Negotiating the sale of a business is never easy but most people tend to think of it as an inherently adversarial process. On both the buyer and seller side, it feels like a zero-sum game: the more you give the less you get.
But Roxanne Reid, a Harvard-trained negotiator with over 38 years of business experience, believes this may be misguided. “It’s not meant to be a boxing match,” she said during her presentation at this year’s #BossUp conference. She explained that when you start from a place of mutual respect and agreement, it’s possible to create value. “There are other ways we can expand that pie,” she said.
The way to do this looks different in every deal. It may involve having the seller stay on for a while following the sale, or it may involve earnouts, or one of the multitude of variables in how the deal is structured. What is important, according to Reid, is that you track and understand the other party’s goals. This will help you reach your ZOPA or "Zone of Possible Agreement.”
“The personal small talk matters,” she said, “keep track of the other person’s arguments and interests.” She highlighted the following keys:
- Create a relationship before you sign a deal.
- Understand and respect each other’s goals and always show respect.
- Put mechanisms in place to foster communication. “Don’t leave everything to lawyers,” she warned. “They are busy, they are tired, they are stressed, and you’re one of maybe 50 projects on their desk that week.”
- Create a fair deal for both sides; be considerate and identify the value.
- Listen and watch for the feelings behind the words; negotiations are emotional.
With this interpersonal foundation laid, then of course it’s important to understand the financials, the market, and other variables that might affect the value of the business including things like interest rate changes and the competitive landscape. This way you can establish things like your reservation point and your walkaway point.
“Keep in mind that once that contract is signed and the deal is done, that contract is put in a drawer but the relationship is ongoing,” Reid said, referencing the fact that in many cases sellers remain involved with the business following the sale. “You don’t want to burn bridges.”
In this respect, managing your emotions in the heat of negotiations is key, Reid advised. She offered three points to avoid having them getting the best of you.
- Know your triggers and evaluate them. What are you feeling and why?
- Give yourself a break. Step outside the room. Reset.
- Breathe. Pause before responding. Silence is powerful.
Watch Reid’s full session here.
