Let's Talk Negotiations

Negotiation is often seen as a nerve-wracking and anxiety inducing interaction between someone that wants something, and someone that has something.

It’s more than that - it’s a delicate dance between people to find a common ground AND it doesn’t have to tie your stomach in knots.

Mastering negotiation can help you secure favorable deal terms, save money, and build strong relationships with sellers.

Effective negotiation results in better deals, alignment with your financial goals, and terms set with confidence to reduce your burden of risk.

Unfortunately, many people quickly rush through negotiation, either because they lack confidence, fear confrontation, or simply don’t know where to start.

The primary reason why so many struggle with negotiation is that they focus too much on winning.

When you approach negotiation with a win-at-all-costs mentality, you’re certain to miss the bigger picture.

Here’s why many people don’t learn how to negotiate effectively:

• Reason #1: Fear of rejection or failure during negotiations.
• Reason #2: Lack of preparation or understanding of the other party’s motivations.
• Reason #3: Focusing too much on price and not enough on terms.
• Reason #4: You never negotiate for little things so you lack the experience to negotiate on the big things.

But don’t worry, because I’m here to show you how I overcome these common negotiation challenges and master negotiations!

#1 - Failure and Fear

Rip off the band-aid. Some think the worst thing that can happen in a failed negotiation is that the door gets slammed and the deal is dead.

Actually, the worst thing is that you don’t bother to negotiate on price or terms and buy a business that can’t sustain it, lose your hard earned money, and bankrupt the company because of it!

Wouldn’t it be better to negotiate up front rather than lose everything in the end?

Fear won’t disappear on it’s own - so let’s work on how to beat it back:

• Don’t fall in love with a deal - you won’t be afraid to lose something when you realize there are more businesses out there than you have the ability to buy.
• Combat the fear of offending the seller by building initial rapport - This helps to understand what matters to them and how to offer a winning strategy for both parties.
• Know you hard line and walk away point - to get the best deal you can you have to know when it’s no longer a win for you so that with unwavering confidence you can say “I’m sorry, I just can’t do that”.
• Going for a NO early in negotiations removes the fear of receiving it.

The last point is a whole subject on it’s own, but just know that getting an early “no” gives you opportunities to reframe expectations. You can only go up from a no.

#2 - Understand Seller Motivations

When I search for deals I often see the reason for selling as “wants to retire” or “to pursue other business interests” but these are superficial motivations.

If they could retire without selling the company, why wouldn’t they?

If their business is such a great buy, why lot let it run and collect cashflow under the current management?

Because there’s something else driving these end results - their personal circumstances fueling the motivation to sell.

I like to take a 2 pronged approach to discovering seller motivations:

1 → Make a list of questions while reviewing financials that you need answered, and find broad, open-ended questions that will reveal that information.

”I see that your marketing budget doubled last year, how did that work out?”

”You did really well during the recession - you must be proud, could you tell me how you managed to do that?”

2 → Have a conversation with the seller and talk to them about their business and legacy - get them excited about recounting the hard work and success they created.

”Most of your employees have been here for over 10 years - you must be an excellent person to work for. What would you say your employees value most about working here?”

These 2 inquisitive steps need to be combined with shutting up and actively listening to the seller to have any value.

If you find that you’re the one talking the most you’re probably more concerned with proving that your motivations to win matter more than the seller’s needs (and they’ll know it).

#3 - Balance Price and Terms

Negotiating on price is a losing strategy - but it’s the focus of many sellers and brokers.

They have evaluated the business, added back seller benefits, and come up with a multiple that they want for their business based on averages across the market.

But… the market value is the value someone is willing to pay.

It’s important to remember that negotiation isn’t just about getting the lowest price; it’s about value and balancing risk.

I focus on the value drivers that matter and highlight them to the broker.

• This shows them that you’re not gunning to devalue the whole deal from the outset just to get a cheap price.
• This also sets important negotiating points around the business’ value that YOU care about.

This is sometimes referred to as “framing” in negotiation.

Codie Sanchez likes to say: “Your price and my terms, or my price and your terms, but not both”

The truth? Terms make the deal. Terms control the risk.

Price does matter - you can’t get cashflow if your debt ratio tanks the business. It just shouldn’t be the sticking point.

Negotiate these terms to balance price now versus the lasting financial risks:

• Earnouts (if the business performs as well as the owner claims they get $X at year one and/or year two)
• Forgivable notes (much like an earnout, but allowed by SBA)
• Seller Financing (balancing interest rates and repayment terms)
• Keep the price as is, but include working capital or Accounts Receivable into the terms.

What’s important is that you don’t lose sight of how terms control the VALUE of the deal and how that shapes the overall risk you carry into running the business.

#4 - Negotiate Everything

I love to negotiate.

I find it genuinely exciting to go toe to toe with other people and find out just how good the deal can get.

I’ll do it at department stores and get my own special discounts.

I’ve done it through my career to get bonuses, promotions, and projects to manage.

To be fair… I was thrown to the wolves in contract negotiation at a Missile Test Range with a difficult contractor that was used to pushing the government around.

I HATED that job at first, but it honed my negotiating abilities like a sharp knife.

By then end of my time there the contractor understood their role was to serve the government and make the best use of taxpayer dollars - I couldn’t renegotiate the price, but I was able to set the terms.

If I can negotiate stakes for the safety and well-being of people working with missile launches, I can negotiate anything.

I may not have a “crucible of negotiation” to test you - but you can build confidence around negotiating with simple things that bring you value:

• Your car insurance - you’ve never been in an accident why should your rates increase?
• A car or home purchase - there’s a lot of wiggle around “sticker price”
• Your cable internet bill - get the promo rate
• Damaged packaging for products at the store - no brainer, see if you can get more than 10% off
• Where you want to eat dinner when your spouse disagrees - do this at your own peril

As simple as it is, just Negotiate Everything.

Quick Tip

Practice by using the top recommended skills in negotiation through:

• Mirroring: Repeating the last few words or key phrases that the other person has said, often in the form of a question, to encourage them to elaborate.
• Labeling: Identifying and acknowledging the emotions underlying the other person’s words.
• Silence: Using pauses strategically to give the other person space to think and speak more. Silence is powerful.
• Framing: Presenting information or an offer in a way that highlights its benefits or minimizes its downsides.

Let’s Get on with It

I can’t promise you’ll fall in love with negotiating after reading this, but you’ll have the tools.

Using active listening, and the short list of negotiating skills - you can significantly increase your chances of a successful negotiation.

Mastering negotiation takes time and careful strategy. Maintain a calculated empathy toward the seller’s and broker’s motivations, and be prepared to offer some creative solutions.

You’ll find that more and more you can get the right terms to land the RIGHT deals.

Stay calm, listen carefully, and show your counterpart how you can both win.

To your lasting success,

Sage Price

P.S. My friends frequently call me for advice on negotiations when deals get tricky. I can help you too.

Whether it’s finding the RIGHT deal or negotiating ideal terms - I love navigating business acquisitions.

Hop on a FREE call with me and let’s find the right strategy together.

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