Striving for a win/win transaction in business

We hear a lot about the "art" of the deal these days, and while I agree there is a fair amount of art associated with every deal, I believe that, in the end, it really comes down being smart and reasonable and a lot of hard work and preparation. Whether it's dealing with suppliers or other shareholders or negotiating with someone interested in buying your business, the aim is that both parties come away satisfied with the result and both sides feel they have achieved success on their most important points. That Win/Win box is the place we all should strive for not only in the business world, but in our private lives as well. Although lopsided transactions do often get done, one party declares victory while the other party will likely carry a grudge forever. These Win/Lose (or Lose/Win) deals engender feelings of elation and feelings of anger that often and ultimately turn the result into a disaster. Sometimes it's OK to wind up in the fourth box Lose/Lose. If the parties simply cannot agree to terms, it's OK to walk away. But often it's because one or both sides refused to negotiate in good faith or their priorities were misplaced. That's when it all breaks down for a variety of reasons, real and perceived and often neither party really understands why. It is essential to set clear and realistic expectations at the outset. Why am I really selling my business? How much is my business really worth? Who are the best buyer prospects? Am I flexible about purchase terms such as earn-outs and non-competes, and am I willing to stay on for an extended transition period? It is unrealistic to expect to achieve all of your objectives, so you must set priorities. Understand which of your objectives are most (and least) important to you. Is it strictly sales price? Is it a change in lifestyle? Are family members involved? Be firm about your highest priorities, and be willing to give on the lesser ones. Above all, be flexible and look for reasonable solutions rather than issuing ultimatums. I find it very helpful to put myself in the shoes of the other person and consider their objectives and priorities. (Think who-what-when-where-why.) That means looking at your own business from the perspective of potential buyers where they see value and opportunities, and what they perceive as particular risks. A business owner who is interested in selling his or her business needs to have a feel for what issues a buyer might have with the business. It's like ordering a home inspection of your current home before you put it on the market to see what repairs a buyer might ask for as a condition to closing. I call it "pre-diligence" that is, undertaking a comprehensive review of every aspect of your business, legal, financial, tax, and operations so that you are well prepared long before the buyer's comprehensive due diligence process is launched later in the sales process. Negotiations begin long before that very first email or meeting and they last throughout the entire process through due diligence and legal documentation to closing, and even beyond and the financial advisor or investment banker plays a critical role in this process. He brings to the table a range of experience and negotiating skills necessary to reach agreement on key deal points throughout the process up to and including the closing. ----- Ken Collins is Managing Partner of KBC & Associates, based in Huntington, New York. Published: Fri, Dec 01, 2017