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Newsletter - August 2022

“Price” is what you pay – “Value” is what you get

A week or so ago, I was again lying awake in the middle of the night – pondering an email I received in relation to an offer on a business.  This in itself isn’t unusual and unfortunately nor was the tone of the email.

While I knew that the author of the email really wanted to buy the business, the way that they approached the offer was only ever going to end in failure.  From the first sentence to the last, everything was filled with negativity.  “The business doesn’t have this; the business doesn’t have that; I don’t like the paint on the ceiling……” 

Negativity breeds negativity and, in this case, two negatives don’t make a positive.  The more negative the person making the offer is, the more defensive the person selling the business is likely to get (not the broker – the owner).  

We’ve got to realise that in most cases, an owner has owned their business for many years.  The business is their identity. It paid for the house, the holidays and the boat. It is like their child. While they may be acutely aware of its shortcomings – any criticism is likely to be taken very personally.

Once criticism is taken personally – the negotiation turns into an argument.

I have to be honest; part of me just wanted to take the person who wrote that email by the shoulders and shake a little sense into them.  But instead, I decided to write about it.  As they say, the pen is mightier than the sword!  

The best way to win an argument is to avoid it from ever starting

I learned this lesson from my Father when I went to buy my first car.  Straight out of the gates I was finding fault with the car – the tyres need changing, there are dents, there are scratches, the car smells funny….  all in an effort to get a “better” deal.  In my inexperience, that was how I thought I should go about negotiating.  I didn’t end up buying that car.  

When we went to look at another vehicle, my Dad said to me that if the car is in your budget and you think the price is about fair – instead of seeing how much you can get off the price, see what else the dealer is willing to include in the price.   

See, Dad used to be a car dealer and realised that it was easier for a dealer to give something that was of high value to me and low cost to them – than discount the price.  He also realised that you go from a negative fault-finding exercise to a positive solution-driven process.  I did end up buying that car and, while the price didn’t change a huge amount, the value surely did.  

This process taught me three equations: 

(I’m right) + (You are wrong) = An argument

Arguments are negative.  For there to be a winner – there needs to be a loser.  A loser that the winner may need in the future. 

(Here is my view for you to consider) + (Tell me your views for me to consider) = A debate

Debates can be positive.  It can facilitate learning through the transfer of ideas.  You do run the risk of it turning into a “talk fest” that may lack in action.

(If you do this, I’ll do that) + (In return for that, I’ll provide this) = A negotiation

A true negotiation is solution-driven.  It is a process where compromise delivers a mutually agreeable result.  Where price is converted to value.

Opportunity lies in imperfection

The thought above got me thinking – “do we focus too much on perfection?”  I think we do.  The reality is that the real opportunity lies in imperfection – especially when we look at businesses.

When we appraise a business, we carefully consider both the strengths and weaknesses and value it accordingly.  The opportunity for the buyer isn’t in the strengths.  The opportunity is finding solutions for the weaknesses.  That is how you add real value to a business!

Choose your advisors carefully

Everybody has a right to an opinion – but that doesn’t mean everybody’s opinion is right.  Ensure that the people you seek advice from are qualified to give that advice.    

Article Credit: Alex Smith; Director
Tabak Business Sales, Auckland