If COVID-19 has reinforced anything for lawyers and negotiators, it is that cash is still king! In a world where paying bills has been put on hold without consequence, the bill collectors, who are used to a steady stream of cash, are finding themselves sunbathing in a dry riverbed.
I lived this in a recent negotiation for a client, and we at CMM foresee it coming to a head with respect to residential and commercial mortgages. Debtors with cash may be able to cut a deal with creditors who have been legally unable to collect, potentially forgiving a significant amount of debt. Money now is better than a payment plan.
My recent story: our client was hit with a lawsuit from its credit card company seeking payment of over $200,000 in accrued debt. The client initially hoped that we could work out a payment plan to buy some time to repay the owed money. I dug in.
I quickly learned that not only was our client sued for this debt, but hundreds if not thousands of people were sued for the same debt types in and around the same time period. This was not a coincidence. Indeed, as soon various COVID-related restrictions that forced credit card companies to delay collection efforts were lifted, the credit card companies sought to collect millions of dollars owed to them. I understood their motive, and I had my leverage. This was not the time to work out a payment plan; this was the time to cut a deal.
Armed with this information, and after strategizing with our client, I was able to negotiate a lump-sum deal, settling for a mere 25% of the amount claimed. The credit card company indeed preferred to accept our client’s payment now – of a vastly smaller sum – than receive the full payment over the course of years. I was able to successfully negotiate a huge win for our client.
This is just one example of the importance of understanding the context and underlying motives of a negotiation. Similar to how credit card companies are filing lawsuits against their cardholders, banks and lenders will soon go after property owners in default, and when facing a prepared negotiator on the other side, may agree to various creative solutions to protect their investment. Approaching these matters in the same way we would have in February 2020 will simply not work.
Negotiations often go awry when one party assumes the motives and intentions of the other party. Whether you’re suspicious that the opposing party gives in too easily or you’re fooled that someone has good intentions when they really don’t, negotiations can sometimes turn into a guessing game.
Everyone’s first instinct is to assume they know what the other party wants – but it’s important to truly understand what’s really motivating them. Is someone trying to sell you their business because they are ready to retire and it’s time to move on? Or are things tough in their industry and they’re trying to ditch the company before it’s too late? Doing your research and digging into the past and present situation of the opposing party is an important step you shouldn’t enter a negotiation without having done first. This process helps you put things in context – and you can’t negotiate effectively without doing that. If you were negotiating a real estate deal during a recession, would you use the same approach as if you were negotiating when the market is booming? It’s no different coming out of a pandemic. Strategies that worked in 2019 must be tweaked now in 2021.
And likewise looking toward the future, what makes one negotiation strategy effective today may make it ineffective in the future. Today’s post-pandemic game plan will most definitely need to be modified when in a similar situation as my client in 2023 and beyond. Every negotiation is unique in terms of facts and timing. A skilled negotiator must take time to do their research and enter that negotiation equipped with all the background information that they can possibly find. This way, you’re fully prepared to tackle the issues at stake in the negotiation.
CMM is focused on helping clients by being effective dealmakers, and negotiation skill is a critical piece of the puzzle. If you need guidance in connection with a business dispute, debt relief, or something in between, let us help you. Contact us at 631-738-9100.