Negotiating the terms of the deal when you’re buying a business is not unlike a game of poker. Old Kenny Rogers was on to something in his famous song “The Gambler”.
“You’ve got to know when to hold ’em
Know when to fold ’em
Know when to walk away
Know when to run
You never count your money
When you’re sittin’ at the table
There’ll be time enough for countin’
When the dealin’s done”
WHEN TO HOLD ‘EM & WHEN TO FOLD ‘EM
When two parties come to the negotiation table, the goal is to get as close as they can while making the least impactful concessions. Having a good concessions strategy could be all the difference in getting a deal you’re happy with.
When you do “fold ‘em” and are at the point of making a concession, be sure to express the value of what you are giving up and clearly define what you expect in return. Take time to think through any necessary conditions of the concessions you make.
Make your concessions in phases of the negations and not all at once. This will strengthen the perceived value of each concession and give you more leverage as negotiations proceed.
WHEN TO WALK AWAY (OR RUN)
First, you’ll need to do thorough market research to gain an clear understanding of the lowest and highest range of purchase price to expect. Then come up with a reasonable “walk away” point based on the price (in light of terms — see below).
Second, you may consider planning to have a BATNA (best alternative to a negotiated agreement) in case negotiations ever approach that “walk away point”. Either way, it’s important to have the courage to end the negotiations rather than talk yourself into a deal that’s not right for you. You’ll be glad you did.
WHEN MONEY’S ON THE TABLE
Know that purchase price is not everything. In fact, the amount of cash you pay on closing day may very well be as important as the purchase price you agree on. Creating terms beyond price (especially when it’s not a full sale) allows you to get a feel for what the seller is really after.
WHEN THE DEAL IS DONE
If you’ve been a part of negotiations in the past you know this to be true — you will second guess yourself. And that’s perfectly okay. Note: don’t dwell on what you “might have done wrong” (this could have a negative impact. Embrace the deal itself and make mental notes (or even write down) things you could have added to the deal. and it will make you a better negotiator in the future.
Robert R. Robles has more than 30 years experience in helping clients with in nearly every aspect of business law, including business formation, management, and business transactions. Call today to leverage that experience for the purchase of your next business. Our skilled legal professionals are ready to assist you with your case.