Dan Martell - Selling Your Startup： 5 Things To Get Right

00:00:00.000 How do you negotiate somebody buying your startup?

00:00:02.000 In this video, I'm going to share with you some strategies of going through that negotiation

00:00:16.880 process because maybe you've had somebody reach out and showed interest.

00:00:20.280 Maybe they've asked you how much you would want to sell your company for or even started

00:00:24.500 negotiating terms with you and you've never done this before.

00:00:27.240 Well, that's what I want to share in this video.

00:00:28.800 You know, I've been building companies now for 20 years.

00:00:30.800 Over the last 10 years alone, I've started and scaled.

00:00:34.040 10 companies have been acquired.

00:00:35.280 The last two were venture-backed.

00:00:36.500 And I've helped 20 plus other entrepreneurs

00:00:38.580 sell their business or go through that process.

00:00:40.540 You know, recently I was working with one of my clients

00:00:42.480 and she was working on the discussions

00:00:45.480 and she had different interests from different parties 0.99

00:00:47.960 and was wondering, how do you structure that?

00:00:50.620 How do you respond to one?

00:00:52.320 How do you get somebody else excited?

00:00:53.760 How do you create that process to try to maximize

00:00:56.320 the value for your shareholders?

00:00:57.800 That's what I want to share with you guys in this video.

00:00:59.660 The five strategies to negotiate an acquisition

00:01:02.840 of your company.

00:01:04.000 So the first one is never, ever put out the first number.

00:01:07.540 And this is a tough one because, you know,

00:01:09.520 if you both are good negotiators,

00:01:11.420 the acquiring company and yourself,

00:01:12.980 then there's like this stalemate.

00:01:14.680 It's like, who's gonna put out the first number?

00:01:16.320 Who's gonna say what your company's worth?

00:01:18.280 If you get stuck and they're like,

00:01:19.720 look, we just need a number, what are you thinking?

00:01:22.060 What do you think, you know, your shareholders,

00:01:23.800 your investors, your board, you know,

00:01:25.560 your team would want as an outcome to make this deal happen,

00:01:28.800 you could say, look, we want to hear from you first,

00:01:31.300 but I can say this, in the past we've had people

00:01:35.260 suggest that the number could look like this.

00:01:37.840 So it's not even you saying it, it's other people,

00:01:40.940 potential acquirers, other people in the markets,

00:01:43.340 maybe it's the valuation from other VCs or investors,

00:01:46.420 they're setting the price so that you don't,

00:01:48.840 you're beholden to that, you're not telling them

00:01:50.520 like this is what I think it's worth,

00:01:51.720 you're just saying, look, this is what other people have said

00:01:54.060 and you know, take it for what it's worth.

00:01:56.360 What do you want to do?

00:01:57.200 And really you're just trying to give them

00:01:58.700 enough information to get them to a point

00:02:00.560 where they're going to assign or write a term sheet

00:02:02.940 for your business, so that's number one.

00:02:04.680 Two, I always suggest moving to the phone.

00:02:08.040 I do not negotiate in email if I feel like

00:02:11.000 the acquirer has some legs and there's some real meat there

00:02:13.340 and they really want to do a deal,

00:02:14.780 I'll be like, let's get on a call.

00:02:16.320 The first one will just be with usually the CEO

00:02:18.720 or the corp dev person, try to understand where they're at,

00:02:21.160 and then eventually it's like, who are the other people

00:02:22.960 that need to be involved in this decision,

00:02:24.760 let's get them on a conference call.

00:02:26.200 And then it's just an introduction, it's a conversation.

00:02:28.460 And then really quickly I'll try to move them

00:02:30.840 to a term sheet, but here's the deal.

00:02:32.040 I always get on the phone to negotiate, to discuss,

00:02:35.380 because there's so much things that can be misunderstood

00:02:38.500 in an email, and also there's a record of what you've said

00:02:41.720 that they can share with the rest of the team.

00:02:43.120 So what I do, my strategy is pick up the phone,

00:02:45.820 talk, follow up with an email to get the commitment

00:02:48.920 of what you've discussed, especially if there's numbers,

00:02:51.220 there's terms, there's strategies, whatever it is,

00:02:53.220 you wanna make sure that you negotiate using voice

00:02:55.800 because that's way more fluid and easy

00:02:57.560 and understanding the nuances,

00:02:59.160 but then you move to an email to lock in

00:03:01.320 the understanding of what was said on the call.

00:03:03.560 The third thing is know your BATNA.

00:03:05.960 A guy named Roger Fisher wrote a book called

00:03:07.700 Getting to Yes, Incredible Book on Negotiation

00:03:10.100 and he talks about a BATNA,

00:03:11.040 your best alternative to negotiated agreement.

00:03:14.000 Before you get into any negotiation,

00:03:16.640 you need to sit down with your team, with yourself,

00:03:18.880 reflect and say, hey, what's our BATNA?

00:03:21.220 What's the number, what's the lowest number

00:03:22.960 we're willing to accept to make this deal happen?

00:03:25.780 And with that, what are the terms that we should look at

00:03:27.920 or review to ensure that we're on the same page?

00:03:30.860 But having that BATNA will help you decide

00:03:33.620 what's the number that you may go back

00:03:35.260 and kind of counter with,

00:03:36.560 or what are some of the terms that are gonna be involved?

00:03:38.600 Whatever it is, understanding your Bessel Tournament

00:03:40.800 and negotiated agreement when you're gonna walk away

00:03:43.140 is a critical step.

00:03:44.380 It's really the third in the five strategies.

00:03:46.100 The fourth is create a competitive process.

00:03:49.060 Please, please, this is the biggest thing

00:03:51.040 that I worked with the entrepreneur

00:03:53.780 that I was consulting was, you know,

00:03:55.940 I call it the escalation ladder.

00:03:57.320 Like I have a framework for how do you take a company

00:03:59.440 that never heard of you and walk them through

00:04:01.620 and escalate to the point where they could be

00:04:03.860 writing a competitive term sheet for that same deal

00:04:07.220 in a very short amount of time.

00:04:08.880 You can do the same thing with investors.

00:04:10.460 If you have a company coming to buy you

00:04:12.420 and you think what you've created is really valuable,

00:04:14.320 then you can take that opportunity,

00:04:16.280 go to other investors and say,

00:04:17.700 hey, we really want to build this business,

00:04:19.560 but we have an opportunity to get some liquidity

00:04:21.500 or exit or return for our investors,

00:04:23.460 but we think there's a big opportunity here.

00:04:25.860 Do you want to look at this deal

00:04:26.860 and maybe preempt that investment?

00:04:28.900 So, creating a competitive process

00:04:31.000 will give you more avenues to negotiate

00:04:34.340 against the different potential acquirers or investors

00:04:36.840 to increase the valuation or the number

00:04:39.440 that you're going to get for your business.

00:04:40.740 So, always create a competitive process.

00:04:43.420 That's number four.

00:04:44.260 And five is hustle across the finish line.

00:04:47.660 Like, no matter what, I just wanna let you know this,

00:04:50.460 30% of deals that get signed term sheets go south.

00:04:53.900 They don't work out.

00:04:54.740 Something comes up in the due diligence,

00:04:57.240 or the negotiations, or just it takes too much time.

00:05:00.580 You know, the way I look at it is once there's a time,

00:05:02.480 a signed term sheet, you wanna set a date

00:05:05.500 that's six weeks to eight weeks out in the future.

00:05:07.920 You wanna make sure that the lawyers are on point.

00:05:10.640 You wanna make sure the lawyers

00:05:11.640 don't have any scheduled vacations coming up,

00:05:13.840 which happened to me in one of my deals,

00:05:15.640 and you want to make sure that you talk to your team

00:05:17.720 and let them know what's going down.

00:05:18.940 Make sure you do interview prep.

00:05:20.580 There's so many things you don't want to get it wrong,

00:05:22.260 but that area's called the red zone, right?

00:05:24.580 That point where you sign a signed term sheet

00:05:26.780 with one acquirer, like, pretty much you have no defense.

00:05:30.860 If something goes wrong with that deal,

00:05:33.060 then it's really hard to go back to the other ones

00:05:35.660 and say, oh, sorry, we passed on you,

00:05:37.400 but this didn't work out, we now want to talk about that deal.

00:05:40.300 Not a good spot to be.

00:05:41.440 So that is the five strategies.

00:05:43.640 First is don't mention a number.

00:05:44.980 Second is talk on the phone,

00:05:46.640 then write an email to follow up.

00:05:48.320 Third is know your BATNA,

00:05:49.580 your best alternative to negotiate agreement.

00:05:51.680 Fourth is create a competitive process.

00:05:54.220 And five is always hustle across the finish line.

00:05:58.120 You know, I want to invite you to subscribe to my newsletter

00:06:01.100 to get exclusive content and private invites

00:06:04.000 to events that I hold.

00:06:05.260 And as per usual, I want to challenge you

00:06:07.200 to live a bigger life and a bigger business

00:06:09.260 and I'll see you next Monday.

00:06:11.440 You

Dan Martell - June 13, 2016

Selling Your Startup： 5 Things To Get Right

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