Negotiating and Structuring the Optimal Deal
Anxiety will affect your negotiating skills; therefore your broker should do the negotiating on your behalf with the Purchaser. It is only when agreements have been reached that you should have further contact with the Purchaser.
While every business sale involves unique circumstances, there are a number of universal tips that apply to most situations – here are 10 practical tips for successful negotiations that you and your broker should follow:
- Keep your eyes on your goals - prioritise your objectives up front. Do not get bogged down on unimportant or non-essential issues.
- Do not expect to win every battle - you will probably never negotiate a deal if you insist on winning every argument. Negotiations require compromise - you need to let the other side win a few points to get anywhere in negotiations.
- Understand the other side's wants & needs - it is often helpful to put yourself in your opponent's shoes, to understand their reasons for buying your business. Once you see the deal from their vantage point, you will be better able to present your goals in a manner acceptable to them.
- Do not get emotional - do not get caught up in the drama of the event, or take matters personally. If you cannot trust yourself to remain calm at negotiations, do not meet face to face with the Purchaser during this time.
- Be flexible - the idea of negotiations is to achieve most of your goals through compromise. Always be willing to think of or listen to alternative proposals.
- Listen - let your opponent do most of the communicating. The ‘Winner' of a negotiation is not the one who controls the conversation, but rather the one who walks away with what he wanted.
- Never be afraid to walk away from a deal - it is important that you never emotionally commit yourself to a Buyer until after a deal has been negotiated. To maintain negotiating leverage, you must always be willing to walk away from any deal that does not satisfy your basic requirements. Always leave yourself room to walk. And yet…
- Never threaten to walk away from a deal unless you mean it - you only get to walk once. Walking away from negotiations should only be used as a last resort, not as one of your negotiating tools.
- Deal honestly and openly - to extract the best deal from a Buyer you and your broker must first build an atmosphere of trust. If you have been overtly sly with prospective Buyers, or have not been particularly forthcoming, you force Buyers to adopt a cautious attitude toward you and your business. You will never achieve a premium deal from a cautious, uncertain Buyer.
- Do not over negotiate - stop when you have achieved your goals. You never know when a Buyer is ready to call it quits - by continuing to push and prod, you may quickly find out.