Improve Your Negotiations With The 5 Golden Rules.   LEARN THEM

In last week’s blog, I pointed out that the perception of how much we need something in comparison to how much our counterpart needs it – a critical component of leverage – is fluid and that timing is a critical component to negotiating the best possible deal. The importance of this is further highlighted in a recent New York Times article, “Why Some Business Owners Think Now Is the Time to Sell.”

In the article, one business owner laments not selling in 2008 when her company had a five-year annual growth track record of 30 to 50 percent, which evaporated when the economy slipped into recession. From a seller’s perspective, it’s better to sell when business is booming, not when you’re fighting for survival, because your need level is likely much lower. Alternatively, sophisticated buyers seek to cherry-pick deals at the bottom of the economic cycle betting that improving economic conditions will help restore lagging growth and profits.

A second example from the article involves tax considerations. An accountant points out that the scheduled expiration of capital gains tax cuts in 2013 could increase significantly a seller’s tax liability. Potential sellers thus have an incentive to close their deals before the expiration date, a fact which buyers can exploit to get a lower price. Of course, if the tax cuts are extended, the parties’ leverage, once again, changes.

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