Negotiations and Business Lessons: Win-Win Or Win-Lose

authentic negotiation business framework business negotiations business relationships cashflow control mergers and acquisitions win-lose deals win-win deals
Most deals are win-lose in the early stages, as you’re not creating more value for both parties. But if measured from a long-term view, deals can be a win-win if one party grows their business or establishes clients.

Mike Lander is a successful entrepreneur and an expert negotiator based in London, UK, with a proven track record of buying, growing and selling businesses. He has a valuable perspective on dealing with commercial deals. As a procurement director in MSP organizations and an entrepreneur, he worked on both sides. Mike has negotiated hundreds of deals.

After a career at KPMG Consulting Firm from 1996 to 2000, he grasped an in-depth knowledge and experience in deal negotiations. Mike shared that his training and experience at KPMG triggered his interest in deal structure, and it made him understand the importance of relationship-building in deal-making.

Win-Win Negotiations

Mike shares that one thing to always keep in mind when in a negotiation is the true motivation of the counterparty. He believes that most deals are win-lose in the early stages, as you’re not creating more value for both parties. But if measured from a long-term view, deals can be a win-win if one party grows their business or establishes clients.

According to Mike, procurement isn’t only about the price - anyone can buy cheap. It threads down to the asset quality, quality and timely delivery, and deep expertise - these are things you can’t buy cheap. To rectify this, all you need to do is create value for your organization. You need to know the sustainability of the supply chain as this is a crucial point to negotiate around.

The overall run-through is essential during negotiation. When negotiating, you need to look at the agenda and risk profile –the cost reduction, savings, innovation reliability quality, environmental impact, diversity and inclusion. It doesn’t matter the size of the organization when doing business. To become a win-win deal, the important thing is how big that client will be as a percentage of your profit in the future.

Cash Flow Control

Many companies get into trouble as they don’t manage capital. You can’t survive on a spreadsheet once you get past being a small company. You need a system to manage that cash flow. To improve this management, the ideal is to organize within the month, not at the end or beginning of the month, because you need to know your cash flow daily. For better control, there are some simple rules to help:

  • Have six months of cash on the balance sheet, three minimum
  • Have your investment capital on top
  • Have a separate bank account with your tax payments and trading account

If you concentrate everything on the same account, you’re taking loans from other parts without analyzing the impact where the money’s coming from. 

Building Relationships For Negotiations

It is necessary to see negotiations as the beginning or the continuation of relationships. In the industry you are in, you need to realize that you will see your counterpart again and again. Be careful and strive to have an ongoing relationship. If you don’t see it that way, you may win the negotiation, losing the connection.

I believe that my success comes from the relationships I’ve built over the years. And also because I’m always catching up. In 2015, I decided to go virtual in my business. When the pandemic came, we had no adjustment. We’re already operating that way. Nothing changed in the relationship with my clients.

Lessons In The M&A Space

In the industry, Mike Lander notes that negotiation frameworks have changed very little in the last 15 years. When three or four buyers may be interested in your company, the challenge to most entrepreneurs, no matter what scale, is how you negotiate the deal properly. He advises having people in the deal space who knows how to run a deal process, especially those who create tension and negotiate smart commercial deals. Most business owners see professional negotiator services as “money out of my pocket.” But the truth is, if you don’t engage the right professionals to help with the deal structure, you might have no money in your pocket. 

Let’s take it back to a couple of years ago when we used to go with the negotiation tips we heard. You may still listen to it or even have gone to a negotiating training that says, “never make the first offer.” Then this whole psychology came that thinks you should make the first offer because that’d help you anchor the deal. The question often arises: who should make the first offer? But there is no rule, and it depends on each deal. I believe it depends on the circumstances.

Negotiation Takes Time

Another thing to note is that negotiation takes time. If you are in an hour-long trade, perhaps the counterpart will pressure you to close the deal at the end of the meeting. The best alternative is to take a break to reflect on what’s been discussed. In this break, go back to the agreed-upon points to make sure you agree. As in the heat of the moment, they can go unnoticed.

An essential part of the negotiation is negotiating commercial terms that don’t stretch your working capital too far. In Mike’s experience, he shares that it’s necessary to have deep insights into your sector and client issues. To Mike, what makes somebody a great negotiator is to know when to listen and when to talk. Most people think negotiating is just about demanding and talking, but the ability to listen and ask questions is an important skill. The seniority in the organization is irrelevant; what’s important is the attention to detail and the ability to listen and capture what's going on. This is why it’s advisable to take someone with you whenever you’re doing a deal.

Be careful with the last-minute cheapskate. If you’re negotiating with a company for a while and there’s no tension in the deal, don’t be surprised when they try to pay cheaper than agreed.

Choose A Business Framework

Mike shares that having a framework for your deal negotiation is essential. Without one, you can’t negotiate. He uses the simple four-step process that allows anyone to negotiate anything:

  • Start with the goals: What are the goals of each side or the interests of each side?
  • The timeline: How long will it take to close the deal? Write the milestones.
  • Analyze the deal variables: Write down the variable prices you think you’d accept as a minimum and balance the prices.
  • Capture the issues that may arise: Figure out the issues that may arise and how to solve them.

The last thing I want to remind you about is that negotiating tactics are helpful things to know. But they are not rules to be blindly followed. It all depends on the situation. And the more experience you have, the better negotiations happen.

Listen to the full episode with Mike here.

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. He is deeply passionate about deal-driven growth. He is also the creator and host of the DealQuest Podcast.

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Corey Kupfer is an expert strategist, deal-maker, and business consultant with more than 35 years of professional negotiating experience as a successful entrepreneur and attorney.

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