"Take the offensive and create an above-market position from which to negotiate company value!"

Mike Brice 2005


Developing a pro-active process that prepares you to be on the offensive when it comes time to discuss investment or a transfer of ownership can make a considerable difference in your initial value-negotiating position. Company value is most volatile near the Market Value of your company. This value can change significantly, up or down, near this point or within the Value Window based upon the presence, absence or weakness in business strategy or execution.

 

Discounted Value

Conservatively, company value can be discounted by as much as 20% or more if you have not taken constructive effort to deal with weaknesses in the strategic position or condition of your business. You will find yourself on the defensive, negotiating at a discounted below-market position, trying to build value into the negotiating process.

 

Premium Value

On the other hand, a purposeful strategy that addresses the overall strength of your company can put you on the offense. Start negotiations at a premium above-market value position of up to 20% or more. Development of an above-market value enables you to effectively defend and hold on to a premium position.

This can represent as much as a 40% difference in value between a below-market (discounted) and above-market (premium) position. For a company with a market value of $5 million this can be as much as a $2million difference or more.

 

Defensive Position

Don’t be on the defensive where you have difficulty trying to offset buyer concern with marginal value. A business where a weak strategy is in place or where the company’s strengths are not articulated properly raises concern on the part of the buyer. This translates into reduced confidence in the return on their investment which reduces the value of the company.

 

Above-market Position

When you negotiate from an above-market position you create a focus on value. You have intentionally developed resources and ability in the company to reduce the concern of the buyer or investor as to how they will get a reasonable return on their investment. Reducing concern and improving buyer confidence significantly adds value to your position and place you in a much stronger position in the negotiating process.