How to Negotiate if you are a “Freelancer”

According to the recent statistics from the Small Business Administration, small businesses occupy 50% of the United States workforce, amounting to 28 million companies. Of these 28 million, 52% (14.6 million) are businesses that operate from home; and 79% (22 million) are businesses that do not employ workers – “non-employer enterprises.”  Approximately 75% of all businesses in the United States are from these “non-employer companies,” which are responsible for a total of $989.6 billion in gross annual income.

The following principles listed are the product of experiences and studies of academics such as Chester Karrass, Harvey Mackay, Roger Fisher and others. A guide to human principles to consider, to navigate that complex “matrix” of emotions, interests and pressures that surround agreements between free wills.

(1) Put Yourself in Their Position

Negotiations arise in the face of a conflict of opposite interests; because if there was no conflict, there would be no need to make concessions. But just because there are converging interests does not mean that there must be conflict between those who represent them. The best thing you can have when negotiating is an attitude of disposition. Show that you want to help meet the goals of others, and that they are just as important as yours. If we do not sympathize, we usually anticipate that they will accept our terms without further consideration, without considering theirs. So, when they don’t accept it, we antagonize them by “playing hard ball” or “being uncompromising.” We turn a conflict of positions into a conflict persons. However, we must be aware that the other party also has legitimate interests to protect and prosecute. Let’s appeal to these. Let’s see an example:

During the renewal of a lease for a commercial property, the lessor proposes to increase the amount of the monthly fee. The tenant, a small printing business, considers that the rent is already high enough, and that the increase is not justified. The landlord claims that the rent has not been reviewed in two years and that insurance, electricity and maintenance premiums have been raised. The tenant responds that other expenses for him have also risen, and that if the rent is increased, he will not be able to meet them. The landlord proposes that raising the rent will increase the value and quality of the neighborhood. The tenant responds that the neighborhood is in medium condition and that is why the rent should not be raised.

Who is right? The truth is that both are, and both are equally justified in pursuing their interests until their final consequences. Knowing the interests of the other party and sympathizing with them will lead us to conclude that, more times than not, they are not far-fetched. Talk about them, attend to those needs and you will gain the trust of those who want to influence – in short, treat people as you want to be treated.

(2) Appeal to Objectivity

Similar to those concepts of empathy are those of negotiating reasonably. We all like to trust that we agree under objective criteria and not whims. Let’s look at another example where an entrepreneur is interested in entering the world of artist management, and manages DJ Walberton to tour several stages in Florida. Being new to the business, he is dismayed when Walberton offers only 15% of commission earnings. He wishes to propose a counter offer, until Walberton informs him that such figure is the market value for those services. He immediately dismisses the counter offer and accepts the terms satisfactorily.

What is this about? The figure is not an arbitrary speculation of Walberton, but responds to an objective standard – market prices. Therefore, by appealing to reason, and demanding it, we give the other party an incentive to do the same. We show that we want to compromise under criteria that exceed our will. We commit to finding a solution based on principle and merit, instead of will and strength. Market prices are only one of the infinite criteria that can be used. Others include: precedent, use and custom, costs and more. The important thing is that the criterion is independent of the will of the parties, in order to lead to objectivity.

(3) Know the Difference Between Offers and Interests

Offers are what they are actually proposing or not proposing to you. The interest is the why. Logically, the initial position of each party is always the most convenient alternative for that party (so be careful to accept initial offers). Thus, when negotiations begin – the parties present their positions and measure how distant they are from each. When these are in conflict, one of two things happen: either one of them is accepted or a new one is made. For the latter, we must forget the offers and discuss interests – which is the motivation of the parties to ratify an agreement. For example, a marketing company wants to lease one of its empty offices and at the same time develop a Social Networking department. He wants to “kill two birds with one stone,” so he asks for the services of a digital studio. He offers to rent the offices for a monthly fee and in turn, manage accounts. The studio wants new accounts, but already has offices.

In this example, we see the two positions found. Let’s split the veil of the offer to discover the true interests. The company wants to put a non-productive space to work and develop a department. In other words, look for more income and new services – that is the interest. Like everything in life, that initial offer is open to negotiation. This is when we get creative when looking for solutions. One possibility may be the following by the studio’s part: “We understand that they want to get income into their spaces. However, we don’t need to operate from other offices. Even so, we still want to help you. That is why we propose an alternative. Instead of charging us a monthly rent for the space, we will establish a commission agreement for the accounts you provide us. Thus, you benefit from our services, obtaining a percentage of the profits, and at the same time you are free to procure to other tenants the offices you have available. Then, instead of charging only a monthly fee, you would charge the fee, plus our commissions.”

This is a classic example of looking beyond the position, and discovering the interest that motivates it, in order to address it directly, promoting transparency and dialogue.

(4) Promises are Exactly that, Promises.

A misleading way to encourage the other party is through promises. This occurs when the parties discuss future projects, to be fulfilled if the current business is carried out. These promises are not part of what is being agreed upon, and there is no guarantee that they will exist. Discard everything that is not the subject of the current contract.

Taking the example of DJ Walberton, after returning from his tour, he is looking for residence in several clubs. He meets with the owner of the nightclub “Metaphor” that is about to open. The owner says “Walberton, I would love for you to play in our grand opening. It will be a spectacular night, with dancers, the sponsorship of [insert alcohol brand here] and special guests. We are going to give you a lot of media coverage; this is going to explode, you will see. The thing is … since we are investing so much so that this first party looks good, we therefore have no budget for a DJ. However, if this first party is a success, obviously we will consider you for the next one – and then we can pay you!”

There is no guarantee that Walberton will appear in Metaphor after the first opening, it is better that he does not consider that fact when deciding whether to appear at the inauguration or not. The allusion to future events is a “promise”, and its purpose is to cloud Walberton’s decision-making so that he thinks the offer is juicier than it really is.

(5) Do not Postpone the Process.

Sun Tzu, the Chinese strategist and philosopher, in his work “The Art of War” proclaims some words that resound as relevant today as they were written twenty-one centuries ago – “nobody gains from a protracted campaign.” In war, as in business, deferring destroys the opportunity, and depletes resources in time, energy and money.

Negotiating at times can be a step forward and two backwards. It is expected that mistakes will be made along the way; each negotiation is unique for its level of complexity, subjects and interests behind them. But if you find yourself in a situation where the business reward almost equals the cost of acquiring it, it’s time to reconsider your efforts. You negotiate to make things happen, not to continue negotiating.

Do not meet a second longer than necessary. Set limits on your time, force them, being flexible at times. But above all, always remain prepared. It is clear that in prolonged negotiations, or suffering from an impasse, the parties cannot agree. What underlies that stagnation could very well be that the parties or some of them do not really know what they want from the negotiation. Or they are not communicating it effectively.

He who does not know what he wants is negotiating to see if the situation improves. He who knows what he wants, acts according to his objectives – to what he wishes to obtain, and to what he is willing to grant and to not tolerate. Moreover, he knows when to enter and leave the table.

(6) Knowing how to say no.

No one is obligated to negotiate. That is why contracts are agreements between free wills. You do not have to reach an agreement, no matter how much you feel you owe it to the other, or that you have invested time and resources. The need to agree, and the fault for pre-contractual damages, applies in rare cases, when the parties have advanced the negotiation in such a way that they have created a substantial expectation that they will indeed contract.

There is a verse from the song “Sleeping Lessons” by The Shins that is indicative of this principle – “you’re not obliged to swallow anything you despise.” Leaving the negotiating table serves a dual purpose – it saves you from bad agreements, and leads you to better terms.

It saves you from bad agreements because if you feel obliged to agree, you will accept any conditions as long as you reach a pact. That lends itself so that they take advantage of you. A good example is pressure situations.

“For a limited time,” “there are only 24 hours left,” “you have to tell me right now”; These are tactics to induce pressure. They cause stress that upsets your decision making and encourages hasty conclusions. When they put pressure on you, it’s because they feel pressure. They are trying to transfer that pressure. When that happens, don’t succumb; Say “no,” or do not answer within the stated time. Most likely, the opportunity will not disappear. And if they return, it will surely be with a more favorable offer.

For better terms, leaving the table can be a very powerful weapon which expresses a desire not to accept the offer as it is, even if that is a “bluff.” If the other party really wants to agree with you, or has no other option, their only remedy is to improve the terms.

However, and likewise, nobody is obliged to negotiate with you, especially if they have a better BATNA than to reach an agreement. BATNA is a term introduced by the Harvard Negotiation Project, which means “Best Alternative to a Negotiated Agreement.” If one has a better alternative than to reach an agreement, give up whenever it is more convenient not to agree. It is important to know the positions and alternatives of the other party, in order to anticipate their reaction to your withdrawal.

*Disclaimer: this blog post is not intended to be legal advice. We highly recommend speaking to an attorney if you have any legal concerns. Contacting us through our website does not establish an attorney-client relationship.*