Negotiation - Information

In any serious negotiation, information is crucial. Whoever has the most relevant information is in the better position. Gather information before the negotiations start. Then gather information during the negotiations. Gather the right information, and you'll be in the strongest position.

Prior Research

Let's assume you are interested in buying a small chain of sandwich shops. What information should you be gathering before you start the negotiations? All the information you can, including:

- Deadlines

- Motivations

- Price

- Personal information

- Competition

- Key players

(These will each be covered in more detail further along.)

Of course you want to know how much income the business is generating, what outstanding debts it has, and how much profit it produces. You need to do all the usual homework to know what you are looking at and to arrive at an estimate of the true market value. In fact, there may be hundreds of things you need to know, from who the key employees are to zoning problems, to the names and numbers of the suppliers, etc.

The specific information you need to gather will be different in each case, but you can learn what to look for in any good book on buying a business. From a negotiating standpoint, almost any information can be used, and the key information listed above will be the most powerful. Get as much of this information as you can beforehand.

Imagine that you sit down to negotiate the deal, and the seller casually mentions that he has a meeting with another potential buyer tomorrow. That puts the pressure on you. If, however, you already discovered that the other buyer is having financing difficulties and can't complete the sale as soon as the seller wants, you have the better position. This is why you need as much information as you can get before the start of negotiations.

During Negotiations

As you begin the negotiations, whether formally, or when first approaching the seller, start taking notes. If it isn't appropriate or comfortable to be writing them down at the moment, do so soon after. Information gathering should continue throughout the process.

To better gather information as you talk to a seller (or anyone else involved), you should first establish good rapport. A lot has been written on this topic, and you should read some of it if you want to be a more effective negotiator. Some quick tips:

- Smile.

- Follow his/her lead. If they don't smoke, you don't. If they don't drink alcohol at a business meeting, you shouldn't.

- Match the pace of his speech, and the volume of his voice.

- Dress like he does (Get this information beforehand).

- Sit more or less as he does.

- Make small talk. Let him decide when it's time to talk business.

- If there is something of interest in the room, ask about it. A fish on the wall, for example. Listen with true interest.

- If you have any common interests, mention them. "I understand you're a chess player like myself."
- Listen well.

- Watch carefully for what irritates and what pleases him.

Once you have established rapport, you want to ask questions throughout the negotiations. Do this in a casual way that makes it easy for him to respond. You'll get more information that way. For example, if you ask "Why is your price so high?" you may offend him, and he's likely to give you a short answer, like "We think it's a fair price." On the other hand, you'll probably get more information if you ask "This is a tough business to pin a value on. I'm curious, how did you arrived at the price you're asking?"

You're not telling him the price is wrong. You're asking an innocent sounding question about how they came to that price. Innocent sounding, but the answer can give you a lot of useful information.

If he tells you he saw other similar businesses sell for that much, you know that precedent is important to him. You'll use that knowledge later. You might find examples of similar businesses that sold for much less, and show him those examples. You might also casually mention similar businesses that went unsold for years.

If he says he knows nothing about valuing a business, and let the appraiser tell him what it's worth, he obviously gives some credence to the professional opinion of "experts." You can get your own appraisal too, and your expert might put a lower value on it. You can even bring the appraiser to the negotiating table to explain.

Continue in this way throughout any negotiations or even friendly conversations. Know beforehand what you will ask, and what you are looking for. Then, between meetings or negotiating sessions, review your notes to determine how to best use the information.

Continues here... Critical Information - What you really need to know...