Lance Hood:               What are some of the 17 things that you must avoid when negotiating or you risk losing the whole deal?

Richard Parker:           There's a lot of dos and don'ts that we talk about in the material, and they're short points but they're very important. So it's good that you talked about the ones that you shouldn't do, because most people try to think of all the things that should do, and what good negotiators do is they know what they should and should not do. So that's great. I'd love to talk about those.

                                    First of all, don't try to win every point, because you're not going to and it just creates bad atmosphere. The other thing - but having said that, if you give something you should get something in return. So if you've agreed to adjust the price of the business than the seller should agree to adjust the terms. So again, if you give something you've got to get something in return.

                                    Every seller is going to have bee in their bonnet, about one particular point. There's always a time where a seller has one point related to the business or related the deal that defies logic but somehow that's their crazy point. And so you have to work around it and decide if it's really not that important, and you'll see what it is because they'll keep raising it over and over again.

                                    Sometimes it's just not worth even fighting for, because when people are irrational or illogical you can't provide them with a logical and rational explanation. Sometimes you've got this "bee in the bonnet syndrome" where for whatever reason they've arrived at that particular position. Let them have their position unless it's really detrimental to the deal.

                                    Now another thing is be very sensitive to the seller's emotions. We talked about that. Understand what they're going to. Be sensitive to that. Here's another point for example, if you cannot agree to a particular point, move on and come back. You can't always reach conclusions on every single point.

                                    So sometimes you got to try to take it to a certain step and if you're not getting the progress that you intend to say, "You know what? This is important for both us and so why don't we just put this off the side for a second and we will come back to it." Or, "Let's just take a day or two for each one of us to think about it and maybe we'll come up with that solution," because there is a solution to every particular obstacle. It's just a matter of arriving at it. Sometimes you get so wrapped up in the actual discussion that you forget what you're trying to negotiate to begin with.

I remember years ago, one thing I think of which is not business related, but when I was in Asia on business and I was there with an associate of mine and he was going to buy a watch. He was buying a pretty fancy watch, and in Hong Kong they have these jewelry stores, lots of them, and they sell all these high end fancy watches or whatever.

                                    And he got into the discussion with someone, I think, the watch is, if I recall at that point, was like a $2200 watch. Just the nature of society and the culture is that you negotiate. And I remember him telling me at one point that there was a particular watch that's he's always wanted since he's a kid, and the model that he wanted is exactly the watch that he wanted, and starting getting into the discussion with the guy behind the counter who's a very nice guy. But again, it's culturally engrained, negotiation, especially with Westerners and he said, "Well I'll give you $1000 for the watch," and this guy was at $2200. The guy laughed, and sort of walked away, and then he came back, and they started discussing it, and sort of over time, and this discussion kept going back and forth and he was at the $1150, and the guy moved down by $250, and they're going back and forth, and back and forth.

                                    Now this is like 45 minutes later, an hour later. And I'm just like watching in complete amazement. And one point, he was at $1500, my friend offered him for the watch and the merchant was at $1575.

                                    Now, I was in Hong Kong the time that Tiananmen Square happened in Beijing, so it was May, I think May the 4th, 1989, Let's see how good my memory is. And so you could imagine at that time it was a real expensive watch - still is I guess...I don't wear one and would never spend more than ten bucks on a watch.

                                    After like 90 minutes I finally stopped him, and I pulled him off to the side, and I said, "Steve, what are you doing? Are you out of mind?" He said, "What do you mean? What do you mean? I'm not going to give him $1575 for this watch."

                                    I said, "I want you to think about something, you idiot." And I remember telling him just like that. I said, "We've been in this place for like 90 minutes. Okay. This is a watch that you've been looking - you've wanted since you were a kid. Right? You're $75 away from each other. Give the guy the $75."

                                    I said, "I would be inclined to tell you, I'll give you the $75, but you have to learn a lesson. I mean you've become so wrapped up in winning this point that you forgot what you walked into the store to begin with for. Now go back there and I want you to think for a second. Do you want this watch?"

                                    He said, "Yeah." I said, "Seventy-five dollars?" I said, "I mean is that any type of meaningful money to you? Is it going to change life? Now walk back there, give the guy $1575. As a matter of fact, give him $1600. Just take this thing. You've got so wrapped up in the negotiation you forgot what you're negotiating for."

                                    And that's what happens to people. Sometimes you have to take a step back and say, wait a minute, the point isn't about being right. It's always about doing the right thing. Okay?

                                    Another thing for example is if you draw the line in the sand with a seller you'd better make sure that you're absolutely prepared to live by it. In other words, if you say, "This is a deal breaker and if you don't agree to this point I'm walking from the deal." You've drawn a line in the sand.

                                    If you draw a line in the sand or put up a wall related to a particular point, you had better be prepared to live by your word, because if they don't deliver on that point you have to walk from the deal and not come back. Because if you don't you will lose every other point going forward and they'll make mince meat out of you.

                                    You have to live by words. So you've got to be very careful and think long and hard before you ever draw the line in the sand. Don't be quick to do that, because there's a solution to everything. So drawing the line in the sand is just a stupid negotiating tactic and you're going to lose all creditability.

                                    Another thing if you have to deliver bad news to the seller about a particular point first of all, don't delay. But also let the broker do it if at all possible, if there is a broker involved in the deal. That's why they're there. That's what they're getting paid for. You have to work with this seller after closing and so you want to maintain a good relationship. So in keeping with that you want to try to do everything possible to get along, not be confrontational, to not be arrogant, to not be independent, to not to be overbearing.

                                    You want to be able to get along because the negotiation doesn't have to be head-to-head and it doesn't have to be confrontational. If you get crazy with every point they never know when you're really serious. You only have to stand up and sort of put a gun between the eyeballs when you really mean it and at those points they're going to realize that you mean it.

                                    But if you have that tactic for every point, they're never going to believe you. It's like the, I guess it's sort of the negotiating version of the boy who cried wolf, right. So you want to get everything you can to get along and not be confrontational.

                                    And the other thing that people need to understand, I read that jargon of the last decade, this sort of win-win, and you see people talk about it, and they sort of lift of their hands, they get the quote marks, win-win, it's got to a win-win, it's got to be a win-win scenario and all that. And, that sounds great and there's certain situations where that's going to work.

                                    You've got a product that you're going to sell to a retailer as part of your business, or you're trying to get a new customer and it's got be a good situation for both people because that's the way engagements happen. But when it comes to buying a business, unfortunately, win-win doesn't work.

                                    What has to happen is, and I know there's going to be some people that think, "Boy this guy is nuts." I mean, "Everything's got to be win-win." Well, you know what? I have the utmost respect for people who take that philosophy but reality dictates that philosophy doesn't work in these type of transactions. What has to - because there is so much emotion involved and that's when you have to downplay on the buyer's side, but there is emotion involved and so win-win is not a realistic situation.

                                    What is a realistic, however is that the buyer wins and the seller is reasonably happy. Because the truth of the matter is, the buyer is taking a larger risk in this transaction. So the balance or the scales of favor if anything should tilt towards the buyer.