The best time to borrow money is when you don’t need it. Mark McShurely knew there were few alternatives when he realized he owed his supplier and couldn’t pay. So, he asked for his supplier’s help. He negotiated a deal. And still couldn’t pay. So, he renegotiated. Hear his story and how he rebuilt his credibility one week at a time and created an unprecedented relationship with his supplier, one of the largest wholesale distributors in America.
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Rebuilding with Integrity with Mark McShurley
We are excited to have you join us. Welcome back. We are excited because we love helping you, the small business owners, learn how to level the playing field in your negotiation. Also, how to level up in all of your negotiations so that you are keeping more of what you make, spending less of it, and making more from your customers. We are excited to have Mark Mcshurley here. Many of you who have read before might remember our interview with Idan Shpizear who owns 911 Restoration.
Mark and Idan, I am totally going to put you guys in contact together because Mark has this amazing business called Roofsimple and he is a Cofounder of it. He is a high school and a college dropout. He’s also a fine arts enthusiast. One might not necessarily think that goes together. He lives in Virginia but has business operations in multiple states. He is married and has six kids. Let’s point out that anybody who’s married and has six kids has to be good at negotiating because there’s a lot in that to negotiate. We’re not going to talk so much about that.
We are going to talk about the fact that when Mark and I met, we had an initial conversation. He was telling me this amazing story about how his business hit a point where they needed to get capital, but it was right around the time of COVID hit. He went to his primary supplier to get essentially a line of credit with them and have since renegotiated that. I was struck by how Mark thinks about his business and how he was thinking about that negotiation. A lot of you reading may be in a situation where you are capital constrained and you need to find creative ways of bringing capital into your business. I thought having Mark on to talk about his experience and how he worked with his suppliers to make that happen could be valuable. Mark, thank you for being here. I’m glad to have you.
Thanks, Christine. A pleasure to be on. I’m excited to go in and a little nervous about how my negotiation skills went compared to what your expectations would be, so I’m happy to learn and also happy to share. I’m looking forward to it.
Thank you. The first question is, how did you get from where you started to where you’re at now? You are out in the Western part of Virginia. What’s the mountain range?
The Blue Ridge in the Allegheny. I’m in the Shenandoah Valley.
Great song and it’s beautiful over there if you’ve not ever been there. How did you come to start Roofsimple?
In high school, I had started a deck staining and pressure washing company. I ended up doing some work for a guy who owned a roofing company, and then he offered me a job as a sales guy on his team. I was probably nineteen at the time. I started selling for him and I stayed for nine years. I ended as the general manager. He’s a super awesome guy. In fact, my younger brother got engaged to his eldest daughter. There are lots of connections here in our little roofing corner of the world, but I wanted to do things a little differently.
He has a great family on business and does a great job, but I definitely thought a little bit differently about how to go about things. One night, I was having beers with a friend of mine, Marty, who’s my partner and cofounder. A lot of things resonated as we were talking. At first, we were only talking because I was thinking I’m trying to get out of the other company and I don’t have anywhere to go. I don’t have a college degree and I don’t even have a GED. Being employed by other people, it is somewhat of a risk to not get the standard degrees or the standard credentials.
The best time to get credit is when you do not need it. Click To TweetYou do have to be prepared to deal with that and not expect everybody to give you stuff. As an employer now, it does make it a lot easier to sort through people when you can see different credentials. It’s not always education, but you want to see certain things. I didn’t have a ton of options and I didn’t earn the money I needed to earn. At the time, it was four kids, so I needed to do decently well and replace my income.
Marty owned a construction company with his dad. They did remodels, home building, and stuff. I was talking to him about, “Can I come to sell some roofs for you in the interim while I figure out what I’m going to do?” We then got talking and a lot of the way was how we wanted to do things or how we wanted to treat people that work with us or our customers. We connected. I was in college for 1.5 years and I emceed weddings. I emceed his wedding reception.
We’re like, “Let’s do this.” That was the fall of 2014, so January 1, 2015, was our official start date. We went off to the races. The first year, we didn’t do very well. We grossed $350,000. Anybody who’s in construction knows that’s not a lot of money that comes your way after that. At the end of 2015, I was our first full-time employee. I was like, “I’m draining all the resources. We can’t hire, market, or grow if I’m draining all the resources.”
I moved my family to my in-laws in Minnesota in the middle of winter in February 2016, so it’s cold. Luckily, my in-laws are great people. They have 52 acres, a little vineyard and winery on their property. We had a separate small basement apartment. It was still tight, but at least we had a land. The cousins were right there and everything, so the kids had a good time. It wasn’t terrible. I do feel like my mindset at the time was bad. A lot of business owners or providers for their family, often when things are feeling very bleak, there’s tons of self-doubt.
I went through a period of intense anxiety. I went to the emergency room a couple of times thinking I was having a heart attack or something. I had panic attacks that I never experienced before. It was dark in my mind. I had to get another job. I’m Catholic so I’m selling Catholic bulletins on the back and there are ads. I ended up selling ads and Catholic bulletins for not a ton of money. They were nice people though in the company. I had to get a job while I was there for 2016, but then at the end of 2016, we hired somebody, our first sales guy, and got things together. I was able to quit that job, and then we started doubling every year after that. There’s a lot of problems that come with doubling and everything like that.
Somebody once told me that there’s a devil at every level. Every time you move out, there’s something else that starts to plague you and causes you your concern. I have a black belt in martial arts and one of my instructors used to say that, “Worry is nothing more than negative goal setting.” Our brains focus on what we think about and our minds are our worst enemy in many cases. One of my mentors who I talk about quite often talks about whether or not something is externally verifiable or internally. He’s a guest on the show and his name is Blair Dunkley. Is it an internal thing? Is it something you’re telling yourself or is it being verified externally? If it’s not being externally verified, then you should not pay attention to it.
I’ve got to think about that more. That rings true to me.
It’s freeing to go, “Am I telling myself this or is somebody else telling me this?” He has a whole different modeling structure to evaluate. For the readers, check out that interview with Blair Dunkley if you haven’t seen it yet. He’s got some great concepts in terms of mind models to help think about that. I often talk about how the hardest part of any negotiation is the negotiation we have in between our ears. We convince ourselves that things cannot be done before we even engage with a counterpart.
I imagine in the story that we talked about in terms of how you came out in 2016 and the business started growing. Growth is great, but definitely at every level there’s stuff that happens out of that. Your business model is such that if somebody gets a tree fall on the roof, you come in and do the work, but you’re not necessarily getting paid right away. You’ve got a lead time and your payment cycle is long from your clients. That means that you’re buying materials, paying your staff, your team, and you’re essentially floating cash for a while. Tell us about how your growth led to that creating some challenges for you in 2019.
Ironically, COVID saved our butts because it allowed me to negotiate about past since. We’ve been fortunate that the construction industry in general, that COVID hasn’t decimated us. We didn’t grow much in 2020, but we were able to hold constant and improve a lot of things, so that was a win for 2020. In 2019, we grew 100% over 2018. There was so much going on that I abdicated some of the financial stuff to our bookkeeper. I wasn’t having as clear of a picture of what was going on in the business, partly because that cashflow is a longer cycle. If you’re not paying attention to it, it gets out of control and that’s what happened. By March 2020, at that point, we’re afraid that sales might depth. Luckily, they held steady, but at that point, it was crazy scary.
Give us a little more context around it. When you hit that point, your cash inflow is lagging what your outflow is and you’re caught short that way. There are a lot of different options. A lot of entrepreneurs may jack up all their credit cards. They may go to their banker to get a loan. A lot of times, especially, because I presume that you have a contract with your supply company, a lot of entrepreneurs are not comfortable going to their suppliers to ask for that. Tell me what the context was, and then how you evaluated at the right moment in time.
More or less to sum it up in a more brutal way, we had gone into debt. It’s ironic how hard it is to be exact, but about $400,000 without knowing that we were spending that money. We were waking up to this around December 2019 to January 2020. In February, we were in the process of getting a loan from one of these business loan places. I forget what it was. We had, prior to that, also gotten that quick $100,000 from PayPal. They have the LoanBuilder program that’s fast and easy. That was a tiny bit of breadth but not nearly enough.
In February, we had started the process to get a more traditional line of credit or whatever. It was funny, in the first week, I gave the guy all this stuff. In the second week, they come back to you and tell you what you need. By the end of February, his tone changes on the other line. It’s like, “Underwriting is completely changed. I don’t know what industries we’re doing anymore.” It’s interesting how everything developed in 2019. A lot of financial people were already aware that there are going to be problems in February.
Ironically, little sidestep on the COVID thing, my family and I quarantined at the end of February, because we had our sixth kid in March, through early April until we saw numbers, and then we were able to verify that we had already had it. We quarantined before everybody shut down at least in Virginia, and then stopped quarantining right when everybody else was quarantining. In March, we were freaking out, so we had to find a way to more or less make $500,000 not be due now, to sum it up. Our suppliers were all accumulated if you will. Our subcontractors are paid every week and our payroll goes out on a normal schedule. We didn’t have any other debt other than that PayPal loan that we had taken out in the interim.
There are two problems I see looking back. One, in 2019, not only should we have been much more on top of the money. We should also have gotten a line of credit right away. I came from it in a certain sense of a more financially conservative mindset of being like, “I don’t want to go into massive debt. How am I going to pay off $500,000?” That sort of thing. Of course, you find out later, especially in the type of work we do and our pay schedule, that everybody has a line of credit. That’s how you survive. What I would have definitely changed about 2019 is, first of all, watch the money, but then get a line of credit.
I love both of those points. One, paying attention to your numbers. I talk a lot about how in order to be effective in any real meaningful negotiation, you have to know your numbers inside that. This is when I was working at a larger company for a larger company as a client. They bought software and they had no idea how to use the software, who used it, and how much of that they used. They were buying at $600,000 a year worth of software licenses and they were only using $280,000 of it. They were spending this insane amount of money that they didn’t need to spend only because they didn’t understand their numbers, financials, and what was being used, how it was being used, and when it was being used.
To the readers, I don’t care if you’re buying a car or getting financing for your business or what you’re doing. If you don’t know what’s economically driving your business, your ability to negotiate and find leverage is significantly reduced in the absence of that information. Point one is knowing your numbers. The other thing is there are industry operating models in every industry. You have this mindset that debt is bad, but then realize that everyone in your industry has line credit because that’s what you have to do to survive.
We come into our business situation sometimes and our pride tells us, our history, parents, or whatever says, “This is how it’s supposed to be.” When you look at ego outside yourself and you look at, “What’s externally verifiable? What’s the market doing? What’s my competition doing?” It sometimes will give us some latitude and freedom to behave in a way that might not be consistent with what our original assumptions were, which will expand your options when you’re negotiating. You came to that realization, “I need credit. The best time to get credit is not when you need it. The best time to get credit is when you don’t need it.”
People are willing to work with you if you show that you are eager to minimize the risk for them. Click To TweetAlso, not during COVID either.
Thank you for setting that context. You’re now in a situation where you need credit. You need to go get it so you’ve got all these different options. Tell us all how you thought about those options and how did you end up deciding to go work with your supplier to get financing from that source?
We already have a line of credit with them but all the jobs get put on the tab, and you pay them off every month. That already existed. What happened was, we looked into a more traditional loan in February 2020 and realized everybody’s underwriting rules were completely going haywire, especially then because that was the most uncertain time. It probably would have been easier even in the summer by then there would have been a little more certainty.
I went back to PayPal and they wouldn’t lend me anything. I never did anything wrong with them. Although now I got an invite but I don’t need it. They changed their underwriting rules too and that was in June or July. The other pragmatic reality was that all of the debt was with the supplier. That was where it had all accumulated. It made sense from that perspective. What you said about knowing your numbers, I can already see one thing that we did wrong, which was we didn’t truly know our numbers so when I negotiated with them, I agreed to a twelve-month payback period.
It was about $530,000. If I had known what I knew later on in the year, I would have known we can’t pay that back in a year. It’s not realistic. When I entered into the negotiation, the first thing was that I went to them and I found out later from my counterpart that pretty much never happens. I would encourage anybody who has a supplier that you might be in trouble with, go to them. Beg for mercy, try and show them that you care because that I think ended up being one of the most important things that I didn’t even realize at the time.
They didn’t have to come to chase me down. I went to them and I said, “I don’t think I can pay this back. We’re in total uncertainty now. How can we get on some payment plan so we can keep operating and you can feel good about letting us continue to operate?” At that point during the negotiation, it was a pretty short negotiation. More or less, the numbers are about $500,000. It was like, “I don’t have that now. I can do a payment plan. What can we do?” They don’t typically do these loans. Their backs were against the wall, too.
It was interesting. We were both against the wall and that’s the one thing I did know, I was like, “I know that they’re against the wall too, because of all the COVID uncertainty.” They’re as worried about it as we are and they’d probably rather have me make some payments than go under. In a weird way too big to fail in our small way. For our local branch, we’re their biggest customer or the top three. They’re forced to deal with it but it was also important. The other parameters surrounding it or the other part of the context was they’re our national supplier. We will work with them in multiple locations. We will probably be working with them for 20, 30, 50 years. We can’t afford to damage it.
We also need to get what we need out of it. I feel one of the things looking back at that we did decently well, although we didn’t fully know our numbers was to get pretty clear right away on what I can pay per week. I did get clear on that, “With this week’s cashflow, what can I do?” When I was negotiating with her, she was also trying to figure out, “What can you do? Can you do this? Could you do that?” Going into it, and trying to make sure that this is a counterpart that I’m going to have to deal with for a long time was, “What are the tradeoffs that I’m willing to make?” One, which sucks is high interest. My loan was at 14%. That’s an ouchy. I was willing to give that away because I was also desperate. Don’t go ask him for money when you absolutely need it.
The big thing that ended up in retrospect and also feedback from my counterpart, Donna, who was amazing throughout the whole process was talking to you, I feel like this is something that, and tell me if I’m wrong, would align well with what it seems you talk about and teach. I immediately realized because this is the counterparty, who I have to deal with in the future, I need to establish credibility. I’ve lost a nice chunk of credibility, to be honest, because I had $500,000 and I didn’t know where it went, “Does this guy even know how to run his business? We’re exposing ourselves to the risk of this guy.”
Priority number one, once they agreed to the deal, which was probably an hour-long conversation, where we went back and forth and I was like, “Honestly, this is what I can do,” and that’s what we did. What I did after that is I paid them weekly. The note was technically due at the end of each month but I paid them every single week. I divided up the amount, paid and sent her an email every single week telling her how much I paid and how things were going. I did that religiously. I did not ever miss a week. Even though what happened in July or August 2020, I’d applied for that Main Street Loan. Throughout that process, I let her know that I was trying to refinance it, but that I had no certainty on it. I was transparent the entire time.
Towards the end, when I realized again, knowing your numbers, we can’t pay off this amount this year. I can pay off $500,000 over five years, no problem, now that I know my numbers, but I can’t do it in a year. That was looming so a lot of weeks towards the end, the payments were smaller than they should have been but I still paid as much as I could every single week. By November 2020, I called her, initiating on my end and I was like, “I can’t pay this in twelve months. If the Main Street Loan doesn’t come through, we’re going to have to find a way to push it out, if you’re willing to do it.” That’s when I finally got some feedback, and she was like, “No problem. We will definitely work with you no matter what. Nobody has ever emailed me every week and paid me every week.” My biggest takeaway was probably establishing yourself as a credible, trustworthy counterpart to negotiate with.
I love this because renegotiation is something that I’m passionate about. It’s a topic that we don’t talk about much. It’s easy to talk about negotiation when you first start dating each other. It’s like, “We’re going to have this business. It’s all awesome, hopeful, and wonderful.” It goes wrong and most people won’t do it. Few people will pick up the phone and say, “The deal that we signed is not working. I can’t do this. How can we value our relationship? How can we fix this?”
It’s stunning to me how many small businesses in particular, but I’ve seen it in big corporations too. Contracts of contracts. I’m breaking my word. I’m breaking my bond. To a certain extent, to your point, yes but you can rebuild that credibility. You can rebuild on that relationship. It’s worse to get into such a bad state that you can’t do anything about it and you’re going to go under and it’s disastrous. Your suppliers are going to be left fighting for scraps of what’s left. That’s not a good position for them to be in.
The fact that you gave that money every week and communicated because this is something that I talk about, especially when you’ve had to initiate a renegotiation. There is no such thing as over-communicating to your counterpart. Once you renegotiate that deal, if things start to go sideways, it’s so much better to have let them know every single week what’s going on versus waiting to go sideways. By doing it that way, which is not how most people do it, you’ve increased the level of uncertainty in that relationship and increased the amount of risk for your supplier to be in that relationship. The approach that you took without thinking about it in this way was you tried to de-risk the situation for your supplier.
There was still risk related but you did everything that you possibly could through over-communicating, paying every week, letting them know the status and you are applying for the Main Street Loan. You’re keeping them abreast of what was going on in the business, that you’ve de-risked it for them. You were solving their problem and addressing their concerns without even knowing or thinking about it consciously in that way, which is an amazing thing. I wish that more small businesses would take that approach.
I’m glad that for whatever reason that I was clued into that. Another lesson was, people are willing to work with you way more than you think if you do a de-risk for them, if you show them that you’ll do what you say you’re going to do. Communicate if you can’t but also honestly about it. Also, when you flip it around to yourself if somebody was in debt to me, that’s what I would want. I’d be way less worried if they were telling me all the time about what they’re doing to try and make it right. I’d be like, “I’ll give you some mercy. I’ll give you some leeway. I might even help you out or whatever. If you ghost me, you’re terrible, the worst person and you’re a crock.” It definitely worked out, and getting the Main Street Loan was the cherry on the top even though it came through the eleventh hour. What a pain but that’s given us a lot of breathing room so that’s been huge.
You were able to refinance with your supplier and in refinancing, you paid that off.
I put it all into the Main Street. There was some leftover for some other things too so that was great. It was a crazy year in that regard. We had never gone through that before and I’d never negotiated $500,000 before at least straight up debt or cash, whatever you want to call it.
Negotiating for $10,000 can sometimes be incredibly more painful than negotiating for multi-billion dollar transactions. Click To TweetI’m picking up on this one thing, because I’ve had a lot of people say this, to me, “I’ve got to negotiate this thing for $500,000 or $1 million.” My largest deal was $2.4 billion. I’m like, “You do realize that the process is exactly the same.” The size of the number doesn’t matter and in fact, negotiating for something that’s $10,000 can sometimes be incredibly more painful than negotiating for a multibillion-dollar transaction.
To that point, it was interesting entering into it, because I was trepidatious at first. I was like, “This is a lot of money. Are they going to shut us down? Are we going to go bankrupt?” They had a lot of power. Although, I also had some power in the sense that if they shut us down, they wouldn’t get their money. We status and also had current receivables with them a few thousands too so their total risk at the time and when I talk to them, it’s probably $800,000.
It is funny how in one way, it was easier, because the larger number and the severity of the situation made everything a lot clearer. Around a $10,000 deal, you can hoodwink people. Shit is not real enough. I can see what you mean. In a $24 billion deal, everything’s real and in some ways, I can see how that makes it clear. Everybody has a lot more on the line so everybody’s going to be a lot sharper at the table, which also, in some ways, I don’t know about deals that size, but I felt the deal was also pretty quick because we weren’t going to go through a lot of fake stuff. It was like, “Here’s where I’m at, and here’s where you’re at.”
Picking up on another thing you talked about leverage. If you think about what was going on in the industry at that time so this particular supplier supplies a lot. It’s a national company. They’re a listed company and they’re publicly in trade.
I’m not 100% sure.
It’s a big organization with operations throughout the United States. They service the construction industry. That’s their market. You’ve got so much going on now in the construction industry and different aspects of the construction industry. You’re feeling pain in different ways. Lumber is almost impossible to come by. There’s this whole thing around what was going on with the tariffs at the time and how tariffs have impacted the construction industry. Plus, you had COVID. You saw the drop in the real estate market in March 2020 when it totally tanked. It’s recovered and booming now, but, even still, there are some significant constraints.
When you think about the suppliers’ business, I would suggest is that part of why you were able to do what you did one, it’s because of the integrity with which you approached the situation. The other two are that you represented a smaller amount of risk for them. It’s a lot of risk for you because it’s big numbers for you but for them, it’s a smaller amount of risk, whereas keeping you going and keeping you in business as one of the top their top suppliers or top company clients in that region. It’s because they’re dealing with some other big companies that are struggling.
They’ve got credit exposure across a large number of their businesses. They’re also insured against these things. It’s something that a lot of people don’t think about. Your suppliers are insured around whether or not you’re going to pay. They also factor their accounts receivable so they may have gotten in money already off that receivable and they use that to finance as well. There are all different factors where you probably had more leverage than you think you did given the size of the business relative to some of the other issues that they were dealing with at that same time. You could have gotten a much better interest rate.
In retrospect, you’re absolutely right. I was a much smaller piece of a much bigger picture. Construction ended up turning out to have a decent year, 2020 overall, even though there are issues like right now. We can’t even get a bunch of shingle colors, because the lines were shut down. There’s a ton of craziness but construction home sales because everybody’s home has kept up to a decent pace but in March 2020, when I approached them, the timing also ended up being felicitous. If I had waited, and they saw that construction wasn’t that much of a risk, they could have written me off, got their money, and moved on.
That played to my favor in accident but approaching them early, erring on that side helped. I also think their backs were against the wall in a certain sense that if I went out of business, they would get nothing, or their insurance money or whatever. It’s probably better if they go with it. If I was to go back, first of all, I would hopefully have known my numbers better, and even if we had gone on a 2 or 2.5-year payment plan, even if it wasn’t the same interest rate that would have been better than the deal I got or reducing the interest rate. I still needed more time, which I didn’t know at the time. Those could be done differently.
This is such a great case study in the process of going through any renegotiation. Some of the things that you did well in terms of asking early, recognizing early that you were going to be in trouble. Also taking the initiative to reach out to your supplier and co-develop or problem-solve with them, and make them part of the solution. That’s good on you because that’s huge. Certainly knowing your numbers in greater detail.
People who have read more than one episode, know I often quote my grandmother who says, “You should know your numbers down to the level detail.” In the tiniest thing, you should know what’s going on because you never know when that tiny piece of information is going to either create or it’s going to either hamstring you in a certain way or it’s going to give you the ability to open something up and create a different type of conversation.
The other thing is having a deeper understanding of what was your counterpart thinking, what were others in the industry and their competition thinking. What’s going on with their suppliers? They’re a middleman. They’re not manufacturing. They’re distributing. What was going on with their suppliers? How is that going to be affected? Those distribution agreements that they have with their suppliers, how are they dealing with inventory? Is their inventory sitting on the shelves? Does it have a low inventory turn? What’s their anticipation? Those external things that could have helped you understand their perspective may have given you some additional leverage in terms of negotiating the rate lower or the timeframe lower.
I am impressed with how you communicated. I love how you paid them every week, even though you didn’t have to, and how you communicated every single week. If the readers walk away with one thing, that need to over-communicate in a renegotiation situation cannot be stressed enough. You did both of those things. Even if somebody did one of those things and paid every week or somebody at least communicated every week, that’s going to go a long way in rebuilding that goodwill.
Many people say, “I want a customer for a lifetime.” When I speak, I’ll ask people in an audience, “Who believes in a customer for a lifetime?” Every single hand goes up there. I then ask, “Who here has a stated policy of renegotiation that you talk about in your sales process where you tell your people, ‘If this agreement doesn’t work, we will renegotiate.’” Zero, people raise their hands. My response is, “You do not believe in a customer for a lifetime.” The reality is that to have a customer for a lifetime, you have to have a process in place that allows you to go through the boom and the bust that every business goes through. It’s a testament to your supplier that they were willing to work with you and you didn’t have to escalate. That’s also a clue that you probably could have gotten and some aspects of the deal could have been better because the person you were working with had full authority to negotiate it. You weren’t asking for anything out of her.
The way their model works, the collection is more regional. It was one escalation point higher. When I went to them, I was talking to the guy who is the first line of, “Your late of something, gives you a call.” I had talked to them in the past. Sometimes, we run over a little bit and then we pay it back. We already had a good relationship because I communicated with him but I didn’t have to very often at that point. When I went to him, he had to run it up the ladder. I only got run up once to her. I’m sure there are other levels that if I had been a naughty person would have gone to.
If you pushed back on things that she didn’t have the authority to agree to, she would have escalated it because she certainly wasn’t the final decision-maker. The assessment of a good deal is whether or not you walked away and got what you wanted. You got a lot of the things that you wanted. The high-interest rate, you knew you didn’t want that at the time. The short payment term, you didn’t know enough about your numbers to know that was not favorable for you. You were able to tell them, “If I don’t get this Main Street Loan, we’re going to have to renegotiate.” It’s because you had done all that to rebuild goodwill, that was not going to be a problem for you. It was a good deal overall and it worked out amazingly well.
We were able to save our credibility and stay in business. It gave us the breathing room to get the Main Street Loan. Overall, I’m happy with it. I didn’t get a lot of feedback until October or November when I called her the second time to initiate a potential renegotiation of the deal. That was when she gave the feedback like, “Nobody ever does this. I can’t tell you how much I appreciate the weekly emails and the weekly payments. We’ll work with you.” I’ve been losing sleep over it at that point. I was pretty high stressed about it. I’m waking up to the fact that I can’t pay this off this year. I had a lot more leverage than I realized. At least the relationship was a solid one. I had the opportunity, at least, to renegotiate if I needed to.
If you don't have a process of renegotiation in place, getting a customer for a lifetime is impossible. Click To TweetThe thing is that for people who are in a situation where you’re overextended or you’re forecasting that you’re going to miss your numbers or not be able to adhere to your supplier agreements or your financing agreements. If you wait and you’re three months behind, that doesn’t work. Especially your suppliers, they need to have some level of reliability because they have to forecast their business. They’re buying inventory and holding inventory. They have agreements that they have to adhere to. They have their staff. Like you, they need some level of predictability or something that’s forecastable anyway. If you don’t give them the opportunity to have that, you’re introducing unnecessary uncertainty into the business and you don’t want to be the person to do that.
The uncertainty is a risk. That represents risk. I have a question for you that I’ve been thinking about a lot more on the sales side of things, this idea of trade-offs. One thing in life is that there isn’t perfect but there can be an awful lot of good if you let it be. At times, it’s about getting that clarity. One thing that I’ve been discussing with my sales team is the idea that a key part of a good sales process is helping the person understand the trade-offs and giving them a little more contrast so they can make a decision, even if the decision is not you. Looking back on sales experiences that I’ve had the most valuable are always the ones where I get a clear sense of the trade-offs quickly. I didn’t know if you had any other thoughts on, in negotiating in general, the difference between perfection and good and trade-offs and whatever.
The trade-offs are huge. Anytime you’re going into a negotiation, you should know everything there is to know about you. That’s point one. The other part is, what are your assumptions about your counterpart? Understanding everything there is to know about you is where you identify what trade-offs may exist. You hypothesize or you come up with a theory of what you think your counterpart’s trade-offs might be. The trick is to figure out, “If I get rid of something that I don’t care a lot about but they happen to care a lot about that thing that’s not important to me, that’s where you create value.”
I negotiated a deal many years ago with Coca-Cola. I was working with a small product merchandising company. They did coffee mugs and all that stuff. Coca-Cola paid them in 180 days. That’s very common for big companies. This was a small company that had 10 or 12 employees. It was during the dot-com era. The market was tanking. They did most of their business with tech companies. Their client bases were shrinking. We had to go and figure out how to renegotiate and get Coca-Cola to pay a hell of a lot faster than 180 days. To do that, we had to know what our trade-offs were. We had to be able to say, “What are we able to sacrifice because cashflow is more important to us right now? Are we willing to sacrifice some on profitability? Do we need to incur some additional costs? Do we need to ship faster?” We had to come up with what those trade-offs were.
One of the challenges that a lot of negotiators have is that they negotiate one issue at a time. They’ll sit and say, “Payment term is an issue. I want to get paid in 60 days.” They’ll go, “Delivery is this issue. I want delivery in this timeframe. Shipping costs, whether it’s freight onboard or whatever, is this and that’s the issue.” They come up with this checklist of things and they go, “I got that. I didn’t get that.” They’ll fight like tooth and nail over this one thing. They’re all intertwined. They all lead to cashflow and profitability and operating risks. Sometimes they’ll impact strategic risks, too.
I’ve worked in sales and it’s one of my big challenges with diehard career-long salespeople who are, to be honest, mediocre at sales and not incredible. People who are incredibly good at sales understand that all this stuff is interconnected. People who are not good at sales don’t understand that it’s all interconnected and look at the price. It’s like, “What are all the things that go into the price?” All of those things are where your trade-offs are. Price becomes an output of a negotiation and not the input into the negotiation once you understand what those trade-offs are.
I like that. That’s powerful. Intuitively, price is often not people’s core issue. We’re not the most expensive but we’re not the cheapest. By working with us, the customer is already making a trade-off consciously but it sucks that the sales guy doesn’t know what the real trade-offs that were made, even on successful deals and on unsuccessful deals. Price is what you’d go to when you don’t have anything else to look at. You may still go at a lower price. If there are people who the lower price is a good fit for what they’re looking for or a contractor guy in his truck, you’re selling the house, it’s a rental, you don’t even care about it, you’re going bankrupt. Who knows? There are all kinds of reasons. If you’re looking for the service side of it, specifically the things that we focus on, you don’t get that from other people. I don’t need to be pushy or glossy about stuff but these are hard trade-offs. You can’t get top-level service and the lowest price unless your friend wants to give it to you for free. Other than that, there are trade-offs with every deal. That’s powerful.
Friends and family should be paying full price for everything anyway.
If they’re your friend, they’ll pay.
That’s my view. One of the things we didn’t talk about, Mark, is what makes Roofsimple different is that you have a strong service mentality for your clients. You don’t show up with some shingles, hammers and nails. You have a service component around insurance. That’s part of your differentiation in the marketplace. You help go through dealing with the insurance components of things. It’s like, “That is a load off to never have to deal with the amount of time that takes, the arguing, the battle it takes to deal with underwriters and assessors and all that crap.” It’s like, “I would put a price to that.”
Other people maybe have time. There’s a time trade-off. You’re taking on an activity that others would say, “I don’t have the time for it.” If time is their trade-off, then they’ll probably buy. If time isn’t the trade-off for somebody else, they’re likely to say, “I can go ahead and do that myself. I’m not working.” Understanding what that is and figuring it out. When you’re selling in a B2C world, you can come up with a set of frameworks to say, “These are the top trade-offs that our customers are likely to be making.” Create a set of questions that say, “Given these trade-offs, these are the questions to ask in order to figure out which trade-offs are more important to them.” That helps you develop that for your salespeople and gives them different questions to ask.
Even the traditional good, better, best, we always have those options. I’d love feedback on this. What I realized is that as part of trade-offs, it’s making sure that those are clearly defined offerings. There’s a pretty high contrast between each one of them so that it’s easy to identify where you fit. I feel like that’s one simple way of almost immediately recognizing at least certain trade-offs right away.
A confused mind does not buy. Having that clarity among the different options is important. One, it allows your customer to put themselves in whatever bucket or box that is. They get to pick where they fit on that. You’re not telling them. They’re picking it. You’re right. Depending on how you’ve written those different offers will also drive trade-offs you can recognize as being important. If those are written with respect to the trade-offs, that makes it that much easier. Mark, how can people find you?
To be honest, I don’t do a ton of social media myself but our business does. I have six kids. I’m pretty busy. You can find me on LinkedIn. If you message me through there, I’ll certainly respond to you or join your network. If you’re interested in any actual conversation, I’m open to having people email me directly. If you’re going to sell me stuff, I may or may not respond to you unless you have an awesome offer. I get lots of those all day. If you’re curious about anything that I’m doing or I can help in any way, I’d be happy to have a direct conversation over email.
Mark, it has been great having you. This has been a wonderful lesson. I hope everybody sees this as a great case study on negotiation in small business and knowing what to ask for or when to ask for it and then taking the initiative to do it. I appreciate you sharing this with us. Many things to learn in here. Thank you very much. Thank you to all of our readers. I love that you tune in. I appreciate you. I look forward to hopefully seeing you soon at events or in our programs. Go to VennNegotiation.com. You can find a lot more information about us. We are in the process of launching our new Venn Master’s Program to help small businesses and entrepreneurs negotiate more effectively. You can find out more information about that. You can go to our website and sign up for my new book that is coming out called, Why Not Ask? A Conversation About Getting More. Hopefully, you’ll check that out. Have a great day everybody and we will see you on the next episode of In the Venn Zone. Thanks, Mark.
Thanks, Christine. It’s a pleasure.
I hope this was good for you.
I’ve learned a lot. I will read your book, for sure. I appreciate it. This is my first. Thanks for having me on.
Important Links:
- 911 Restoration
- Roofsimple
- Blair Dunkley
- LinkedIn – Mark McShurley
- Why Not Ask? A Conversation About Getting More
About Mark McShurley
Co-founder of Roofsimple.
High school and college drop out.
Fine arts enthusiast.
Resides in Virginia with his wife and 6 children.