Negotiating Tips: Selling, Buying A Business

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Posted on January 12, 2009 by Peter Siegel, MBA

Negotiating Tips: Selling, Buying A Business

When a business buyer and business owner/seller are tired of sending offers and counters back and forth without achieving a satisfactory resolution, it might be time to meet face to face. And to be effective, parties might borrow some ideas from skilled negotiators. Ten ideas to use when negotiating are:

1. KNOW WHAT YOU WANT. Seems simple enough, but one reason people don't settle on a deal is because they change their minds, in response to changes proposed from the other side. Be clear about your bottom line and stay with it.

2. LISTEN TO THE OTHER PARTY. When people who feel they're being "heard," they become much easier to work with than if they believe their concerns are ignored.

3. ESTABLISH RAPPORT. Chatting about the weather and the recent performance of the home team, at the beginning of the conversation, is not a waste of time if it helps the parties "warm up" to each other.

4. BEGIN WITH WHAT YOU AGREE ON. That's how diplomats "broker" a cease fire between warring factions. They find a common ground, get both sides to agree on some basic principals, although small, and then proceed, from that foundation of agreement, to address bigger issues.

5. KEEP EMOTIONS IN CHECK. Volatile personalities can magnify small differences into critical, anger provoking issues. Remain cool and think before speaking or acting.

6. SLOW DOWN. When demands and counter demands are exchanged quickly, there is no time for either party to think through what he or she is trying to accomplish. Conducting the discussion at a methodical pace helps to prevent those brash statements that disrupt a mutual accord. The mutual accord is what parties need to achieve if they're going to have an agreement.

7. BE WILLING TO GIVE AND TAKE. When someone thinks the differences cannot be resolved, he or she often is surprised that by moving a little toward accommodating the other person, and the other person doing the same, there suddenly is a point at which they meet in the middle.

8. MAKE SURE YOU ARE CLEAR ON CONCEPTS. Misunderstandings often arise because there was no understanding about what was being discussed in the first place. When I say "profit" is it calculated the same as when you say "earnings"? Are we really in agreement about the exchange of receivables and payables? What does that mean to you? Do you understand it the same way I do?

9. PLAY "WHAT IF!" There is room for creative ideas when negotiating. If a fresh idea can break a stalemate, it needs to be introduced. Suggesting a possible compromise as a "what if?" is a non-threatening, non-demanding way to get the other party to join you in thinking "outside the (negotiating) box" in which you both might be trapped. Example: "What if you agree to buy all the inventory, and I agree you can take six months to pay for it?"

10. USE THE BROKER. An experienced intermediary not only knows how to act as a "third party" who can dispassionately notice what the principals can't see (because they're too close), but also can draw on experience to bring additional and useful information into the discussion. One negotiating block was overcome when the broker let the seller know he could take a promissory note from the buyer, then sell it--at a discount--to get the cash he needed.

To get discussions moving forward, and maybe toward a mutually-acceptable agreement, parties are advised to meet up at the bargaining table, and bring with them some negotiating skills.