragmatic, action-oriented mentality. Rather than spend too much time and money refining theoretical ideas, you develop a prototype quickly and then see if the market will buy it.

As I said in the book, for every business that fails because of poor planning there are a dozen that never get off the ground because of too much planning.

The Ready, Fire, Aim approach obviously doesn’t apply to surgical procedures and rocket science. But it will be very useful for 90 percent of the new-business ideas you are likely to come up with.

Want to start a business selling diamond-studded collars for kitty cats? Fine. There are two ways to go about that:

• You can spend most of your time and money manufacturing a line of such collars – and only after that is done, start to think about how you can sell it.

• You can make a single collar and go down to the local flea market or your neighborhood pet shop and see if you can find a customer for it.

Most people start businesses the first way. That’s why most businesses fail.

But with the Ready, Fire, Aim approach, you devote 80 percent of your initial resources to discovering an efficient way to sell the product. Once you have done that, you have found the key to successfully market it. With that key in your pocket, you don’t have to worry about all the other problems that will arise in the natural course of business. You won’t have to worry, because you will be able to create the one thing that can solve almost every business problem: cash flow.

Here, in a nutshell, is what I mean by Ready, Fire, Aim:

Ready: Get your product idea ready. Make it good enough to sell. Don’t worry about making it perfect. There will be time enough for that later.

Fire: Start selling it. Sell it every way you can. Test different offers. Test different ad copy. Test different media. Keep testing until you discover something that works. This is your Optimum Selling Strategy (OSS).

Aim: Expand your customer base by focusing on your OSS. As your customer base grows, develop business procedures to accommodate that growth. Hire the best people you can to manage your business. Discover, through “back-end” marketing tests, other products and services that your customers will buy. Use those discoveries to refine and perfect a fast-selling line. As this back-end business flushes cash into your company, invest a good deal of that cash into front-end marketing.

That is the cycle of a successful start-up venture.

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The Three P’s

Leadership in business should be about three things that begin with the letter P: prospects, products, and profitability.

Prospects are your customers-to-be. If you want your business to grow, you must focus your people’s attention on their needs.

Products are about your existing customers. If you want them to stay with you, you must constantly motivate your people to refine and upgrade your products. (Think Apple.)

Profitability is the metric by which you can best judge the health of any business. You must inspire your people to do what needs to be done to reach your financial goals.

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Confessions of a Serial Entrepreneur

Q: When did you decide to become an entrepreneur?

I think it was when I was 12 because that was the year that one was legally allowed to work for a salary. I got a job with my friend Brian in a car wash in my town. We worked Saturdays and Sundays, from nine till five, drying cars as they rolled out of the building. Since we were small we were assigned to clean and dry the inside windows. Brian did the front. I did the back. It was a very simple job, mindless really. But it was relentless. We were in and out of each car as soon as they rolled out, about one every thirty to sixty seconds. It was amazingly boring. I found myself looking up at the clock every eight or ten cars. Just three or four minutes had passed. On top of that the boss, an obese, cigar-chomping character straight out of central casting, would pillory us in order to impress his best customers. “What kind of job is that? Do it again!”

I think it was then that I thought, “I got to find a way to make money on my own.”

Brian and I eventually reached burnout. We refused to do interiors any more, we told the fat man. “We will only dry,” we announced. “And the only thing we will dry is the radio antennas.”

We were fired before the second hand of that clock made its next rotation.

I was happy to be free from the car wash but was very soon missing the $30 a week I had been making. So I came up with the idea of writing and publishing a booklet called “Excuses for the Amateur.” It was a helpful guide for my fellow classmates who were too dimwitted to come up with excuses more creative than, “The dog ate my homework.”

The excuses I listed were – and I can’t prove this since it is no longer extant – clever and mildly witty. I sold out the first edition and pocketed more than fifteen dollars, if I remember correctly. “This is what I want to do,” I thought. The next day I got hauled down to the principal’s office a personal critique of my booklet and business idea by Sister Bonecrusher herself.

In retrospect I can see that it incorporated much of what I did in my adult career: writing, direct marketing and sometimes pushing the envelope a bit too far.

Without the prospect of further editions, I put my publishing dreams on hold and got a paper route and some lawn cutting and snow shoveling jobs and before I knew it my weekly compensation as an independent operator exceeded my salaried position at the car wash.
I call this my annus mirabilis.

Q: In Ready, Fire, Aim you say that of all the forms of entrepreneurship the one you least like is retail. What sort of experiences did you have that formed that view?

A: Yes. Nearly every one. During high school I took weekend and evening jobs at a few local restaurants. I worked as a dishwasher, busboy and waiter. I worked hard – at least by the lax standards I kept at the time – but reasons unknown to me at the time I was never a standout employee. My employment as a waiter came to me thanks to my younger brother Andrew who had secured a waiting job at Scotty’s, a steakhouse about fifteen minutes walk from my house.

Scotty’s was
a traditional steakhouse in most respects. The waiters were all mature and experienced men, my brother and I being the sole exceptions. My brother was astutely condescending to the other waiters, which made them think him their equal. I was deferential, which made them realize I was just a kid who had no right to be there. While I worked diligently, whispered criticisms reached Scotty.

Scotty, I should say, was a middle-aged Jew who had decided to speak with a Scottish accent and name the restaurant Scotty. The exit interview, as they call it these days, went something like this:

Mark, me boy. Sit ye down. I’ve something to tell ye.

What is it, Scotty?

I hate to tell ye this, lad, but I have to let ye go.

Let me go, Scotty? But why? I’ve always been on time. I’ve always worked hard. I’ve never dropped a tray.

Ah, don’t make me tell ye, lad.

Tell me!

Well, if ye want to know, I’ll tell ye.

Yes, please.

The truth is, me boy, you’re a hump!

A hump?
Yes, me boy. It’s a sad fact, but you’re a hump.

I never had the gumption to ask him what a hump was. I figured that the lesson – a lesson I’d already learned at least four times by then – was that I was not cut out to be an employee.

Q. That’s very funny. And I can see how that might have soured you on your potential as an employee, but what made you decide that the retail business itself was a bad business.

A: I don’t think it’s bad for everyone at all times. But I do think that it presents the entrepreneur with all sorts of unnecessary and difficult problems.

Q: For example?

A: For one thing it requires a great deal of expense getting started. You have to buy or put money down on a building. You have to outfit that building. You have to buy inventory. And so on. Even a small retail operation – say, a local camera shop – will set you back a hundred grand or more before you open the doors.

I’ve talked in some detail about this in several of the books I wrote (as Michael Masterson) but the kind of entrepreneurial business I like is one that allows you to test the business idea as quickly and cheaply as possible. You can do this easily if you are selling products online. You can also do this in almost any sort of personal service business. But you can’t do that in retail. You have to risk a whole lot of money before you have any idea if the basic business proposition is valid.

Another thing I don’t like about retail – at least from the entrepreneur’s point of view – is that it becomes a ball and chain. Retail businesses generally rely on inexpensive and inexperienced employees to make profits. And good retail managers are few and far between. This means that despite your best efforts you can almost never get away from the business. You must be there – at least a few hours a day – every day the damn business is open.

There are other reasons I don’t like retail. Any would-be entrepreneur contemplating a retail business should read chapter X of Ready, Fire, Aim before taking the plunge.

Q: But surely you acknowledge that some retail businesses make their owners very wealthy. McDonald’s, for example. Or the Gap.

A: That is true but those are not really retail businesses, at least in the conventional sense. They are franchises. Those businesses work on a very different model. You build one store that works and you replicate it over and over again. You make money by selling the stores to others.

Q: Did you ever have an experience with a retail business that worked?

A: Yes. Several. One in particular is a painful memory because I had the chance to be an owner but demurred. It was in 1972. A close friend of mine, Michael, had an opportunity to open up a rock and roll club in Freeport, Long Island. Michael and his partner (who could have been Scotty reincarnated) bought an old bar on Merrick Road. The previous bar had been a “bucket of blood” as they called it, a gin joint for alcoholics and bikers. Mike asked me to help him renovate the building. By that time I had done a lot of work as a freelance carpenter, so I was able to help him design and build out the club into something that college kids would like. Mike gave me the option to be paid for my work or trade it for sweat equity. I chickened out and opted for the cash. It eventually became one of the largest rock and roll clubs on the island. We had national acts like Richie Havens and The Ramones.

Q: What did that tell you?

A: Sweat equity is a very good deal if you (a) believe in the concept and (b) can afford it.

Q: So it wasn’t a total loss?

A: Not at all. I learned a valuable lesson and Mike gave me a job as a bouncer. That was how I met my wife. So I have The Right Track Inn to thank for my marriage.

Q: You mentioned that your first experience in publishing was when you were twelve years old. What was your next experience?

A: I did some publishing during my stint as a Peace Corps volunteer in Chad, in Africa, from 1975 to 1977. I was assigned to teach English literature and philosophy at the University of Chad. The Peace Corps director at the time asked me to write and publish a newsletter for the in-country volunteers. I did that and enjoyed it. It was also during that period that I wrote a book in which I attempted to document some stories and songs that were kept alive by an oral tradition. That book was never published but it gave me a taste for writing books.

After I got back I responded to an advertisement I saw in some Peace Corps publication for an editorial position in Washington, D.C., writing and editing a newsletter called African Business & Trade. I got the job and spent a bit more than four years in Washington, teaching freshman at Catholic University introductory literature courses, working as an editor during the day and attending PhD classes at night.

At first it was loads of fun being an actual journalist. I had no idea what I was doing but I was mentored by a very smart guy named Michael who taught me the importance of thinking about what I was writing before I wrote it. It is mildly embarrassing to admit it now, but I had managed to finish college and graduate school as an A student without ever thinking much about what I was writing.

But eventually the novelty of writing about business wore off. One day I was writing my umpteenth article on countertrade in Nigeria when I fell asleep at the typewriter. When I woke up a moment later I discovered I had finished the paragraph in my sleep.

Q: You jest, of course.

A: No. I swear, it happened. I knew then that I had to get out of the slave-writing side of the business.

Q: So what did you do?

A: Michael had left a few weeks before then. My boss, Leo Welt, was searching for a replacement. I walked into his office and told him that I could do Michael’s job at my current salary. I have no idea why, but he accepted my offer and I became publisher.

Q: How did that go?

A: For me it was a great experience. I had to learn what the publishing business was all about. It turned out it was much more about selling ideas than it was about dutifully researching news and writing articles.

Q: So you became a marketer?

A: A very bad marketer. With Michael gone, I had no one to mentor me. Leo was too busy with his other, more successful businesses. I had to figure out how to sell these newsletters on my own. I did the best I could for the year I was there but I’m sorry to admit that I never figured it out during my tenure.

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Three Ways to Get Rich

Recently,  I watched Michael Moore’s documentary “Capitalism: A Love Story”. As always with his films, I found it to be entertaining propaganda.

One of his primary arguments is that the rich have duped “the rest of us” (Moore brilliantly aligns himself with the workingman) into believing in capitalism by spreading the myth that anyone in America can become rich.

It’s a wonderful irony. Here is a guy, the son of an autoworker from Flint, Michigan, who gets rich in America through hard work and initiative… and then makes a movie based on the premise that you can’t do that.

The truth, as Moore sees it, is that the only power the poor have over their financial future is to vote in social democracy — where the “system” works to put more money in the pockets of the working and middle classes.  (Though, as history has proven, that doesn’t usually happen.)

The reason socialists have a problem with capitalism is that it cannot make everyone wealthy. And that’s true. I like the idea of making the world a richer place. But I know from experience that it can be done only one person at a time.

And this brings us to the question Moore raises in his film: Is it possible for an ordinary person — without special contacts or resources — to become wealthy in America today?

I’ve been studying that question since I started writing about wealth building 10 years ago. And it’s clear to me that ordinary, unconnected, wage-earning Americans do it all the time.

I’ve mentored at least a dozen people who started out at the bottom and are now multimillionaires. So Moore’s premise, I’m saying, is bullshit. You can get wealthy in America. And there are three ways to do it:

  1. You can get wealthy by scrimping and saving.
  2. You can get wealthy by hoping and praying.
  3. You can get wealthy by earning and investing.

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The Economics of Customer Service

I once “fired” a client – let’s call him Jerry – who had paid me more than a million dollars and wanted to keep on paying me more than 20 grand a month. In every aspect but one our relationship was terrific. He was fun to work with. He was a natural-born salesman. And he was a quick study.

The only trouble: He didn’t believe in “customer service.”

Jerry’s business grew because of his management and marketing skills. He kept the overhead low and created compelling advertising campaigns that sold his products at deeply discounted prices.

But he had no interest in getting to know his customers or in helping them in any meaningful way. To him they were an objective means to a profitable end. In fact, he had a sort of disdain for them – as if he felt they were fools for responding to his offers.

Another thing that bothered me was that his products were inexpensively produced (they had to be because of his discounted pricing) and, thus, relatively inferior in quality.

I tried to convince him that this may have been a valid approach when he was breaking into the market – but he had to gradually improve his products if he wanted to be successful over time.

“Consumers are very aware of price,” I told him. “But most customers are looking for long-term relationships with the people they buy from. They may give your product a try because of its low price, but they won’t stay with you unless they are happy with its quality.”

He didn’t get that.

So I said, “Think about all the purchases you’ve made in your life. I’m sure you shopped price when, for example, you went looking for a new car. But I’ll bet a year or two later, though you may have remembered what you paid for the car… what really mattered to you was how well it held up. And how well the dealer treated you.”

He laughed at that. “Maybe. But I’m still always concerned about price.”

Then I reminded him of Joey, the kid he’d hired to work on his phone system. He hired Joey because he was willing to work for $20 an hour, while more experienced techies were charging three times that much. “You were happy with Joey when he started. But when it looked like it would take forever for him to get the job done, you fired him and hired someone more expensive.”

He gave me that. But I couldn’t get him to budge on the customer service issue. Meanwhile, the market he was in was getting more competitive. Product and service quality overall was improving. But not his.

I could see the writing on the wall. And that’s when I “fired” him.

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Balancing Act

Last week I gave you my formula for making a ton of money without compromising your values. But that doesn’t mean everything will be smooth and easy. You will still have lots of trouble giving time to your other priorities — to your health, to your family and friends, and to your hobbies.

My business life got much better in 1993 when I started to focus on long-term profitability and quality. But I wasn’t able to master my time and get all my other personal goals accomplished until I started writing about personal achievement. That forced me to rethink everything I was doing. And after several years of trying different time-management programs, I finally arrived at a system that allowed me to get everything done that I had neglected for the previous 30 years.

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The Unexpected Side Effects of Making Money (and How to Avoid Them)

My life changed dramatically and immediately when, in 1982, I decided to make “getting rich” my number one goal.

Within a few weeks of that decision, I convinced my boss to raise my compensation from $35,000 to $75,000. A year later, I was a bona-fide millionaire.

My status changed too — from just another good employee to a junior partner and employer of hundreds. This made me more confident. And that confidence had a noticeable effect on everyone I dealt with. They took my opinions more seriously. They gave me more respect. Most memorably, my lifestyle changed. Instead of eking out a modest living, paycheck to paycheck, I was able to buy a car without asking how much it cost.

But making this change happen had two negative consequences:

1. I gave up thousands of hours of good times with friends and family.

2. I did a few things I wish I hadn’t.

When I set that goal, I knew there were more important things in life than money. But I suspected that I would be more likely to achieve it if I made it my number one priority. That turned out to be terribly true. There is enormous power that comes from saying “I will put this goal above all others.” It is impossible to understand that power until you have experienced it.

Most people won’t even dare to try. And maybe that is because most people have more sense than I had back then.

I didn’t recognize how monomaniacal I would become. I didn’t anticipate how willing I would be to put my family second. Most of all, I didn’t realize that I would be making some ethical concessions along the way. When my partner and I were accused of misleading advertising, I was actually shocked. All of our copy had been run by lawyers. It was accurate to the letter of the law. How could they call it misleading?

Because some of it was.

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Winner Take All? The Yin and Yang of Negotiating

Sid had done it. He had convinced the IRS agent to forgive the mistake my partner Joel and I had made. He had spent three weeks with the guy, working mornings, golfing with him in the afternoon, and taking him out to dinner.

If the IRS had stuck to their ridiculous position, it would have cost us $10 million. But Sid’s logic and diligence and charm had persuaded one of its bulldogs to do the right thing.

A month later, Sid’s bill crossed my desk. It was for $85,000. “That’s odd,” I thought. “I could have sworn Sid was billing us by the hour.”

Had he done so, the bill would probably not have exceeded $15,000. Still, $85,000 was a small price to pay for the service he had provided. I signed the invoice and sent it on to Joel.

The next day, Joel called me into his office.

“You saw his bill.”

“Yes, I signed it.”

“I saw that. But you know he was supposed to bill us by the hour.”

“Yes, I know. But what he did was worth a lot more than eighty-five grand.”

“Maybe so, but that wasn’t our deal.”

I shrugged.

“We have to bring him in and negotiate the amount.”

“Okay.”

“But we have to plan this thing. We have to rehearse.”

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Superstars and Thoroughbreds

There is nothing that will change your business faster than getting a superstar to work for you. A superstar is someone who comes with his own high-powered battery pack fueled by nothing more than the desire to be your best performer.

Finding them takes work. Lots of work. You have to sift through a hundred wannabes to find a true superstar.

Hiring them is easy if you show them that you recognize their potential. Give them base compensation that is slightly better than industry standard and performance compensation that can make them rich. The most important thing a superstar wants in his job is the authority and tools to accomplish his goals.

Make sure, in hiring him, that he has what he needs.

Managing the superstar takes skill and patience. Superstars are like great thoroughbreds. They need to be well fed, shod, and cared for to be at their best. But they also need a lot of exercise and a good, lightweight jockey to steer them now and then.

And finally this: When your thoroughbred fails to win the race, change the jockey… don’t kill the horse.

 

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