“Negotiation is like jazz. It is improvisation on a theme. You know where you want to go, but you don’t know how to get there. It’s not linear.”
So says Ambassador Richard Holbrooke, former US ambassador to the UN and past winner of Harvard Law School’s Great Negotiator award.
It’s true that when selling your business, you will need to employ an eclectic range of personal skills and responses in order to reach an outcome that all parties are happy with.
You could say that it is an art…and one that requires a certain panache.
Follow these simple guidelines and you might just pitch it right…
The show’s the thing
Try to think of selling your business as putting on a good performance – the important action is all happening out front, whilst the technicians see to the details backstage.
It’s well worth, in your initial dealings with your buyer, trying to agree a set of core business terms before you call in the lawyers.
Take a leaf out of Warren Buffet’s score sheet: a champion of plain speaking and ‘the personal touch’ in business, whenever he wants to acquire a company he writes the CEO a straightforward letter of intent and leaves the technical nit-picking for later.
It may be tempting to let a legal professional bang their fist on the table and thrash out detailed terms at the outset, but you will be forfeiting the positive relationship (and profit) that a more human approach could ensure.
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Key factors to agree on at the start are the cash on closing, any seller take-back, what happens if either party wants to pull out before the transition period is over and the working capital in the business at the point of sale.
Listen and learn
It’s best to really get to know your buyer before any key terms are agreed upon. And that means using your ears and not your ego in the negotiating room.
Try to keep the focus on results and what would be the best outcome for both parties.
Remember that the more you say, the more you give away so try to be controlled. Ask your potential buyer lots of questions, including what they want out of the deal. Let them talk and take notes.
You will then have more of an idea of what is in your control and what is not. Try to ascertain how creative, trusting or cooperative your buyer is.
If you understand their tendencies, you can behave in the most constructive manner.
There’s no use going in ‘all guns blazing’ when your buyer is reserved and cautious. Nor would it be wise to be too conciliatory in the company of a hard-as-nails veteran of the negotiating room.
However you pitch your negotiation style, it’s worth putting a racy optimum selling price on the table when the time comes to talk hard cash.
You should have a plan A, B and C in your mind from the outset. A is the ideal – the top price you could hope for. B is a compromise, but workable. C is when you walk away.
If a buyer brings you down to B, you are still in a good negotiating position. You have allowed the buyer to feel like they are in control and so will probably have a little leverage on other assets and aspects of the deal.
Know your worth
No one is going to want to buy your business if you aren’t passionate about it. Take this energy into the negotiations. Keep in mind all your enterprise’s best assets and ask yourself what in particular would be of interest your prospective buyer.
Be wary of offering too much of a discount just to make the sale and no matter how tempting it may be, don’t make promises you can’t keep.
If the buyer has agreed to the full purchase price, don’t get carried away and promise things in terms of stock and timings that won’t be feasible.
Remember that both buyer and seller are trying to find the right ‘fit’ and this will take a lot of jostling around. Panicking or getting impatient will not help the process.
Are you a salesperson or a negotiator? It’s hard to wear both hats.
The art of negotiation is not an exercise in selling: it has to be a measured discussion about how to achieve a mutually agreeable outcome.
Don’t put your buyer off by going for a classic sales pitch. Rather than saying ‘look what we can do for you’, try a more equable approach: ‘This is what we do and what we can offer. How can that work for you?’
The Ambassador may have had a point. Jazz is often referred to as a musical conversation. By dropping the sales banter for some empathetic discussion, you and your buyer may end up playing the same tune.