There are multiple ways business transactions are operated, ranging from simple coffee meeting exchanges to more complex ones requiring negotiations, consultants, and lawyers. Regardless of the type of business transaction, your ability to run it smoothly is imperative and most importantly, possible. Considering every factor and prepping before any transaction will ensure that it’s stress-free and sets you up for success.
Here are some of the techniques Skidmore employs to the business that would also help with yours, whether startup or enterprise level.
Negotiate assertively to ensure smooth business transactions
Prepare a letter of intent or term sheet
Draft the first version of an agreement
Prepare an alternative plan
Consult an advisor or lawyer
Considering you’ve done your prep work and have all your orders in line, going into a business transaction with confidence speak volumes. When there are negotiation tactics that need to be applied to more complex transactions, it’s recommended that you first outline guidelines to achieve the best outcome for yourself while also allowing the other party to participate in reaching their goal as well. This is especially true when there is a sale of a business where the buyer may lean on the seller for consulting advice, or if there is negotiation of a joint venture where two parties will be collaborating post-transaction.
Clearly defining your goals and objectives with the minimum acceptable outcome will help veer your business transaction to your ideal solution. Knowing when to hold onto something and knowing when to allow for some wiggle room will supercharge your ability to compromise while still staying on strategy. Also, understanding your competitor’s business and possibly their objectives will help with anticipating possible tactics or solutions when brought up.
Remember that it’s imperative to be truthful and accurate. Providing inaccurate information can lead to a loss of credibility on either side and can risk the integrity of your entire transaction. Accurate and successful negotiations will lead to successful and smooth business transactions.
Preparing a letter of intent (LOI) or a term sheet that outlines the key terms of a transaction will help you expedite the completion of any complex business transaction. A letter of intent is often the first document negotiated between two parties of a transaction. It’s an opportunity for the parties to put the terms of the proposed transaction on paper, along with conditions and steps to be followed in order to complete the final transaction. This is most useful in business agreements such as mergers and acquisitions, joint ventures, investment from equity firms, selling a business or even leasing office space.
Providing inaccurate information can lead to a loss of credibility on either side and can risk the integrity of your entire transaction. Accurate and successful negotiations will lead to successful and smooth business transactions.
For complex business transactions, such as the sale of a business or investment by a strategic investor, take the initiative to prepare the first draft of the agreement. This gives you control over framing the structure of your transaction and implementing key points that have not yet been discussed. It is often the case that the other party will not make extensive changes to your document. It is important to keep the first draft of an agreement fair and considerate of the other party’s needs and objectives.
Something to always remember going when engaging in business transactions, is there always is more than one favourable solution available for your business. For example, if you are in the process of selling your company, having several potential buyers is immensely beneficial to get the best market price. Engage several prospects for your negotiations and avoid being locked up in negotiations with just one buyer. If you are looking to purchase products, lease office space or acquire a loan for your business, always have alternatives. As an added bonus, the other party will be aware that it has viable competitors, leading you to have better pricing, contracts and smoother transactions.
Finally, if any negotiations fall through, consider your best alternative to a negotiated agreement. Brainstorm all available and possible alternatives to the transaction you are negotiating. Choose the most promising options and expand them into actionable alternatives. Keep the best alternatives as a fallback.
As a successful business owner, you have acquired plenty of transferrable skills through education and experience. Identifying your lack of skillsets though, is vital to ensuring smooth business transactions. Being aware of this, you can consult an appropriate advisor or lawyer to remedy these weak areas depending on the type of transaction. This ensures that you have all of your bases covered at expert level so there will be no shortage of knowledge at your disposal when it’s time for the transaction.
These techniques have helped Skidmore in varying degrees, dealing with complex enterprise deals to negotiating smaller business deals and making these transactions as smooth as possible. If you are looking for a business transaction consultation or looking to sell, connect with one of our advisors for more information.