Dealing With the Potential Risk of Negotiations
This week’s guest, Henry Daas, is a serial entrepreneur, business and ﬁnancial coach, screenwriter, avid traveler, golfer and tennis player. He also actively trades the ﬁnancial markets and is the author of FQ, which is all about financial intelligence. Despite his current success, he also knows what it’s like to see everything fall apart. He’s learned how to assess deals from a standpoint of both ROI and potential risk as a result.
Henry shares that around 2003 he bought a fixer upper and started interviewing contractors. He found one he liked (“Bob”), and they started doing real estate together. Their first deal? They bought a house for over a million dollars, knocked it down, and built a three million dollar house in its place.
Things were going well, and they started doing a lot of deals. However, things went south. The housing market crashed when Henry and Bob were knee deep in a multi-million dollar deal. Huge firms started collapsing, and Bob found himself crumbling. Sadly, he committed suicide and Henry was the last principle investor left holding the bag alone.
Multiple lawsuits ensued, and it wasn’t clear how things would end. Somehow, amidst all the financial turmoil of the time, the property was foreclosed on and Henry was released from his obligations as part of the proceedings. By the time he’d gone through three years of sleepless nights, and had endured extreme stress.
Potential Risk? Don’t Ignore Red Flags!
Henry realized he had deluded himself into thinking he had eliminated risk. In hindsight, he hadn’t put proper controls in place. His partner had controlled the books, and Henry had never asked to audit or review them. There was a lot of potential risk he had been blind too!
Things had been moving fast, and when loan officers and banks were sloppy with their paperwork, he didn’t identify that as a red flag. Now, he looks under every rock to identify risks on every deal. He doesn’t just want to know ROI, he wants to know risk and be able to balance the two.
After his lawsuit ended, Henry was told that one reason the judge had relieved him was because the other side had been slow to respond. They had frequently given the runaround, or made basic communication difficult. Their failure to communicate responsively cost them millions of dollars. If you’re ever in the midst of a deal (whether it’s going well or not), don’t forget how impactful small details are.
Reach out! Follow up! Be responsive!
You never know what a difference it could make.
In order to have a business, you need a product or service you can sell. Sales growth sometimes can be hard! So many companies are banging their heads against the wall as they try to grow their customer and client base organically. What they’re failing to look at, however, is the opportunity for strategic alliances and other forms of deal-driven growth.
Henry works with many remote companies. He’s found that people will spend huge amounts of money trying to build organic sales channels, even if they’re not that great at it. Sometimes they’ll pivot towards a fulfilled-by-Amazon or other drop shipping service. Although that can seem like a good plan, there are challenges when you don’t control the terms or have much power within the relationship.
Another option is to find someone with whom to enter into a joint venture or strategic alliance. Regardless of what you pursue, the multiplier effect is key. If there isn’t something that’s going to synergistically enhance your sales or client base, there isn’t any purpose. Be sure to consider the potential ROI as possible risks prior to entering into one of these relationships.
No matter how you go about your business, always be open to the lessons available to you. When you pay attention, you can always find something to learn that will help take you to the next level. Don’t be afraid to ask for help, invest in coaching, or join a mastermind group.
True deal-driven growth isn’t something you have to do the hard way by forging your own path. Why not rely on others who have gone before? There are so many resources available for you!
Protection Within Partnerships
One of Henry’s first partners started as part of a college friendship. He shares their first business ran for about 10 years, and it went great…until it didn’t. In fact, he initially joined Entrepreneurs’ Organization and hired his first business coach because he needed to navigate how to end the relationship. He hadn’t full recognized the potential risk beforehand!
By the time the business was successful, it was operating at the four million dollar mark. However, because their arrangements were verbal and there were no clear buy/sell agreements or other contractual deals, there was a great deal of conflict. Ultimately, Henry left the partnership with nothing.
After things ended poorly with his second partner (earlier referred to as Bob), Henry decided to be a solo-act. Although there are both pros and cons, he’s satisfied with his current position. If he were to enter back into a partnership, he would insist on much greater clarity on partnership terms and obligations.
Again — prepare for risk and take precautions to protect yourself from unnecessary problems.
Regardless of hardships and struggles, Henry is pleased with his outcomes. He’s overcome great losses, and he’s also had huge wins. By believing in himself, investing in coaching and assistance, learning from his experience and mistakes and persevering through hardships, he’s been able to have significant entrepreneurial success despite and, in part, because of the challenges he has faced.
Corey Kupfer is an expert strategist, negotiator and dealmaker. He has more than 35 years of professional deal-making and negotiating experience. Corey is a successful entrepreneur, attorney, consultant, author and professional speaker who is passionate about deal-driven growth. He is also the creator and host of the DealQuest Podcast.
If you want to find out how deal-ready you are, take the Deal- Ready Assessment today!