Making deals is an inextricable part of doing business, whether in the office, over the phone, on the golf course, or over lunch on business days. It’s all about the deal. It seems simple; talking, listening, shaking hands and reaching agreements. But what do you need to know to make a good deal?
According to Brent Beshore, founder, and CEO of investment firm adventur.es, a business deal includes three basic components: “The expected return, upside potential, and downside risk. Another way to describe this is to ask, “What do I expect to happen? What is the best possible scenario? What is the worst possible scenario?’ The goal is to have a fair expected return, a huge upside, and very little downside.”
Brian Paes-Braga is a deal-making veteran. While still in his 20s, he founded Lithium X, a lithium mining company that he successfully sold two years later. Today he serves as principal and head of merchant banking at SAF Group, a structured credit, and merchant banking group. He also holds seats on several boards of directors—including DeepGreen Metals, an innovative underwater mining company—and was recently appointed board chairman at Thunderbird Entertainment Group, a Vancouver company that produces and distributes content across a variety of media channels.
Although some people have the skewed notion that successful deals result in a winner and a loser, Brian Paes-Braga says that’s not the case.
“Deals are about meeting the needs of two or more separate parties,” he says. “When I put together a deal, whether private or public, I try to understand the needs of the other party and what my needs are, then I try to find common ground between them. When it comes to negotiating the sale of businesses, and in particular public businesses, you have to value the needs of your investors and find a way to best meet those needs.”
When you find yourself in a negotiation situation, the first thing you’ll want to do is take an objective look at yourself and what value you have to offer. Think about the terms of the potential deal, the minimum you’re willing to accept and what the other side will get. Think also about potential pitfalls. What can go wrong?
Once you’re at the table, says business writer Tim Denning, it’s good to let the other side share its position first.
“When the negotiating starts,” writes Denning, “the first thing you must do is shut up and let the other side make the first offer. The first offer can often be very different from what you expect. Once the offer is out on the table, the negotiation begins, and you have the advantage.”
Many experts agree that one thing you have to do while making deals is, to be honest. Not doing so can irreparably ruin your credibility. The other thing you have to do is watch out for are dishonest negotiators. We want to believe that everyone is truthful, but that’s not always the case.
Corey Kupfer, attorney, professional dealmaker and founder and president of Authentic Enterprises, LLC, says that “Integrity is often defined as doing the right thing at all times and in all circumstances, whether or not anyone else is watching.” he adds that “Using any kind of dishonest tactics or manipulative techniques when negotiating shows a lack of integrity. Disingenuity and not operating from a place of integrity will eventually come back to haunt you. Building a reputation of integrity takes time; you will need to work to protect that reputation.”
Making deals is part art, part science. While there are some specific components for making deals, there are also opportunities for improvement. Stacy Goldberg, founder, and CEO of nutrition company Savorfull, an online platform that connects clients with healthy food options, says she regularly evaluates how things are done in her business, including dealmaking activity.
“We’re always looking for a better way,” she says. “We’re constantly getting better at making deals because we’re constantly asking ourselves if this deal is really going to be beneficial for both sides. There could be an attractive deal with a high-profile client, but at the end of the day, it’s not the right deal. We are getting much better at not making deals that don’t serve us, which is an important lesson.”
“When the negotiating starts,” writes Denning, “the first thing you must do is shut up and let the other side make the first offer. The first offer can often be very different from what you expect. Once the offer is out on the table, the negotiation begins, and y.