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How to break a bad deal and not break your business

How to break a bad deal and not break your business

Britain broke market access with BREXIT, and Trump broke the Iran deal with just a tweet, but neither seemed to consider much of what comes next! How do you break a bad deal, without breaking your business? On The Money Show with Bruce Whitfield, Pavlo Phitidis outlined an exit plan for business owners, to use when a good deal goes bad:

Before you Shake on It

Being able to implement a deal exit plan that protects your business and reputation begins long before you shake on it. Before you shape, and make that, deal:

Know Thyself:

  • Know your business – Make sure you have a clear understanding of your business, its market position, and where you’d like it to be in the future.
  • Know your purpose – Knowing why you do what you do equips you with the clarity to understand where your boundaries are. Those are essential to hold on to when you’re in the deal-making process.
  • Commit to bettering yourself – Take time and care to create and build your own reputation, and craft how you would like to be perceived. The way you think becomes the way you behave, and that’s what creates people’s perceptions of you.

Prepare for The Deal, and then Act:

  • Why you’re doing the deal – Clearly outline, and understand, why you and your partner are making this deal and the terms and conditions, benefits, and responsibilities, attached to your respective roles.
  • Prepare, then act – Every deal should be: 60% preparation, and 40% action. In your preparation, focus on ensuring your business can survive if the deal goes bad, because if things go well, you have nothing to worry about anyway.
  • Date before you get married – You can’t establish a good relationship, based on a clear understanding of each other, that’s rooted in empathy, overnight. Instead, start out small, and learn more about each other before you sign the big deal.

Clearly Define the Deal:

  • Tightly define your deal when: the odds are high. If your deal exposes your intellectual property, or critical business assets, make sure the contract is watertight, including a strong exit and acceleration plan, to protect your business.
  • Loosely define your deal when: the odds are low. These types of deals are best-suited for learning experiences, where you are still looking towards establishing a longer-term, stricter set of contractual terms.

Your Exit Plan for When You Must Break the Deal

Open and Consistent Communication:

    • As part of your deal-making mechanism, agree with your partner on metrics and reporting systems before you begin working together. The better you define the deal’s success in metrics, the more easily everyone involved will be able to understand the progress and suitability of the deal.
    • Increased reporting at the beginning will make it easier for everyone to understand the successes, obstacles, and pitfalls, of your deal as it plays out. As you move forward, you can reshape those reporting mechanisms to ensure that they remain beneficial for everyone involved.
    • Be disciplined in your reporting. Stick to your meeting schedule, and meet as often as you feel necessary, especially in the beginning.
    • When things go wrong, your metrics will reflect it. Use your metrics to navigate the success or failings of your deal, because these can serve as early alarm bells for everyone.

Understand How Your Partner Will Behave and Manage the Process:

  • Very often, the first response to tabling an exit plan for a deal is one of shock. Your partner may feel betrayed or unsettled. That could lead to them comforting themselves with disbelief, and then moving on to anger, blaming others, or even attempting to bargain their way out of the exit plan.
  • Ultimately, however, acceptance must come, and this is the most critical part of your exit plan:
    • Making the best of a bad situation is key for your business, yourself, and your deal partner.
    • Define alternatives to the deal: If there are no alternatives, the relationship is broken. If you’ve previously discussed alternative deal plans (and you should, in a casual setting), now’s the time to consider and implement them.

Control your Emotions and Communication

Don’t type that response, minutes after receiving that email. Breathe to control your mind and take a moment to control your emotions before communicating.

Restructure to Add More Value & Don’t Leave a Scorched Earth

  • Work to break the deal, not the relationship, in your exit plan.
  • Look for alternative ways to continue working together, and recover the relationship, because this can build an even stronger one.
  • Be like Dropbox: Initially, Dropbox was an entirely free product but, instead of implementing full fees for their entire product range, the company learnt more about their users’ needs, and then offered a paid option with additional features. Users could continue to use the free product, with added value features becoming a fee-based subscription service.

Do you need help brokering a deal? We can help. At Aurik, we help business owners navigate the deal-making process and help them build their business into an asset of value.

Tags: The Money Show, Business Exit, Exit strategy

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