If you are buying a business or selling a business, good negotiation is crucial, because usually you do this only once in your life. You don't get a second chance.
Of course, knowledge is essential when negotiating. But besides the technical side, financial & legal, other issues play a big role. Are you looking to sell a business? Below are the ten Golden Rules:
#1 Good climate
Cultivating a good negotiating climate is essential for a good outcome. Parties need to invest time in each other before getting down to business. Realize that negotiations are conducted by two parties, you and your negotiating partner.
#2 Preparation
Preparing is obviously important. Do you, and your adviser, really know what you want and where the other party's wishes lie? Is he able to use the change well to attract important business to himself? Does he, and you, know your resistance point and not be tempted to ignore it after lengthy and exhausting negotiations? It is important to properly define need to have's and nice to have's.
#3 Negotiating position
It is important to properly assess what negotiating position you are in? Do you want to negotiate or have you unintentionally found yourself in that position? Both have different impacts on the negotiation strategy to choose.
#4 Real opening offer
Determine well in advance what you want to pay or receive for the business through a valuation. Make a realistic offer and consider the type of process in which the negotiation takes place. If you are talking 1-on-1 with the seller, an offer at the lower end of the range may be a good opening. If you are participating in a broad sales process, it may be advisable to bid higher than the lower end of the range. However, never more than you are willing to pay!
#5 Award
Grant each other something. Nobody wants to be pushed around and if there is a longer relationship at stake, the long-term gain is greater if you grant your negotiating partner something.
#6 Soft on the person
In creating a good negotiating climate, it can be said that negotiation is soft on the person but hard on the substance.
#7 Strike
Cease or suspend negotiations if you no longer feel comfortable. In doing so, stay close to yourself and don't go past the resistance point. Stopping negotiations can send a powerful message if it is authentic and sincere.
Check out our tips on how to sell a business:
#8 Taking Minutes
Collectively write down the most important negotiated points still at the negotiating table. It frequently happens that there are different interpretations of what was discussed. In a new round of negotiations, start with the principles where last time stayed. Name the common interests but also the differences of opinion / opposing interests that still exist.
#9 No dirty tricks.
Stay away from "dirty tricks" (agenda manipulation, no authority, salami tactics, "good cop, bad cop" etc.) in negotiations, in the long run this does not pay off.
#10 Intuition
Think carefully in advance where your resistance point is and don't go over it if the facts don't change. Realize: better no deal than a bad deal. Your intuition is a good advisor in this regard.
Finally: Better to lie awake at night before the transaction than after. So get good advice from an adviser who also considers "soft sides" of the negotiations.
