There’s one factor influencing all of us when we negotiate a significant sale and that is we’re human. We have feelings. And several human feelings affect all significant transactions, specifically fairness, relationships and trust. Here are some truisms as it relates to them.
Fairness Feelings
All parties to negations want to be fair, we just have different ideas of what fairness is. We need to make sure our fairness is rational. For instance, it’s rational for us to negotiate our price based on the business value, but not on what we need to retire. It’s not rational to base it either on what we’ve previously sunk into the business or what the buyer might earn if they only did this and that. Buyers pay for what the business is worth.
Relationship Feelings
We won’t sell our business to someone who we don’t like. Conversely buyers usually won’t buy from someone they don’t like. It doesn’t work that way for it’s more than about price. It’s about selling a big part of our lives, so we must develop a relationship with the potential buyer. And relationships can’t be built with someone you don’t know. So, we must spend time getting to know the buyers as people first, then as a prospective buyer.
Trust Feelings
The best transactions are between people who trust each other and trust begins with a relationship. Fact is, it’s hard to trust someone we don’t know. Why is it important? When we trust, we are less likely to suspect that they have ulterior motives or will be deceptive. When negotiators lose trust, they become angry and often act irrationally and that never ends up well.
Trust is also built on honesty. Some sellers say, “This is what I told the Internal Revenue I made, but I really made more.” Buyers think that if you lie to the Internal Revenue, who has the power to put you in jail, they don’t stand a chance of getting the truth from you. Don’t do that.
Interests and Positions
The devil is in the details. You prepare by developing your Worse Case Alternative, your Minimum and Asking Price, as well as your Target. Now you can even do the same for your counterpart. Brainstorm some negotiating points. Begin with the critical and obvious points but also understand interests and positions.
Positions are specific stands one takes at a given moment. These are based on underlying interests. A buyer may take a position that the business is worth $300,000 but their underlying interest may be to take over a long-time market leader (you) because of the prestige they think they will gain. Real interests always trump any specific position they may be taking at the moment. Try not to take things buyers say too personally as it often reflects their position rather than their real interest.
Verify Authority
If you have the ability to make all decisions relating to the transaction and your counterpart doesn’t, you are at a disadvantage. Make sure you are dealing with all of the people who are buying the business, preferably in the same room, every time you negotiate.
If you are dealing with a representative of the buyer or seller, reserve the same “I’ll take it to my people” for yourself. “I will have my accountant (lawyer and/or consultant) look over this proposal and get back to you by next week.”
Another approach is to get to the other authority in person. Suggest they be brought into the negotiations. If that’s not possible, you could withhold or withdraw from the negotiations since the representative doesn’t have commitment power. At a minimum, if dealing with a representative, gain their agreement that they will recommend the deal to the authority.
I have some other thoughts for you, but they will have to wait until next time.
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Receive daily email training messages as well as have access to our short (8 to 10 minute) printing-specific training classes on product knowledge and selling through the new CPrint Academy. $495 for a year’s subscription covers everyone in your shop. Go to www.cprintalliance.com for more information. Message Tom at tom@cprint.com or reach him at (304) 541-3714, connect on Facebook and LinkedIn and follow his business tweets on Twitter @tomcrouser. Tom is Senior Contributing Editor of this magazine, chairman of CPrint® International and principal of Crouser & Associates, Inc., 235 Dutch Road, Charleston, WV 25302, www.cprint.com.
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