The Vest Pocket Consultant:

The place to go to make your small business grow

By Rosalind Resnick

True confession: My favorite sport is haggling.

Let me explain. When you go to the Gap to buy a sweater, you walk through the store, pick out what you like, try it on and bring it to the cash register to check out. The salesclerk wraps up your purchase, runs your credit card and sends you on your way. No challenge there.

Compare that to the thrill of haggling. Whether you’re in a Moroccan bazaar or a jewelry store in Shanghai, paying retail is not an option. First you pick out a leather handbag or a necklace that you like. Then you ask how much it costs. The shopkeeper quotes you a price that’s five to 10 times what you know the product is worth. You turn around and walk out in disgust. The shopkeeper chases after you. You tell him you’ll be back after lunch, that you need to look around. He offers you a deep discount if you’ll come back to his shop right now. This time, he offers you a much better price. Two hours later, you stagger out of his store with your trophy, congratulating yourself on bagging the steal of the century.

Here in New York, I don’t get to haggle on a daily basis–for bags and jewelry, that is. But as an entrepreneur and real estate investor, I deal with a lot of lawyers, contractors, plumbers and electricians who give me bids that I consider more of a starting point for negotiation than an actual price.

That’s where my haggling skills come in handy.

For example,

1. I tell the vendor that I’d love to hire him immediately but that I need to get some competitive bids. There’s nothing that makes a service provider drop his price like the possibility that he won’t get the job at all–especially in this economy. When vendors compete, I win.

2. I do the math to figure out the vendor’s profit margin. When it comes to working with service providers (white collar or blue), the biggest cost is generally labor. If you can figure out how long the job will take and how much the workers will be paid per hour or day to do it, you can generally figure out how much profit the contractor has added onto his bid and make him sharpen his pencil accordingly.

3. I mentally prepare myself to walk away. In any negotiation, the first person to walk from the table wins. Never let any contractor or service provider become so indispensable that he can hold you for ransom. Always have a Plan B, Plan C, etc.

The bottom line: Haggling can be fun, but it’s also serious business. And once you master it, you’ll never pay retail again.

This entry was posted on Monday, November 2nd, 2009 at 10:34 am and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.