When to Let Go of a Deal

Business negotiations are often highly charged, with both parties determined to win, no matter what. This way of thinking is somewhat short-sighted because ultimately you want to find a good solution for everyone and forge a partnership based on mutual respect where both parties are equally represented. Sometimes, however, it's not possible to reach this middle ground, and walking away is the only viable option. 

Factors That Determine the Walkaway

The various factors you need to consider when negotiating include:

• Are you gaining anything of value? What's the primary source of value the counterparty is offering, and how does this align with your goals?

• What are your nonnegotiables? Ensure you have a set of nonnegotiables that everyone on the negotiating team is aware of so that your team doesn't agree to something you later come to regret.

• Do you have leverage? Consider who has the leverage in the scenarios, and determine the value of leverage.

• Have you done enough research? Do you know the counterparty and what they may be hiding? You may be getting into a deal with a company that doesn't actually fit with yours.

If you find these questions reveal negative answers, it may be time to walk away from the deal. In hindsight, accepting a flawed deal can have many implications such as: 

• Poor revenue.

• Employee problems.

• Loss of profits.

• Implementation issues.

• Negative impact on reputation.
   

In this situation, it's acceptable to walk away without burning bridges because you've done your due diligence and understand the contract isn't beneficial at the time. In the case of Bridgepoint looking to partner with Pernod Ricard, the due diligence team found various problems, including declining profitability, that caused Brigepoint to back out of the deal.

Creating Leverage

Who's more eager to consummate the deal — you or your counterparty? The party that's more interested in the deal needs to create some kind of positive leverage that ensures the successful conclusion of the deal.

Show the counterparty what they can gain by partnering with you, not what they can lose by not partnering with you. Plan an alternative option, known as BATNA (best alternative to a negotiated agreement), and use it as leverage in your negotiation. If using leverage still doesn't bring about the desired outcomes, it may be time to let go of the deal.

Planning the Contract

To minimize any fallout due to a potential problem in the future, a contract can contain an exit clause, which details how each party can go their separate ways in the least damaging way possible. Include this clause for peace of mind.

Your contract's appearance is critical to the successful conclusion of negotiations. Ensure the contract is accurate and comprehensive, and present it to the counterparty in the correct business format. Be sure to reduce PDF file size; it gives your contract an attractive, professional appearance. 

Bottom Line

If you consider your bottom line and possible alternatives, you have a good framework to use in your negotiations, and you can potentially avoid the walkaway. The BATNA approach maintains your leverage and gives you greater scope and more flexibility to negotiate your desired outcomes.

To obtain more knowledge, network with others in your business community, and gain valuable insight, a great option is to join your local chamber of commerce.