When it comes to acquiring or selling a business, negotiation is vitally important. But it can also be complicated. Unfortunately, many prospective business buyers and sellers overlook the significance and complexity of negotiation.
There are four basic ways to negotiate. It is wise and worthwhile to consider your strategies before the time to buy or sell arrives.
Negotiation Tactic #1: Take It or Leave It
In this negotiation tactic, the buyer makes an offer and the seller makes a counter-offer, then both sides leave it there. Rather than negotiate further, the buyer and seller are ready to walk away if the counter-offer is not accepted.
It is important to ask yourself if you are completely comfortable with this uncompromising approach. Sometimes a small degree of flexibility can go a long way towards turning a proposed deal into a reality.
Negotiation Tactic #2: Consider Splitting the Difference
Another negotiation tactic is to offer to split the difference. This straight-forward tactic demonstrates flexibility. However, the financial implications of splitting the difference may not always make the decision to do so worthwhile, for one or both parties.
When considering rejecting an offer to split the difference, it is important to think about all the factors involved in allowing the deal to fall apart, such as the amount of time it will take to find another buyer or another business to buy. Demonstrating a willingness to split the difference is often seen as a goodwill gesture that can facilitate further negotiations within an environment of lower emotional intensity.
Remember that when both sides are communicating, potential remains for a deal to be reached. When communication ceases, the opportunity is lost.
Negotiation Tactic #3: Offer What is Most Important to Each Party
Understanding what is most important to both parties is usually critical for a successful deal. Important areas can range from allowing a relative to stay with the business to moving the business to a new location. Not all things the parties will consider important are directly linked to money, and it is vital to understand this all-important negotiating fact.
Negotiation Tactic #4: Bring in a Pro
In negotiations there is an adage, “Never negotiate your own deal.” Emotions can run high when it comes to buying or selling a business, and then there is the problem of perspective. Buyers and sellers often lack the perspective an outsider can bring.
Inviting help and guidance from someone who buys and sells businesses for a living can be a huge step in the right direction. A professional merger and acquisition advisor can make it possible to not only establish a fair price but also address the numerous unexpected issues that arise when buying or selling businesses.
Deals are put together piece by piece, and skill is involved in the process. Working with others is at the heart of successful negotiation, and that means taking into consideration what the other side wants and what the other side needs.