March 20th 2024.
Have you ever stopped to think about how much negotiation is a part of your daily life? From convincing your kids to get ready for school to calling the phone company to lower your bill, negotiation is everywhere. These low-stakes negotiations may seem easy to master, but when it comes to selling a six or seven-figure company, things can get tricky. That's because we often rely on outdated stereotypes from movies and TV shows, rather than using effective negotiation techniques. We may even resort to telling white lies in order to pressure the other party into making a quick decision. But when it comes to selling a company, technical skills alone are not enough. It takes a human touch and a set of specific strategies to navigate high-stakes negotiations.
As a business owner, I've learned a few valuable tips from my experience with high-stakes negotiations. One of the most important skills is the ability to listen. Many people feel the need to dominate a conversation in order to be in control, but the truth is that the best negotiators know that listening is their most powerful weapon. By listening carefully to the other party, you can identify their true objectives and use this knowledge to craft a deal that satisfies everyone's goals. For example, I once had a seller who was hesitant to let the buyer speak directly to their customers before committing to an acquisition. But upon listening carefully, we realized that the buyer only wanted to verify that the customers were satisfied with the business. By understanding their true objective, we were able to find a solution that worked for both parties.
Another crucial aspect of successful negotiations is anticipating potential problems. When there is a significant amount of money at stake, the other party is likely to be skeptical and may even imagine potential issues that could arise. It's important to identify these issues upfront and address them with honesty and candor. For instance, if your business is going through a rough patch in sales, don't try to brush it off or make excuses. Instead, be transparent and explain why it's happening and how you plan to fix it. By being upfront about potential challenges, you can prevent unpleasant surprises later on in the negotiation process. I once had a client who failed to disclose a past lawsuit, which ultimately cost them the sale. It's better to bring any potential issues to light early on, rather than risk losing the deal later.
It's also essential to have a backup plan in place before going into a negotiation. Your greatest leverage is your ability to walk away from a deal, but this leverage weakens if you come back to the table. Having a backup plan gives you the confidence to walk away if necessary, without weakening your position. This was a lesson I learned early on in my career as a business adviser. We had to resort to our backup plan when the buyer's attorney was being unreasonable. By having other interested buyers and a solid backup plan in place, we were able to walk away and still close the deal with a more reasonable attorney.
Ultimately, being a skilled negotiator requires more than just technical skills. It also requires being a nice and approachable person. Instead of storming in and shouting demands, take the time to understand the other party's perspective and treat them with respect. It may take practice and experience, but the best way to approach negotiations is to put yourself in the other person's shoes. When you do this, you'll have a solid foundation for a productive and profitable discussion.
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