Two Foundations of Good Negotiation

Steps to Selling your Business Part 32.

At this point in the sale of your business, you will have one or several Letters of Intent from interested buyers.

When we work with clients, we do a lot of heavy lifting in thinking, analysis, explaining, and positioning. We have found that buyers respond very well to this effort and demonstration of professionalism. This is extremely helpful as we begin to understand what motivates and is essential to the buyer.

Negotiation strives to keep the power on your side.

Let’s be clear: keeping the power on your side is not the same as getting everything you want 100% of the time. Constructing a deal is much more than that.

In the end, your Advisors can do only that: advise you; the final decisions are yours to make. But, a good team will help you understand your non-negotiables before any agreement takes its final form.

An experienced team will know what to give up, what concessions to make, and what points to stand firm on to ensure you reach your goals. You may wiggle on minor points of contention, even give up some ground in minute-by-minute negotiations, but it’s possible to do that without giving up control of the process.

I have watched some virtuosic negotiators at work. I’m convinced it is a whole suite of skills and talents working together on an unseen and sometimes supernatural level.

Skilled negotiation requires a high level of natural empathy – seeing things from the other side’s perspective and adjusting tactics accordingly. At times, negotiations may seem instinctual to an outside observer as their Advisors adjust on the fly.

There are two principles at work behind the magic of negotiation.

First, all good negotiation is rooted in knowledge.

At the negotiating table, knowledge is power. It is a fundamental mistake to negotiate something you don’t understand. We push our team to be the best-informed people in the room.

Remember that your buyer has initiated a new level of scrutiny at this stage. In the past, I have seen ill-prepared Advisors taken by surprise by facts about their clients that the buyer uncovered. If that happens, the seller loses significant ground, which, to have great outcomes, cannot occur. This holds true during diligence, as well.

With knowledge as their foundation, your Advisors can anticipate questions in advance and have responses ready. This is transformative – what your buyer thought was an ‘issue’ becomes an opportunity to prove that you can lead them through to a mutually acceptable resolution.

Your team’s commitment to knowledge should also include a thorough understanding of the buyer’s company. Get a good picture of who your buyers are, the history of their organization, and their trajectory, and we can make accurate decisions about how to approach them with the best outcomes in mind.

The second foundational principle of good negotiation is honesty.

Honesty holds power in negotiation: a true story doesn’t fall apart under inspection, and valid numbers hold up to scrutiny.

We are diligent about discovering your weaknesses with honesty and transparency. No one can drag anything out of the dark when you’ve already brought everything into the light.

At the negotiating table, I’ve seen it proven again and again— we build our approach on a moral foundation, and it stands solid while we fight for the deal our clients deserve.            

If you are planning to divest your business or have questions for one of our Advisors, please contact our team today.

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Written by: Douglas Nix