Negotiating Mistakes to Avoid
Here are a dozen ways to ruin a deal (and suggestions on how to save it):
1. Concentrate on disagreements. It's tempting to go straight to the problems in the deal. This creates a deadlock, and no reason to continue. Start with, and emphasise, the points of agreement, no matter how small. This gives the other side hope that compromise is possible on the big issues.
2. Hide the flaws. A seller should make sure serious flaws are disclosed before the first offer. A buyer's motivation to buy peaks at the time of the offer, and goes down from there. Disclosing serious flaws after an offer is made is not only unethical, but it is poor negotiating strategy.
3. Ignore the marketplace. Everyone wants to buy low and sell high. The fact is, almost all buyers who insist on paying less than market for a business never buy a business (or they fall for a "pig in a poke"). And, sellers who overprice their business end up owning it forever.
4. Take unreasonable positions. Unreasonable positions create distrust, and distrust ruins deals. I believe the major reason sellers suffer so much when they overprice their business is that it makes the buyer wonder what's wrong with the business. Buyers that make lowball offers usually don't get a business, but they do get the seller's bad feelings.
5. Unrealistic objectives (Buyers). Many buyers want the perfect business: no risk, high profits, no competition, and of course a bargain price. It doesn't exist! I believe a more realistic objective is to find an interesting business with prospects for growth, with disclosure of important facts from the seller, and a fair price.
6. Unrealistic objectives (Sellers). Many sellers want to retire or buy another business with the proceeds of a sale. They need all cash, a quick sale, no income taxes and the highest possible price. Unfortunately, this choice isn't available. The real choice is between selling for market value, or over pricing the business and not selling at all.
7. Some people can't quit when they're ahead. Dragging out the negotiations with multiple counter offers decreases the chance of ever reaching an amicable agreement.
8. Don't listen. Most of us assume the other side wants to take away that which is most important to us. Listening carefully to the other side's position often allows you to solve their problem at very low cost to you.
9. Negotiate against yourself. Good negotiators will ask you to do better before they respond to your last position. Don't fall for it!
10. Delay. Time is the enemy of every deal. We all have second thoughts about committing ourselves. As time goes by, the more likely we think we made a mistake.
11. People want to do business with people they like. Cultivating the other side and listening to their needs will often get you a better price and certainly an easier deal. Making enemies will often get you lack of cooperation and possibly a lawsuit!
12. Don't put it in writing. This is the most avoidable, yet most frequent negotiating mistake made. Whether through honest misunderstanding or worse, the deal you thought you had will change if it's not in writing (and signed).
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