Q. I am currently negotiating the buyout of my partner’s business interest. Before I make an offer, do you have any recommendations that may help me during the negotiations?
A. Effective negotiation is an art that can be learned. Understanding the basic principles of successful negotiation can help you to make the best deal possible and steer away from possible costly litigation. The following are some universal and crucial negotiating tips that could help you:
• Before you enter into the negotiation, know what you want. This means that you should already have determined the maximum amount you can offer based upon your personal financial situation and the calculated worth of the business. Also, you should determine what issues you are willing to back down on. By understanding these issues prior to the negotiation, you can keep sight on what you absolutely need, and what you can do without.
• Make sure that what you offer is realistic. You may need to get a professional appraisal of the business to help determine its true value. Do your due diligence!
• Prepare yourself by reading a book on negotiating, or by consulting with an attorney or CPA. You must learn about the various tax and legal ramifications of the purchase, and the different deal structures available to you.
• Learn as much about the selling party as you can. Why are they really interested in selling the business? Are they pressured for time? Are they negotiating with anyone else?
• Get to know the seller personally. It is much easier to communicate with someone with whom you are familiar than with a stranger. Your ability to influence the seller may be enhanced when you have a pre-existing relationship.
• Develop an agenda and stay with it. In addition to determining what you want and what the bottom line is, like at any important meeting, you should also ascertain what you would like to accomplish during any given communication. That way, if conversation veers off course, you can always steer it back to the most important issues.
• Don’t let your emotions get in the way and become a deal-breaker. If you feel yourself becoming frustrated and your temper begins to rise, take a break. Do not take the seller’s negotiating tactics as a personal attack.
• If the negotiations hit a wall, isolate the cause. If there is an issue or a group of issues over which a stalemate develops, dig a little deeper to find out the underlying issues that are causing the conflict. Very often, these issues, once discussed, are less crucial than they seem and can be easily resolved.
• If the situation seems hopeless, take a break. If the negotiation is going nowhere, and you don’t want the deal to die, take time out to regroup. Review the issues, examine your approach, and try to come up with an alternative strategy. An experienced negotiator or mediator, who is an impartial party to the negotiation, can often work through tough issues and get the process back on track.
Utilizing these strategies can’t guarantee that you will always get what you want in a negotiation situation. However, if you have a solid game plan, you will certainly enhance your chances for success. Best of luck!
Barry Dolowich is a certified public accountant and owner of a full-service accounting and tax practice with offices in Monterey. He can be reached at 372-7200. Please address any questions to Barry at P.O. Box 710 Monterey, CA 93942-0710 or email: firstname.lastname@example.org