Sometimes negotiating fees can feel a bit like David vs. Goliath. This week, I realised we were paying too much for some professional services and more than we could reasonably afford for our accountants. They are great and give us valuable advice, but this hasn’t been our best year. I had to question my dentist’s unfathomable quote and I have also been drafted in by one of my friends to deal with an outrageous bank on her behalf. On each negotiation I did, I was successful. I even exceeded my own expectations on a couple of occasions.

Although I enjoy negotiating, I don’t always get such good results. So I thought I would look carefully at what I’ve been doing. What is making the difference and how can that be of help to others? What I found was that I was taking the exact same steps I normally did. I wasn’t doing anything differently, but I was certainly being different…

So here are the steps to take when negotiating fee reductions. The first 3 steps help to decide what to say and the second three, how to say it.

Step One: Be clear about why you are going to negotiate. This may sound obvious, but why do you want the fees reduced? Are the fees unreasonable, incomprehensible, or is it that you can’t afford to pay them? Often, people will think they will be better received if they argue that the fees are unreasonable - they don’t want to say they can’t afford to pay. This usually just gets things off to a bad start. You may, in fact, get your fees reduced, but damage the longer term relationship with that person or company.

This week, I had to, regretfully, tell our accountants, we couldn’t afford to use them this year. I really was just telling them, not calling to negotiate. Their fees are entirely reasonable. I told them how much we appreciated them, we were sorry to leave and that we would be back as soon as we could. I didn’t ask for a thing. They appreciated the honesty and that we had spoken to them rather than just leaving. Within 24 hours they had come back to us and reduced their fees for this year. Not dependent on anything. This is clean, honest, wholesome business.

Step Two: Decide on your bottom line. What are the deal breakers? How much do you need this service? With most things, you can think about what would make you walk away. With some, you may not have that choice. For instance, when you owe a bank money, you don’t really have a bottom line to use. You can’t really threaten to move your overdraft somewhere else. I have used my future earnings potential and past record to get help from a bank though. When I spoke to a bank for my friend recently, I told them I was an employer and this was a person who would get out of this temporary problem and be worth backing for the future. They did actually listen to that and cancelled £54 of fees!

You don’t need to begin the conversation with your bottom line. You may never need to mention it, keep it safely in your back pocket as an insurance if things start to go badly.

Step Three: Don’t anticipate their reaction. This can be tricky but well worth it. When you are planning what to say, don’t take into consideration what they may or may not answer. So long as you are sure of yourself and your points, you will be prepared. Mostly, what we anticipate is just the little demon on our shoulder that tells us we aren’t good enough or we won’t be able to pull it off. Then we enter into the conversation expecting failure.

This week I have had a tricky negotiation with someone who was charging outrageous fees for a professional service. I believed it was probably an oversight that he had continued to charge so much. I rang him, having taken some advice and being absolutely sure that the fees were way too much. He told me there was no oversight, he was fully aware of what he was charging and that was his fee. If I had anticipated this reaction, I think I would have been openly angry from the outset. That wouldn’t have been helpful as he is a calm man and it would have pushed me into a weak position.

Step Four: Remember you are the customer. I don’t think that the customer is always right but the customer should always be listened to. It’s important to remember this when you are in a situation where you feel less than powerful. Talking to banks is one many people find difficult. Another place of powerlessness is healthcare. It is easy to be intimidated when talking to healthcare professionals, whatever they are like. Just take time to prepare and remember you are a customer.
I had to question my dentist’s fees this week and found it quite scary. I spent some time preparing what I would say. So that I remembered I was the customer, I told him I wanted to have a conversation before I sat in the dentist’s chair. This was to make a distinction between customer and patient and I told him that. I also told him I was worried because I was going to question him and then let him put a drill in my mouth! Sometimes, it’s ok to be vulnerable in a negotiation. False bravado can translate to being surly, defiant or even aggressive. My dentist heard my fears, reassured me, explained the fees and then gave me £100 off! So, never think you have to be bolshee to get the reduction.

Step 5: Remember who you are and come from a position of strength. Before you pick up the phone or go to see the person, take time to remember Who You Are. What puts you into a position of strength? When I was in debt, and had to speak to the bank, I often ended up in tears. A friend gave me a great piece of advice - always hold in your mind these words (and say them to yourself like a movie star), “Do you have any idea who I am?”. Try it, it puts a strut into your voice and makes a huge difference.

Being prepared to walk away also gives you strength. Back to the man with the outrageous fees! His fee was £1,200 for four hours work, administering a pension fund. Not exactly rocket science and it isn’t a unique service either. I explained I thought his fee was shocking and why I wasn’t prepared to pay it. I explained in solid financial terms why it was a bad deal and asked him how I could get out of it. I told him I felt he was making a very bad long term business decision, and I understood that he could choose to make it. By the end of the call, he asked me if he could go away and “chew it over”. I wished him a good holiday and said I would speak to him when he had done his thinking. This one isn’t finished yet, but he will make a concession. The first round was to me. If he comes back with a good deal, great. If not, no loss.

Step 6: Be friendly and affable. It always pays to start off friendly. Assume that you will end the conversation friends. There is no reason why not, after all. Negotiation is not arguing or scrapping. Be nice until you have to get tough. When you’ve been as tough as you need to be, go back to being friendly and affable again. It makes a world of difference. The conversation in the last step got quite tough for a few moments. I asserted myself quite strongly and it wrong-footed him. As soon as I could after that, I found a place to share a laugh and we were back on a friendly footing.

That’s it. Good negotiating takes good emotional intelligence. If you feel youself about to get angry or being pushed somewhere you don’t want to go, get out of the conversation. If you are on the phone, invent a reason to get off and say you’ll call back. If it is in person, ask for some thinking time, this is quite normal. Above all, enjoy it. What’s your greatest negotiating success?

This post appears in The Carnival of Personal Finance at LazyManandMoney. It is our first entry to the carnival.