Long and short: Managing negotiation tactics to the leverage you have

As a service provider, nothing gets me angrier, more quickly, than a client who messes with the payment terms after the service has been provided.   The leverage rests with the payor, save some degree of reputation risk and ultimately legal action.  Let’s say someone agreed to pay you in 45 days, and then on day 53 decides to not return your call, then pretends not to see the email with the statement, then promises to call you back but doesn’t, then says the cheque is in the mail when it isn’t, etc etc.  If you lawyer up, you will ultimately get the money but probably later than you would have by continuing to beg and certainly with less net in your pocket.  The payor knows this and uses the leverage they have.  This happens to me sometimes in Private Equity but my clients are generally honest people who trade on reputation and need my service repeatedly.  In the construction business in the 90s in Montreal, life was a little different.

I got a call from an architect I didn’t know to paint a new cut-and-sew factory on Chabanel Street that he was designing.  The architect was a very fine and modest gentleman who asked me politely to paint the ground floor of his home for free as a favour for making the introduction…I was in no position to refuse work.  It was a straightforward job for about ~$100K.  We had agreed to a pretty standard payment schedule that matched the progress of the job save for some standard holdbacks.  The first couple of payments were pretty close to on time, but as the project went on, the flow of funds slowed.   I asked the architect to intervene, but even though he took some calls from his newly painted living room, he thought it was ‘best to leave this between me and Mr. Miller.’  Thanks.  I was getting pretty antsy as cash flow was tight for my little company in those days.  I put pressure on the client, Mr. Miller, but the tougher I got, the tougher he got.  “I will pay you when you are done. If you don’t like it too bad.”  He knew that I had less cost to put in than I had money to collect, and that he could probably find someone to finish the job if he really needed to.  Also as an end-client, rather than a general contractor, he probably wouldn’t need me again anytime soon. The amount owing was too small to warrant sending some ‘friends’ to collect.  As much as that was a stated common practice in those days, it was still a risky tactic and to be used sparingly.  I was spitting mad but kept my team running. 

One day near the end of the project Mr. Miller called me to ask for an addition to the scope.  His sewing machines stood on metal U-shaped stands that were rusting.  He wanted them painted in between closing the old factory and starting the new one.  It would be a tight turnaround but he was hoping I could paint them for him very quickly.  Sure thing, I said. I had a spray booth at my warehouse so we could get a smoother finish in less time if we picked them up, did them on my site and returned them.  Mr. Miller loved that idea and agreed to pay me another 7 or 8K for this change in scope.  Stupid Man.  I can’t remember ever hearing someone yell as loud as when I told Mr. Miller he would not get his stands back (or be able to reopen his factory) until I got a certified cheque for the entire amount owing plus a late payment penalty.  He was so agitated that he had to put the phone down and take a moment.  His sister (who was his business partner) picked up the phone to tell me that she has never seen her bother this agitated and that she thought he may have a heart attack. “I hope not, I said.  Let me know when the cheque is ready.” 

Today, Trump has leverage in many places.  He uses his popularity and related power to convince Republican senators to sell their souls and support motions they otherwise wouldn’t.  I am sure that everyone who deals with him loathes him viscerally, but they like what he does for them and know they need him. Now.  He will make trade deals that are favorable to the US, especially with the smaller and weaker countries.  To put it bluntly, they need the business.  Zelensky despises him but he made the mineral deal because Trump has the power to abandon Ukraine completely and let Russia destroy his country.  He still may.  There is a lot of story left to tell on many fronts but for a while it may seem like Trump’s strategies are winning.  Until he needs something from someone who has the stones to turn the tide.  And it will happen.  And people everywhere will remember how they were treated.

Bullies like Trump and Mr.  Miller are full of hubris and short-sightedness.  They think that their adversaries like the game as much as they do.  They don't see how much hatred they sow, and they don’t appreciate how long memories can be.  For sure there are times when you should use your leverage to get the best deal possible and be as ruthless as you can be.  Business can be a game of survival, so sometimes you have to choose when to kill instead of be killed.   But you need to be conscious of your need for reputation, and of the possibility that you will need someone you are stepping on.  It may be sooner than you expect.

P.S.  Over the coming months, I will share many war stories about my time in the construction industry in Montreal in the 90s.  Some have told me privately that they wish I would not share as it makes the industry look bad.  Maybe so.  The stories I tell happened to me, as I am telling them.  I have every reason to believe the industry has cleaned itself up a fair bit in the last 30 years.  In any case, they are juicy stories, so I hope you enjoy.