As the founder of Spartan’s Alliance, Bart Rupert works to help entrepreneurs buy and sell businesses for a living. When it comes to getting the highest possible upside from the businesses you buy, negotiation is the most important thing– but many people aren’t doing it the right way. Luckily, Bart is here to share his One Big Tip for negotiation.
Asymmetrical negotiation and asking “why” questions
According to Morgan Stanley, 88% of all new wealth comes from buying and selling small companies or real estate tied to them. At Spartan’s Alliance, Bart works with entrepreneurs to teach them the best way to do this through experience. Just like flipping real estate, the goal of buying small companies is to capture the upside. To get the highest upside, Bart says that using asymmetric negotiation techniques is the key. Asymmetric negotiations will get you a 20 to 40 percent upside.
Most people use traditional negotiating techniques, which means they’re facing the problem space head-on. Asymmetric negotiation comes at the problem space from a different angle by asking “why” questions rather than “what” questions. For example, instead of asking “What type of price?” or “What terms?” you should ask things like “Why do you want to sell your business?” first. The “what” questions only engage with our left brains and don’t acknowledge that people have a lot more to them than analytical data.
It’s important to look at more than just the financial side of the business. Doing this can make sellers defensive and restrict your conversation. On the other hand, when we ask “why” questions, they bring in the right side of the brain. This will get you a more emotionally driven answer. Once you know why selling the business is important to this person, you can look at the problem through their eyes and solve it together rather than oppose each other. This allows you to get a better price in the end and leaves them feeling better about everything. Plus, doing this can compress the time it takes to complete the deal.
Narrowing the gap
Even after you ask the right “why” questions, there will still be a significant price gap between what a seller is asking for and what is a reasonable amount for you to pay. If the seller’s number is still unrealistic, it’s time to bring in Bart’s two-approach mechanism for bringing down the price. Continue with another “why” question, and then bring in a “how” question around the price: something like, “How do you expect me to pay this when I could get a comparable business for less?” The seller may not even realize the competition that’s out there. Presenting them with this question will help them see that their price is unrealistic, and they’ll start to seek information rather than fight you on it.
Eventually, once they realize that they’re asking for much more than their business is currently worth, you can present them with a choice to either sell the business to you for a more reasonable price or continue to grow the business until it’s worth what they’re asking for. Oftentimes, they’ll decide that investing more time into the business is not what they want to do, so they’ll choose the former. Overall, the best way to negotiate is to work with the other person– at the same side of the table, as Bart says– rather than against them.
Visit www.spartansalliance.com to access links to Spartan’s social media, video content, and all sorts of resources that cover these techniques using real examples.