How to Negotiate Cashflow Like A Pro

...and get anything you want.

Welcome to another edition of a Cashflow playbook! This time, we're foregoing talking about an actual asset class in lieu of something that will help you BUILD those ass(ets) :) - Negotiating

Summary

Intro: Getting What You Want by Getting to Yes

Everything in life is negotiable. Those who learn that lesson early will reap compounding dividends as the years go by.

Except, hardly anyone does it. A recent study found that those who negotiate can add upwards of $2m extra to their lifetime income. That’s nothing to shy at.

But we aren’t going to do the 101 version we are going to talk specifically about how you negotiate deals and investments better. So if you want a promotion, new client, better deal or, more money, this is your gold standard.

Firstly know this, in any negotiation, there are many ways to approach the situation. Harvard published an article by Calum Coburn titled ‘Negotiation Conflict Styles’...that outlines 5 different approaches and when to use each based on a degree of cooperation and assertiveness. But what we’ve found is that the data and frameworks are less useful than specifics and examples.

Playbook

Steps for Negotiating Like a Pro…Backed by Pro’s

To understand the deeper complexities of how to best negotiate we spoke with Baylor University’s negotiation expert professor Dr. Emily Hunter on tips to improve your negotiating skill, and threw in some of our own. Our full interview notes are here. Dr. Hunter is the Management Department Chair at Baylor University’s Hankamer School of Business as well as a Professor on Negotiation and Conflict Resolution for Baylor’s Professional Selling program. We also talked to one of my investing partners who has done 100’s of deals in his career as well as my largest investors who has done the same.

I’m also not too shabby. I’ve negotiated hundreds of deals over my years and my biggest lesson for you is my smallest, always ask for what you want, you just might get it. So use these below strategies to negotiate not only your pay but importantly your next promotion, or your next business deal.

How to Negotiate in Business? - the Deal Negotiation Playbook

Step 1 – Practice

Nothing beats practice. Start small, negotiate with friends and family first. Then negotiate with a client, then go toe-to-toe with the boss, then a potential business seller. If you

Negotiation is in fact, a skill you can learn aka… put in offers on multiple houses, on multiple biz’s. Ask multiple owners for revenue share. Or even simply, get out of your comfort zone daily by bartering with one person a day you buy from.

Start with low stake requests–like bartering at a farmer’s market– or scenarios where it doesn't really matter if you get what you ask for. Asking for a discount at a store is very low stakes, but it helps you practice negotiating when buying a new car.

Is it likely that you will get rejected or denied? Sure, but they could also say yes.

This helps build confidence and force you to get comfortable with rejection. Don’t know where to start? You can follow Jia Jiang’s 100 Days of Rejection Therapy to help get your feet wet.

“My favorite book for basic negotiating skills is Getting to Yes,” Dr. Hunter said. “It really helps you give you a mindset of being a collaborative negotiator if you’re a beginner and just have no idea how to negotiate.”

As you develop your skills, and begin to negotiate deals with high stakes, with teams and with people of other cultures, Dr. Hunter recommended Global Negotiation as “really good for [developing] those advanced skills of how to negotiate across cultures and really work in a global business setting.”

There is always something to learn for a future negotiation, whether that be an experience, a book or a peer.

So practice. Put up offers, get turned down, ask why you were. Then repeat with lessons learned.

Step 2 – Prepare

If you are going into a meeting with a biz broker or seller, preparation is key. Be ready to go to war…for what you want of course. However, don't make the mistake of coming in TOO hot. That might scare off the seller or make them feel you’re too aggressive, hence not the right person to buy their business. Buy Then Build by Walker Deibel notes that you should be prepared enough to make them feel like you’re a ‘cooperative entrepreneur’ rather than an’ aggressive VC.’

In these instances you want to be fully prepared and ready for the negotiation with backing to support your offer and their demands. Hence, you’ve already researched the company, done what due diligence you could have with the financial information available and made yourself aware of the seller and their background.

Here are a few things you can prepare yourself with prior to the meeting or call:

1) Bring your LOI/term sheet that should include items like:

• Written offer with refundable good faith deposit of X, let's say $1,000-up
• Purchase price (subject to due diligence)
• Down payment (cash and/or outside financing)
• Terms and conditions on the balance due, which will be financed by seller
• over a X year period at a reasonable interest rate (I ALWAYS NEGOTIATE 0% w/ upside for them maybe)
• Monthly payments, amount and duration
• Date first payment begins, number of days after closing

​Here’s a template if you don’t have one.​

2) Bring a copy of your bank statement or financing so they know you're serious

3) Bring (or explain) your due diligence and plan to close. I.e. I have here a signed non-binding LOI or a term sheet for x price, and x terms as listed above with a 30 day due diligence window.

• Make an offer contingent on something like following (each deal is different hit up your attorney):
  • All financials subject to review and approval by buyer
  • Lease terms and conditions are subject to review and approval by buyer
  • All equipment is in good working order at time of closing
  • All sellable inventory is at a normal level at time of closing
  • Any financing needed by buyer can be obtained at acceptable terms
  • Buyer and seller agree on acceptable industry non-compete agreement
  • Buyer and seller agree on acceptable transition and training period for new management
  • All outstanding legal issues and contingent liabilities disclosed

4) Bring comp's (just like in real estate).

5) Bring current market trends. I like to print off the bizbuysell quarterly insight report or a PE report or a Goldman Sachs report

6) Bring your earnest money or small refundable deposit to show the offer is serious (hold it in escrow).

Another way to prep is to be smart about the setting. Sounds trivial but if you get the owner or other party, somewhere they're comfortable, feel heard, and is conducive to conversation you just might have the upper hand!

Take when Disney acquired Lucasfilms and all the beloved Star Wars characters for instance. That negotiation began with a secret breakfast meeting as Disney CEO Bob Iger and George Lucas bonded and got to understand the other’s interests.

The meeting had everything—privacy, space and food—that helped make Lucas comfortable enough to disclose that was fine selling his creation of Star Wars (even for somewhat less money), but what really mattered was that he continued to have a creative say in how the story would be told.

It allowed Iger to properly build a relationship with Lucas and focus on how he would ultimately allow Lucas to have a significant amount of creative control just as he did when Disney acquired Pixar and Marvel.

If you feel the need to have a lil resource with you, complete one of these negotiation preparation worksheets prior to the meetings so you really understand all the issues and other parties’ interests.

**To view the rest of the playbook and access your resources, visit the vault!**

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