It’s not what you earn. It’s what you negotiate II

May 11, 2011

Sully got fleeced and was never heard from again

Last week, we outlined the first 4 of the 5 steps in negotiating with ticket scalpers. This week, the money shot.

THE CLOSE

5. Wait for ONE scalper to approach you. (Never deal with scalpers in pairs, for the same reason you don’t want to deal with two grizzly bears.) He’ll initiate conversation.

And again, these prices are germane to this example only – tomorrow night’s Bon Jovi show in Des Moines. Adjust accordingly for whichever NBA playoff game or Wiggles show you want to attend.

Him: “You buying? Who’s buying?”
You: “Show me what you got.”

He’ll show you the tickets, with cost price displayed. Let’s assume they’re the coveted floor seats you want.

Him: “You can have the pair for $300.”
You: “You can have $250.”

(NOTE: So how can scalpers make money if they’re selling to you for less than cost?

Volume. Most of their sales earn them money by profiting off unsuspecting people who are convinced that tickets for this show aren’t available. After all, there are multitudes walking into the arena at this point. Surely the tickets are all gone, right?

We’ve witnessed hopelessly clueless ticket buyers paying a premium to a scalper when equally good seats were sitting 20 feet away at the venue’s own ticket window. The perception of scarcity trumps the reality of seats still being available.

Besides, how the scalpers make money isn’t your concern. Like we preach about car salesmen, they’ll make their money. Just let it be off the suckers, and not off you. Besides, by coming in late and offering the scalper a $10 loss, you’re saving him from a $260 loss.)

(SECOND NOTE: Don’t say “Would you take $250?” Nor “How does $250 sound?” You’re using statements here, not questions.)

Remember, you have an enormous advantage here. Once the show begins, your money will retain all of its value. The scalper’s tickets will lose 100% of theirs. At this moment the seats are filling and the last groupie backstage is putting her panties back on. Now, one of two things will happen.

1.    You’ve got a deal.
2.    You don’t.

In scenario 1, the scalper will cut the deal as soon as possible. Before you know it, he’ll have given you the tickets and walked off with your cash. He’ll do this for several reasons. One, time is money and he might have several other tickets to sell to someone else. And if he doesn’t, then that means his workday is now over and there’s no point lingering at the “office”.

In scenario 2, he’ll let you know that your offer is either a) insultingly low, which it could theoretically be if you didn’t do your homework on eBay and Craig’s List, or b) something he might take, but not before trying to squeeze you out of a few bucks more.

If it’s a), then you’ve got information that you didn’t have before. You’ll walk from this person and find another scalper, preferably out of sight of the first, and adjust your offer accordingly. If it’s b), he’ll provide a corroborating argument.

“Come on, this is costing me money. I can give them to you for $x.”

Is $x below your predetermined maximum? Stand firm anyway.

“$250 is the highest I can go.”

Be nonchalant and without saying as much, make it clear that you’d just as soon spend the night at the sports bar across the street than listen to Richie Sambora’s talkbox.

WALK AWAY. Which remains one of the smartest things you can do when a deal isn’t to your liking.

Give the scalper a few seconds to chase after you and accept your offer. (If it’s really that great of a deal, there’s a good chance another buyer will swoop in. So again, give the scalper a few seconds. Nothing more. If it really is a price you can live with, immediately return and bump your offer up. Splitting the difference can usually work here. But don’t get caught in the tango of incrementally converging on a price. Get it done in no more than 3 steps. His offer, your counteroffer, and whatever you agree on if it’s neither of the first two.

One more thing. Strategic cash locations:

Carry none of your ticket-buying money in your wallet.

Hundreds go in the front right pocket, front left if you’re lefthanded. Carry no more hundreds than it would take to cover your predetermined limit. Your self-imposed $330 “limit” can rapidly become $400 if the scalper sees too much green and “can’t make change.” They can always make change. Their lives are conducted in nothing but cash.

Twenties in the other front pocket.

Fives in the back. At least three of them. No tens.

That way, you’ve got enough to cover every possible five-dollar increment, and you don’t have to worry about showing more than you’re willing to pay.

You’re welcome. Now get out there, take advantage of a lowlife, and enjoy the show.

**This post is featured in the Carnival of of Wealth #38**

and

**The Totally Money Carnival #19: Oreo Edition**

Filed Under: Capitalism, Economics, Personal Finance, Shopping Tagged With: , , , , ,

Why pay someone when I can do it myself?

May 9, 2011

You still need to build wings, seats, landing gear and beverage carts, too. Seriously, it's easier to just visit Southwest.com

Because sometimes it makes sense.

It’s called Ricardo’s Law of Comparative Advantage. It says that things work best when everyone does what they’re best at. Ignore it, and you’ll hurt yourself financially.

Say you work as a salaried salesperson, but you also happen to be a capable amateur gardener, and can trim 50 tree branches an hour.

(sigh) Why does there always have to be math?

There’s very little math. Stop whining.

A mustachioed man wearing a Chivas USA cap knocks on your door, and explains in broken English that he’d like to trim your branches for $9 an hour. You reluctantly agree, even though hiring him means depriving yourself of a relaxing pastime.

So you hire him, and find out he’s half the gardener you are: he takes an hour to trim 25 branches. Should you grab the garden shears out of his hand (points facing downward), say you’ll do it yourself and fire him?

No.

If you earn $40 an hour, forgoing an hour of that to trim your branches makes no economic sense. Better to pay Javier $18 to do it and free up your time.

But if you really enjoy gardening that much, then yeah, go ahead and garden.

Real life example: we have a woman who cleans the house fortnightly. She charges $100, takes her time (usually about 8 hours), and is amazing. Of course we could clean the house ourselves, but it’s easy for us to get distracted. Whereas for our housekeeper, our house is strictly a place of business – not somewhere to walk around naked and listen to loud music in. (As far as we know. We try to stay away on days she visits.)

But she’s good at what she does. It’d take us longer than it takes her, and even though it’s our place, we admit we wouldn’t be as thorough. Also, we hate cleaning. (That being said, we’re still the kind of people who will spiff the place up, at least a little, for the housekeeper’s arrival.) We also don’t have the fancy equipment she has, nor would we be willing to invest in such. Furthermore, we travel frequently enough that it’s sometimes worth it just to have her there to feed and water the cats, which can allow us to extend some trips by a day or two.

If you don’t enjoy doing something, and the professionals don’t charge an exorbitant amount to do it themselves, it’s perfectly fine to hand them the wheel.

Are there exceptions? Well, what do you enjoy doing?

An example: changing motor oil. Again, there’s a capital investment involved. We happen to drive SUVs that require more oil than that effete little subcompact you drive to Whole Foods in. This isn’t a primer on how to change your oil, but here’s the list of ingredients:

6 quarts of synthetic blend $24
Filter $4
Pan $3
Cap wrench $8
Swivel wrench $14
Jack $140
Jackstands $90

That’s about it. Everything else, you can steal.

Go to Jiffy Lube, you pay $35 for a synthetic blend change. We save $7 by doing it at home, but have to buy $255 worth of additional equipment. It’ll take 47 oil changes for the capital investment (most of that involved in getting the truck off the ground) to pay off.

But this is for 2 SUV’s*, so that’s 23 oil changes apiece. Say we average 4000 miles between changes, that’s 92,000 miles each. And we can use the jack and stands for other maintenance, too.

Jiffy Lube techs have an underground station and muscle memory – their least competent employee can change oil far faster than yours truly can jack up the SUV. However, we’re at their mercy as far as getting in, jiffily or otherwise. Meanwhile, there’s zero wait time in our garage.

Also, they’ll test the vehicle’s battery**, recommend an unneeded replacement of an air filter***, maybe find a few other things wrong. Some of those might even be legitimate.

The psychological reward for changing your own oil is substantial, too. Chicks claim that they dig scars, but what really gets them hot is grease-stained hands.

On the flip side, paying someone to do what you can isn’t necessarily bad nor even something to discourage. You can eat every meal at home, but every now and then it’s only natural to want to leave your palate in the hands of a professional cook (and your dirty dishes in the hands of professional bussers.)

*We normally use “trucks” to describe what we drive, simply because they carry lots of cargo and we take them off-road. However, if they were authentic trucks in the F-150 or Tundra or Ridgeline sense, they’d have an extra inch of clearance or so – possibly just enough to allow a normal-sized person to get underneath without spending $230 on hydraulics and accessories. Thus our use of the term “SUVs”.

**A battery tester can cost $80. Seeing as that’s almost the price of a battery, is it worth it if you’re going to change your oil at home instead of getting a free test and readout at a professional oil change place? Well, while batteries die gradually, it’s pretty hard to perceive their imminent death without a tester. You’ll just wake up one day and she’ll be cold and unresponsive. Which she was going to be anyway. Jumper cables get you to the AutoZone, where they’ll test your battery without charge (haw!) and install a new one, also without charge. Well, they’ll charge you to buy it, that is. And you can assume it’ll be charged. Dropping it in place will be on the house. But it’ll still be charged. For no charge.

***If you plan to keep your car for even as little as 25,000 miles, buy a K&N filter.  They cost 5 times more than standard air filters, but you can wash and reuse K&Ns. And they come with a million-mile guarantee.

**This article was a #1 pick in the Best of Money Carnival 103rd Edition**

and

The Festival of Frugality #280

Filed Under: Capitalism, Making Smart Choices Tagged With: , , ,

It’s not what you earn. It’s what you negotiate I

May 4, 2011

Meet this week's winner of the non sequitur street sign award

Time and again, it’s the one complaint we hear most often from people who spend more money and earn less than they’d like – “I suck at negotiating.” “I couldn’t sell space heaters to Eskimos.” “Not only did I pay the seller’s asking price, I gave him a 15% tip and offered to spend the next couple of weekends painting his house. And pay for the paint.”

There are plenty of books about negotiation – Ron Shapiro and Mark Jankowski’s The Power of Nice is worthwhile if you can find a partner to do the exercises with – but none will teach you anywhere near as much as actual bargaining and deal-cutting will. As anyone who’s read a book on automotive maintenance knows, theory is no substitute for practice.

Here’s a quick and cheap way to build valuable negotiating experience, with very little downside. Best of all, it’ll make you feel like an aspiring criminal.

Ticket scalping.

Particularly, live scalping. None of that StubHub child’s play. We’re talking about the kind of negotiation where you actually have to face the other party in the transaction, should a transaction occur.

That last clause is critical. There doesn’t have to be a deal. Millions of people carry the mistaken belief that sealing a deal is necessarily an accomplishment. It isn’t. Most negotiations are worth walking away from, at least temporarily. Time can often be your friend, especially if the other party’s facing a deadline.

The standard example for ticket scalping is sports, but concerts also work if the artist is big enough. If you live in a city with an NHL or NBA team, one scalping session – either as a buyer or a seller – will teach you enough to go into your next car or house negotiation in a far better position.

Strategies differ if you’re a buyer or a seller. We’ll address each individually.

BUYER:

Say you’re in Des Moines a week from tomorrow and want to see Bon Jovi at the Wells Fargo Center.

1. Find out how much tickets officially cost. In this case, they range from $20 to $130. That venue diagram is critical.

2. Spend a minute on eBay and 30 seconds on Craig’s List to determine going rates, which rarely match list price.

3. Determine how badly you want to see this show. Assign a dollar figure to it if you can. “I’d love to be on the floor, but not for a penny more than $150.” If you’ll spend the rest of your life in regret if you miss the show, then presumably you should have bought tickets beforehand. This isn’t Led Zeppelin at the O2 Arena or the Super Bowl. There’ll be other Bon Jovi shows. Jon will still be dreamy.

If the event is something you can live without seeing, it’s time to have some fun.

4. Go to the venue no more than 20 minutes before showtime. That is, get yourself there in enough time to have parked and walked to the ticket window (which, of course, is where scalpers congregate.)

You don’t want to get there any earlier. If you linger without visible purpose for an hour, you’ll betray yourself as someone who’s looking for tickets and will be propositioned by any number of professional scalpers. Any scalper who propositions you will force you to make a decision then and there. If you want to defer your decision until shortly before game time, your bargaining power with that scalper will rapidly decrease. He (they’re always male) then might even refuse to sell to you out of spite, which is an option for him if there’s at least one other buyer visible.

If you haven’t memorized the seating chart, bringing it with you wouldn’t hurt, although you don’t want to tip your hand as a naïf by making the chart visible to the regular scalpers. (Who’ll be easy to spot, and even easier to hear.)

Next week, we show you how to go in for the kill.

Filed Under: Capitalism, Making Smart Choices, Net Worth, Shopping Tagged With: , , , , ,
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