The Non-Negotiable Discussion

by Travis Latter 24th of July, 2024

The Non-Negotiable Discussion

Last week, I had one of the most frustrating events happen and I wanted to share it with you….

We have been working with a vendor who we will call “Michael. Now Michael was excited to sell his business, which he had grown from a small training organisation into a respected institution over the last decade. With retirement on the horizon, he felt it was the right time to hand over the reins.

However, eager to start his new life, Michael did not clearly enunciate his non- negotiables with me early in the process. Although we asked and received answers, we later regret not pushing him into further definitions.

I had spent considerable time with a buyer we will call “James” to ensure we had an alignment of values, valuation and key factors. Based on our discussions I felt we had a winner at all levels! We informally met with James and the meeting went off tremendously. Things were looking great but I had this nagging feeling it was going too…

We entered into a term sheet, received the deposit and commenced Due Diligence. As the discussions progressed and seemed promising, Michael belatedly introduced the need for some critical terms concerning staff retention.

James, who was taken aback by these unexpected conditions, felt frustrated and misled and that included being inadvertently misled by me. This caused tension and led to a real cooling of the deal and the negotiations became protracted - teetering on the verge of collapse.

James definitely considered walking away from the deal, unhappy with the sudden shift in terms Michael thought were implicit. There was no mis-intent however the INTERPRETATION was different based on unspoken assumptions.

Seeing the deal at risk of falling apart, I recognised it was this interpretation difference. This again showed the importance of transparency and clear communication. I suggested both sides go ‘back to their corners’ and had a strong meeting with my vendor to clarify and solidify Michael’s non-negotiables, ensuring they were both reasonable and explicit.

It was then over to James where we workshopped the ramifications, allowed James to ‘clear the air’ and thus restoring trust between Michael and James. The main conduit was framing Michael’s non-negotiables as essential for the business’s continued success. This also aligned with James’s long-term interests.

“Your expertise and proactive approach prevented the negotiations from breaking down and ensured that the terms of the sale did not change unfavourably for Michael or James.”

“Thanks to your intervention, the deal was successfully concluded without lowering the sale price, meeting all of Michael’s original objectives”. Both parties came away satisfied, with James respecting the clear, professional boundaries set during the renegotiations, facilitated by your skilled guidance.

The lesson here, for both myself and all vendors is the early establishment and clear communication of non-negotiable terms. If these terms were reasonable and explicitly stated from the beginning, we would have saved both parties at least two months, the monies it cost and the toll it took on all parties – me included.

By ensuring your business broker (as the intermediary) is aware of the “deal Breakers” they can adopt a proactive approach allowing both “Michael” and “James” to fully understand and respect the conditions crucial for the business’s future.

Tags: selling exit strategy tips small business