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Eyes On The Prize: More Effective Negotiation Skills When Selling Your Website
By Quiet Light
If you’ve ever bought or sold a business (or even looked into doing so), you’ll know it’s a complex process. But one of the most important components of the process—the art of negotiation—is an area where buyers and sellers alike can make things harder than they have to be.
In business, as in real estate, negotiation can be a sticking point for sellers and buyers. And also as in real estate, negotiation can become a deal-killer if one or both parties get so caught up in the back-and-forth that they shift their focus from a successful sale to trying to “win.” To keep the proceedings simple, the tone civil, and the sale on track, a little planning is in order.
Before You Start Negotiation: Identify Your Priorities
An offer to buy a business usually contains several negotiable components. The process of negotiating these components is where sellers, and buyers, often get taken up in the desire to “win” rather than crafting a solid agreement.
Before you begin negotiations in earnest, it’s a good idea to sit down to identify what you will and won’t be negotiating. Identifying clear, concise goals can relieve a significant amount of stress at later points during your negotiation. Consider breaking the discussion into three parts:
- Non-Negotiables: The items on which you or the other party are absolutely unwilling or unable to negotiate.
- Semi-Negotiables: These items may be open to discussion, but will usually require extensive negotiation to change.
- Non-Material Negotiables: These items are readily negotiated by both parties.
For example, if you’re selling your business because you’ve opted to take a new job, your negotiation list might contain:
- Price for your business (set a minimum price that you are willing to accept)
- A limit of 60 days for training (start at 30 days)
- Type of financing (straight financing only, no performance-based financing)
- Interest rate on financing (Minimum of 4.5%, however, negotiable depending on the other aspects of the deal)
- Holdback terms (either no holdback or 30-day holdback, negotiable up to 60 days depending on rest of deal)
- Financing terms (ideally less than six months, but no more than 18 months)
- A reasonable non-compete agreement
- Asset allocation
- Non-Material Negotiables
- Language in the contract that does not place undue risk on the seller
- Training specifics
- Introductions to vendors
- Duration of the non-compete (assuming the scope is sufficient)
This list will vary from deal to deal. For some people the list will be extensive, for others there will only be a handful of items that concern them. But nearly every negotiation can be greatly simplified by taking the time to set your negotiation parameters beforehand. Be sure to have reasons for setting your parameters and to not fall into the trap of setting a parameter just because it sounds like a good idea.
The Goal: Knowing When to Walk Away & When to Stay
At the heart of every deal there is a seller who wants to sell and a buyer who wants to buy. If this seller and this buyer are going to complete a deal, they need to agree on the details. But how do you know when the details no longer work in your best interest?
Many times sellers (and buyers) go into a deal with the hope of simply “feeling out the process”. The problem with this approach is that when you are in the midst of a negotiation, it can be difficult to identify when you are negotiating with your best interests in mind and when you are negotiating as a reaction to what your counterpoint is doing.
If you identify your priorities before you begin negotiating, it will be significantly easier to identify when a deal simply will not work. Walking away from an interested buyer is never an easy decision. Knowing what makes up the “big picture” before you negotiate will help you avoid regret if you find that you have to walk away from the deal.
Focus On The Big Enchilada, Not Small Potatoes
Until someone invents negotiating robots, human emotions are going to be in play during any negotiation. Unless you’re Mister Spock (or one of those hypothetical negotiating robots), you can’t suppress your emotions, but you can be aware of how anger, fear, and even joy can push you into ill-advised actions. Buyer or seller, you can tank a deal if you let yourself get too caught up in gaining inches instead of running toward your main goal.
Every request, and every decision, should be made with informed and considered intent. For example, if you, as a seller, are set on a limit of 60 days for a holdback, ask yourself if it’s really a non-negotiable component. Will it hurt you in any significant way to take a longer holdback if that will seal the deal with your buyer?
Remember: Reasonability should always win out. Neither sellers nor buyers should be expected to bend to unreasonable requests, but both parties will benefit if they measure their individual requests against the yardstick of their shared overall goal—a successful and mutually beneficial sale.
Negotiation is as much an art as it is a science. But if you approach the deal with an open mind, a clear understanding of both parties’ individual and shared goals, and a willingness to compromise when it counts, you’ll be well on your way to ensuring your next business deal is a successful one.