My wife, Gayle, and I recently celebrated our 35th wedding anniversary. We’re both strong-minded but we’re careful not to let our differences turn into a contest of wills, where one “wins” and the other “loses”.
Yet that’s often what happens to people with opposing interests—in business as well as in life. The steamroller may “win” in the short term, but at the cost of longer-term damage to a relationship they’ll be counting on down the road.
It’s far better to find options that meet both parties’ needs. And that’s where an experienced third party can help.
In the buying/selling of a business, that experienced third party is a business broker trained in guiding buyers and sellers to common ground. In Canada, individual business brokers often represent the interests of both the buyer and the seller of a business. This is known as dual agency.
I believe the fact that we operate as dual agents with an intimate understanding of both parties’ needs has a lot to do with our success in closing deals. Our goal is to achieve the objectives of both and to protect both, advising what is and isn’t reasonable.
Let’s say you’re the seller. You want to maximize the value of your business while minimizing risk and taxes. When the sale is closed you and the buyer need to be on good terms. You are probably going to train them. You will probably be lending them part of the purchase price. You may even be staying on with them for a period of time.
The purchaser is buying without audited statements, and even though they have done some diligence, they are buying largely on trust—trust that you have developed with them during the investigation stage.
You and the purchaser have opposing objectives during negotiation, however, and emotions can run high-it is important that you let your business broker do the negotiating. They have training and experience in negotiating that you probably don’t. They will help you reach a deal that achieves your goals and the buyer’s goals—they understand both. If the deal does not work for either of you it will not work at all.
That does not mean you shouldn’t provide input into the development of a counter offer – you should, however, keep in mind that it has to work for both of you.
Building a pattern of agreement
We start by looking for mutual gains. Your counterpart is working for the best deal they can get. Where do they overlap? Start with what you can get agreement on, and build a pattern so it’s easier to get a concession when one is needed.
Know what concessions you’re willing to make in order to get more of what’s important to you. Prioritize what you must have, what you’d like to have and what you don’t really care about. The latter can be a bargaining chip—what’s disposable to you may be important to the other side. Your broker will facilitate the trade off, as you give up some things that are a little important for things that are more important.
Generally, the first offer you get from a potential purchaser is not their best – it is their first. Price, terms, closing dates, diligence timelines, inclusions and exclusions are all negotiable.
As you work through the negotiations, keep in mind your Best Alternative to a Negotiated Agreement (BATNA). You need to determine this before you start the negotiating process. It may be that you simply keep the business or that you hope another buyer will be presented. If that’s the case, and it’s clear that an agreement can’t be reached, then you have to be prepared to walk away.
In the end, you make the decision. Not your accountant or your lawyer or your family and friends. You must decide based upon what works for you.
If you’d like to do further reading on effective negotiation, I recommend Getting to Yes: Negotiating Agreement Without Giving In, by Roger Fisher, William L. Ury and Bruce M. Patton.
Give to get. Give and take, and the need to listen to and understand the other party’s position, is needed on both sides.
It’s not personal. Avoid confrontation—learn to separate the person from the issues.
Focus on issues not position. Find common ground of shared interests.
Be prepared. Know what’s essential, optional and dispensable.
Keep an open mind. Be receptive to creative solutions.