That’s an important question to ask in your career. Why? Because the stronger your bargaining power is, the higher the price you can ask for your skills. On the other hand, if your bargaining power is weak then you risk being undervalued by the market. You might get paid less than you deserve.
There is a scene in a recent episode of The Apprentice UK (one of just a handful of TV shows I watch, by the way) that clearly describes this principle. The teams were given two vans full of fishes each and they had to sell all of them before 7 p.m. One team, being very close to the deadline, desperately needed to sell all the fishes that were left. They went to a law office and tried to sell the fishes there. The price negotiation between the team and the potential buyer was interesting. It went something like this (I don’t remember the exact numbers so these are approximations):
- Team: 130 pounds Buyer: 50 pounds
- Team: 100 pounds Buyer: 50 pounds
- Team: 75 pounds Buyer: 50 pounds
- Team: 55 pounds Buyer: 50 pounds
- Final price: 50 pounds
Do you see how unbalanced the negotiation process was? The team reduced their asking price significantly over time but the buyer never increased theirs, not even by one pound.
Why did it happen? Because the buyer’s bargaining power was way stronger than the team’s. The team had no choice but to sell the fishes. The buyer, on the other hand, didn’t need the fishes. That’s why the buyer won the negotiation without conceding even one pound.
I learn one important lesson here:
To be valued by the market, you need to have strong bargaining power.
Here are some ways to increase your bargaining power:
1. Increase your intrinsic value
This goes without saying. Your intrinsic value has a big effect on your bargaining power. Your intrinsic value depends on your personal quality such as your skills, knowledge, and attitude. To increase it, you need to constantly improve yourself.
2. Avoid desperate situation
A homeowner who needs money fast is much more likely to sell her property for less than its real value. She desperately needs the money so she doesn’t have the time to wait for a better offer. Just like the case with The Apprentice’s team above, the buyer can make a ridiculous offer and still win the negotiation.
So you need to avoid being in a desperate situation. Have a cushion. Save money and build an emergency fund so that you have time to find a good offer.
3. Have options
The more options you have, the more you can prevent yourself from being undervalued. If you don’t have options, you have no choice but to take whatever offer you get no matter how bad it is. In career, getting offers from more than one companies increases your bargaining power. So does having alternative income streams.
Here are three ways to have more options:
- Build your network
You can get information about available opportunities through your network. The stronger your network is, the more opportunities you can potentially get. These 106 tips to build your network might be helpful.
- Start a side business
It’s not easy to build a side business while you are still having a day job, but you can start slowly. Allocate time in the evening or weekend to work on your business. Over time, it could become a strong source of income. It takes time to build a business so the earlier you start, the better.
- Develop skills in related fields
If you are a web developer, you may want to learn about web design. If you are a writer, you may want to learn about blogging. This way you have more options in your career because you aren’t limited to just one field. Project-based learning is a good way to develop your skills.
Once you increase your bargaining power, don’t let yourself be undervalued. Ask for what you are worth.
Photo by SergioTudela
I like this thinking, good post. In relation to #2 (avoid desperate situations), another way to increase bargaining power is to create scarcity (a sort of desperate situation the other way around). Let your value be seen as constantly increasing and in-demand by showing that your offer is not going to be around forever.
I also like what you said about self improvement. Very awesome! I know you’re always improving yourself, Donald. Keep the good stuff coming!
Hey, this is a cool topic 🙂
I think a lot of people don’t get what they’re really worth because they lack the power to be assertive. In a way, they get used and they sell themselves short. This is why bargaining power is important. It helps you get as much as possible in return for what you provide.
Very nice idea, Donald! Thanks a lot for sharing this post!
I’ve experienced some time ago this what you have written about fish. Now, I realize I was wrong and that I need to have a strong bargaining power. It’s time to change it. Thanks for a help!
I like your idea about scarcity. That’s a very good idea.
I agree with you. Bargaining power helps you get the most out of the transaction.
I’m sure you can make it. Good luck!
Donald, I love the idea of future proofing your career and becoming increasingly valuable through the skills that you choose to learn. For example, I intend to increase my value by learning one of the most common languages in the world: Spanish.
By the way, you said that the Apprentice UK is one of the few shows that you watch. What are some of your other favorites? Just curious 🙂
I love the idea too. I also like your term “future proofing your career.”
As for the TV shows I watch, I have just one other show I regularly watch: American Idol. Looks like I’m not a TV person 🙂
good reading, quite an insight on how i can improve my bargaining power,need more tips.
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