Art of the Deal: Know Your Walk Away Number
I grew up in San Diego. As a kid I would often usher visiting friends and family down to Tijuana for a short day trip. Few experiences compare to taking Midwesterners or East Coasters into Mexico to savor the different and unique culture. Back then it was a simple crossing. No passports necessary. Present a driver’s license and you were quickly on your way.
This is where I learned to negotiate.
The unspoken Tijuana rule is to never pay the asking price. Everything is negotiable. It’s what defines both the selling and buying experience. Within moments of walking onto the merchant street, everyone is your “friend,” every product “authentic” and the vendor you are talking with has the “cheapest price.” Once you present interest in an item, the buying dance is on with each party bringing new prices to the table. Shopping a little further into back alleys brings a more aggressive sales process.
The key, both in business negotiations and in the back alleys of Tijuana, is to know the highest number you are willing to pay.
Once you reveal how badly you want something, you lose the upper hand. The vendors quickly pick up on your interest and play hardball. You need to start with a lower number and work your way up as part of the negotiation. The good salesmen in Tijuana often try to get you caught up in the activity of purchasing the item, talking fast and working to close the sale as quick as possible.
You have to learn to walk away.
Once you show you are willing to go without, vendors will chase you begging you to buy. You now have the upper hand in the negotiation. Sure, oftentimes vendors will play to your emotions. It ranges between guilt, with statements they couldn’t feed their families, to discussion on boss who won’t allow the sale. There’s also the tactic of showering you with compliments or offering a free shot of tequila when you buy.
Oh, the good old days.
All of these are tactics to throw you off your game. Emotions can do that, as can the promise of tequila. The key point is to know the final amount you are willing to pay. Stay focused, walk away when necessary and understand that it’s all part of the art of making a deal.
Selling your business can be just like shopping in Tijuana, minus the tequila.
You will need to walk away from the deal a couple of times. If you don’t, it means we haven’t negotiated well enough. This isn’t to say it is easy. It’s to highlight that this is how the process works. Often times my clients are offended by the first offer on their business. I can tell you that I offended many Tijuana vendors back in my day with my first offer as well. It is how the game is played. It’s not a reflection of your business or you personally.
It’s the art of negotiation.
There’s no guarantee that it will always be a lengthy negotiation or that buyers will lowball offers right off the bat. Just like Tijuana, occasionally you find the tourist who pays the asking price outright. It’s not right or wrong. It’s just their personal preference to bypass negotiations.
There have been times when a buyer walks in and pays the business owner’s asking prices as well. It’s the exception to the rule.
Most buyers partner with a broker to navigate purchasing a business. Good qualified business brokers love the art of the deal. It’s unlikely they will advise going in at full value with the first offer. They want to test the boundaries of your asking price.
Subsequently, that’s why you have me in your corner. While I may not spend my days south of the border anymore, I thrive in the negotiation phase. I’ve continued to gain steam after my early start in the art. Today I specialize in creating favorable terms that save business owners thousands in taxes. I also understand the dynamics of competition. Once you bring another buyer to the table, you start to create the upper hand.
We also deploy the practice of walking away.
It’s not uncommon for me to both save and make my client more than my fee in this phase alone. The negotiation process isn’t for everyone. Additionally, most owners bring emotions to the table. Just as they did in Tijuana, emotions remove focus. By partnering with an expert, you can focus on achieving your ultimate goals.
In the end, regardless of the process, the final decision will come down to you. Which is why it’s essential to know your walk away number.
Not every deal is worth accepting. The key is to identify which one is a deal that you can live with. Some owners are timid of drawing a line in the sand. You aren’t married to the number. You have the ability to change your mind mid-negotiations.
It’s a much needed tool to give you focus during negotiations.
So as you look toward your own exit, what is your walk away number? If you are unsure where to start identifying this number or ready to start implementing your exit process, contact me today. I help business owners at all stages of the exit work to achieve their desired goals.