Image by congerdesign from Pixabay
Founders ready to sell often think they should start learning negotiation tactics to get the best deal. John Richardson, co-author of Never Settle with Attia Qureshi, believes that they should start getting better at negotiating much sooner than when it is time to sell. So how should founders gain the skills needed to get what they have worked so hard for, and why does the best deal not always equate to the most financial gain? Never Settle helps guide the reader in applying negotiation skills and seeing improvement, skills that can be used to equip founders to be ready when the time comes to negotiate their exit.
What Does Never Settle Really Mean?
The guiding principle of Never Settle is practicality over theory. Through exercises and guidance in the book, the reader can expect to gain real-world experience negotiating everyday situations that can then be applied to more specific negotiations, such as selling a business for a price that satisfies you. Through personal accounts, you can understand how this guidance was developed, including the lessons learned in the process. The goal is for the reader to take away negotiation habits they can practice and improve, and to never settle for less than what they feel is equitable or even advantageous. This book is particularly helpful for business owners looking to sell, as it helps them prepare now for the eventual exit that may have been their end goal in starting their business. Below are a few takeaways that will be helpful to business sellers.
Motivation for Sellers
Knowing what you want as a founder ready to exit is the most important aspect of any negotiation. As Shakespeare famously scribed, “to thine own self be true,” and that means basing negotiations around what your ultimate goal is for selling. You want to leave any business you create with a sense of accomplishment rather than regret, which means understanding your own interests and why you’re ready to sell, as well as which aspect of leaving the business matters most to you and your loved ones. If top dollar is the goal, know that you may have to give in other areas to negotiate the best possible price with the buyer, including remaining as the business’s manager. If retirement or wealth diversification are your goals, you may need to accept a lower valuation to achieve the freedom or diversification that matters to you. Anything less than what you want could cause some seller’s remorse in the future, so understand what you are willing to give in order to gain what you seek.
Reframing for Win-Win Outcomes
The best-case scenario for a founder is having multiple buyers make offers to acquire your business. However, the most important buyer should always be yourself. You need to be willing to continue with business as usual, or find other ways to keep your business while still obtaining at least some of what you desire as an outcome of selling. Otherwise, you open negotiations with the lesser hand. Knowing that you can walk away is even more important than knowing when to walk away. Negotiations can be filled with emotions, ranging from happiness to anger, regret, and desire, all of which can cause a lapse in judgment and a fight-or-flight response. Never negotiate from a must-sell position, as your own body’s mechanisms may cause you to give in when your logical mind may say it isn’t the best offer.
Flexibility Over Rigidity
Even after the deal has been made, but not yet finalized, you must be ready to negotiate. A common buyer tactic is the retrade. A retrade is when a buyer changes the purchase price or deal terms after an initial agreement, such as a signed Letter of Intent (LOI), has been made. This is often a tactic to remove potential competitors and to lure a seller into feeling desperate. The best way to counteract the retrade is to highlight the buyer’s identified wins in the original agreement. If the buyer wants to submit a lower price than originally agreed, being flexible on that option could also give you a chance to renegotiate other items of the sale to your advantage. In the end, being flexible can prompt the buyer to reconsider a retrade, given the risk of losing more than they save by offering a lower price on previously negotiated terms.
Know the Market
Ultimately, your goal as a seller is to get what you want. Knowing who is ready to buy and what their motivation to buy may be will help you identify the best potential suitors to focus on. That’s where pairing with a brokerage is an advantage, because you have someone who has your interests in mind, but also knows the market for achieving your goals. This partnership, in which the seller knows their own interests and motivations for selling, is the best way for a business founder to pursue an exit.
Do you think it is time for you to sell your business? Reach out to us to discuss why you are ready to sell and how we can help you make it happen.