Scott Barnett & Associates Blog
Learning to Negotiate in the Real World

August 30, 2022
When I was in college and engaged in my first small business (buying and selling used cars), I learned several things. It was something I have always referred to as my shadow education and it was definitely matriculated at the school of hard knocks.
Here are four lessons about negotiating I learned early on that served as the foundation for whatever negotiating skills I have demonstrated throughout my career.
Lesson 1: Negotiate with Car Salesmen
The first real life lesson, and what caused me to start dealing cars, was when my Business Law professor told the class, "You want to learn about negotiating? Go down to Mile of Autos and trade your car at one of the dealerships. Work them all the way to signing the contract but then walk away. Do the same thing again down the street. Even do it a third time if it hasn't sunk in. You will learn a lot about negotiating, the market and life."

Of course, he was right. It is one thing to learn how to negotiate in a classroom. It is quite another to apply those skills to a real negotiation where you potentially have a lot to lose and you are also relying on soft skills and instincts to guide you through.
Lesson 2: Playing the Part
The Business Law professor's other piece of advice, which on the surface now feels outdated, was to buy the most expensive leather briefcase available (we used them in those days). Take the briefcase with us to job interviews, even if the only thing in it was that day's Wall Street Journal. In retrospect, perfect for the 80's.

While the briefcase may now feel like a relic of another era, the point that you dress and act the part to gain others' confidence, especially during negotiations, remains true.
Lesson 3: The Final Offer Isn't Always the Final Offer
The third lesson was when my brother went down to a used car dealer and bought a $3000 Buick and they completely screwed him. I went back down with him- he had fortunately told them he needed his brother's approval.

I bettered the deal by several hundred dollars by being a yeller. I was clearly channeling my passionate Scottish trader ancestors in some way. Besides playing the part of a screamer to improve the negotiations, I had also quickly sized up the situation and realized we had more of a hand than we were playing.
Lesson 4: If It's Too Good to Be True…
The fourth lesson was when I went down to a used car dealer in a rundown area of the city because I had seen an ad for a late model station wagon for a really great price.

When I called, the salesman had told me, "It's a cherry! A/C, stereo, upgrades, 3 forward speeds, one owner..." He could barely contain himself. I literally ran to my car and drove down there. He had it ready for the test drive in the lot when I arrived. I took it out for a drive with him and he was right- a fabulous car. It was almost too good to be true.

We came back to the lot and as I turned into the dealership, he pointed to a spot to the side of the mobile home that doubled as his office and said, "Park it there." I was in a hurry on this deal, however, so I drove it straight up to the office.

"No, no no," he was almost yelling. So, not wanting to screw up the deal, I put it into reverse to back up and... nothing.
"Three forward speeds" he had told me... There was no reverse.
Segueing into Entrepreneurship
Following my negotiating exercises with car salesmen, I continued to buy and resell cars for quite a while. It became what is probably my first substantial enterprise as an entrepreneur. I estimated that over that period of time, I probably owned in the vicinity of 50 cars- so many that I came to the attention of the state Department of Motor Vehicles. I received a letter from them informing me that I was an automobile dealer. No surprise there but they also insisted I pay a fine, get bonded and have a paved "car lot." That was not going to be possible. I should say for the record, I was paying income tax on the profits.

Friends, roommates and others became the proud owners of my cars for the period of time they sat in inventory- not long. And while the state government may have been good at spotting minor transgressions like mine, they were not very good at following up in those days.

I can go on about the trials of my car dealer career. That, however, is not what this blog is about.

Translated, these four lessons that paved the way for my car dealing days and my later professional development, were very clear:

  1. You do not learn how to negotiate from a book. You learn it by doing it. The basics you learn working a $5,000 car deal are fundamentally the same as when you are buying a company or a restaurant. Learn the market, gauge the other side's position and do it by the numbers.
  2. Exude authority and confidence - but not arrogance - by playing and dressing the part during negotiations, which of course also include job interviews.
  3. You can improve a deal. It might take work and even some histrionics, but the "final offer" is very often not really final.
  4. People lie. Things that appear too good to be true usually are.

And a final lesson not related to negotiating, but one that is worth noting: governments and regulators are not necessarily your friends. They want your money and they don't particularly act like they want you to be in business at all. You are just making more work for them.
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