On Negotation

Every time I think about reflecting on negotiation I always reach some new conclusion. Negotiation is a skill is always changing because people often change too. The most effective tactics become stale with time. We adapt and learn the common techniques and they stop working. So we develop new techniques and continue to innovate in the field.

Recently, I was asked questions about selling a business. Valuations, why someone would buy it, and how to make the most of the opportunity. Selling a business is an interesting negotiation because if you don't sell you keep making money (provided the business is good - otherwise nobody would buy it anyway).

Working on the Youtube show, I learned a lot about this in particular. The show was simple. Three investors with very large fortunes would come on a Youtube show, be presented with a SaaS business, and have a discussion about buying it or not. It was like Shark Tank, but for Saas Companies - was called "deal or bust" and it was a massive success. It's still on Youtube - the show is owned and hosted by Nathan Latka.

I learned a lot about negotiation by watching VCs and wildly successful entrepreneurs talk it out. It wasn't all that complicated, but the little differences between them and amateurs were obvious.

Negotiating the sale of a business.

It's vital to know your numbers, and do quick math on the "back of a napkin" so to speak.

This type of quick number crunching makes all the difference. Nobody saw the numbers before the show started so they had to be quick to figure out the valuations. To be clear, these businesses were legit. Big margin, good revenue, and a very scalable system.

Next came the routine questions.

What are you (the founder) doing in the business now?

This was a key question because the investors would try and figure out their "buy back" → the amount of money they would have to add into the business to make up for what the founder was doing. Founders who did everything were never in a position to sell because hiring to replace them was expensive and rarely worth it.

Would you stick around?

Many investors want to keep the founder around so the transition can be smoother. This is often called an earn-out. Sometimes it's just sticking around for a year and the sale price is paid in increments. Sometimes there are special terms around the company's numbers or milestones built into the earn-out.


There are always questions about the numbers. What happened during COVID is a new one but that comes up as well. Most investors are looking for companies that are growing, and maintain growing margins too. Too often we'll see companies that are growing in revenue but their expenses are also going up so it's not really that lucrative long term. There needs to be a separation between the business's costs and their earnings → money in goes up, money spent does not go up (or does not go up as much).

Why are you selling?

This is routine. Everyone has their own reasons. The good answers are things like "spend time with family" or "it's just not matching up with what I want for my life" (especially since they often want to be working less while making money). Answering this question by saying something like "I have a better opportunity" is a bit risky. Why? Because investors will likely try to get in on both the company you selling and the next opportunity as well. That's sort of just how it works. There's always an opportunity.

What makes great negotiators great?

There's not much to it, it's simple, but not necessarily easy.

They ask great questions at the right time. The questions which interrupt the flow of the conversation to create a positive thinking pattern in the mind of the person they're asking.

My favourite question came from Sujan Patel - CEO of Mailshake. He asked a founder who was very adamant that he wouldn't take the deal being offered a key question "What are you looking for in this deal?"

That's it. They then took the answer and formed the deal in a way that fits with the seller's answer.

Being a great negotiator is not about fake positions or fancy "schmoozing" → it's an effort to understand what the other side wants and - if we can reach their wants in a way that makes us happy - we make the deal.