You can’t run a business without making deals. At one point or the other in your business, you will need to make agreements with other parties outside your business. These parties can be your clients, potential business partners, or even another business owner who is looking to sell their business to you. The truth is you can’t be a savvy business owner if you do not know how to make a deal.
And not just any deal, but a good deal that will bring good benefits to all parties involved; most especially you.
Making a deal is somewhat of an art.
Luckily, this article has been written to help you become a great deal-maker.
Here, you’d learn everything you need to know to make great deals that will push your business to the next level.
Let’s get right into it…
What Is a Deal – How to Make a Deal
Of course, the first thing you need to know is what exactly the word deal means.
So, what does a deal mean?
Well, in business, the word deal is used to refer to an agreement often between two or sometimes more parties to do business together.
Oftentimes, it is done between a buyer and a seller and usually involves the exchange of valuable items like services, goods, money, and even information.
A deal is considered sealed or closed when all the parties involved agree to the deal’s terms and conditions and shake on it.
Once an agreement is reached, all parties involved will have to sign the agreement papers.
Typically, the terms and conditions will be properly documented in the papers that the parties involved sign.
This makes the deal legally binding and anyone that defaults on the terms can be sued.
However, some deals may be informal and won’t involve signing an agreement of any sort.
This kind of deal is more common among small businesses.
Sometimes, parties that have worked together before and have deep trust in themselves can also decide to have informal deals.
With informal deals, negotiations can also be done informally, like over coffee, work lunch, or emails.
And it can be sealed with just a handshake rather than a contract.
However, it is still a great idea to have something to serve as a reference document even when making informal deals.
For instance, you could make a basic contract or have the terms of the deal documented in an email.
Pros and Cons of Business Deals – How to Make a Deal
Business deals just like any other thing have both good and bad sides.
While they offer your business certain advantages, they can also come with some disadvantages that may be detrimental to your business in the long run.
Knowing the pros and cons that deals come with can be very beneficial when trying to make a deal.
Knowing the advantages will help you ensure you maximize them in the deals you make.
While knowing the disadvantages will help you avoid them as best as you can.
Therefore, let us take a closer look at some of the pros and cons of business deals.
Pros of Deals
A deal can help organizations share their resources.
This in turn will lead to better utilization of said resources.
For instance, let us say a restaurant and a seafood business make a deal for the seafood business to be the exclusive supplier of seafood to the restaurant.
Resources will be effectively utilized because the restaurant will get a substantial discount from the seafood business.
And they in turn will always have regular and guaranteed sales.
Deals can lead to increased productivity for both parties as well.
Like in a case where a business cannot complete their operation with just the roles in their workforce.
A perfect example is an online store that needs to send ordered items to its customers.
If the online store is a small business, its focus will mostly be on marketing, customer service, and production.
And it likely won’t have the workforce or resources to include a courier service in its business.
In a case like this, the online store can simply make a deal with a delivery company that will pick up and ship the ordered items to customers.
The online store can then focus all its attention on marketing and production; this will increase the productivity and efficiency of the online business.
And finally, assuming a company decides to expand into a new location.
They may have a hard time adapting to the new location.
However, they can make the adaptation process a whole lot easier by simply making deals with companies that are already established in that location.
Cons of Deals
One of the major cons of deals is that there is a chance of it going bad.
This means that one of the parties may default on the deal terms and this will likely spell trouble for the other party or parties involved.
Sometimes, it can make lead to a loss for all the parties involved.
Or in other cases, the issue can drag on for so long and can result in a lawsuit.
And a lawsuit will further eat at the resources and capital of all the parties involved.
It may even damage the reputation of the parties involved.
This is why you have to properly conduct your due diligence before you make a deal with any party.
You should ensure that the organization or individual you are looking to make a deal with is honest and won’t dishonor the deal terms and conditions.
Sometimes, other parties do not deliberately default on deal terms.
It could be that they simply do not have the capacity to do their part.
So, you also need to make sure the party or parties have the financial and every other backing to carry out their end of the deal.
Yes, deals can improve productivity and efficiency, but they can also negatively affect productivity.
How? It is simple; when you take up a deal with another company, you may end up spending more resources and time trying to carry out your end of the deal.
Of course, when you made the deal, you likely did not think that you will have to spend that much time and resources on it.
But as you try to keep your part of the bargain, you may notice that it is taking a toll on your business.
Your business may start operating less efficiently and effectively.
Tips on How to Make a Deal
When making a deal, you have to follow certain guidelines and tips.
They will help you make the best deals and ensure you avoid the disadvantages of business deals.
You can also use these tips to maximize the benefits you get from the deals you make.
With that said, below are 12 tips on how to make the best deals.
1. Make Proper Preparations
You should not just make a deal without first preparing yourself for it.
At this point, you should be more concerned with finding out everything you can about the people you intend to do business with.
You need to do your due diligence to ensure you do not get ripped off or get into business with someone that does not have the resources for it.
If it is another business you are looking to make a deal with, then take your time to find out what you can about them.
Look at their websites, check their customer’s reviews, find out how long they have been doing business, and generally look for anything to prove their legitimacy.
You can also find out if the business has done any deals before.
If they have, then analyze these deals to see how they do business.
Information about their past dealings may not be publicly available, so, you could probably ask them for it.
If they do not provide it, do not think much of it.
However, you should look for other ways to determine how they run their business.
Perhaps, find out their prices and offers and also check out what their competitors will offer in this case too.
If you are trying to close a deal with a client, you may not necessarily need to go through all this process.
However, if the deal will involve the client owing you money for some time, then it will be wise to do your due diligence on them.
2. Know Your Priorities
You need to know and understand your priorities before you start making negotiations for the deal.
Think of the deal and what you want to get from it.
This will make it easier for you to figure out your priorities for the deal.
When you know your priorities, you will know the areas you are willing to negotiate and the non-negotiable areas.
It will also prevent you from making a deal that won’t benefit you the way it is meant to.
A very important thing you need to consider when trying to figure out your priorities is the price.
It does not matter whether you are the seller or the buyer.
You need to know your highest and lowest acceptable price.
So, assuming you are the seller in the deal.
If the price the buyer is proposing is lower than your lowest acceptable price, you will know that it won’t benefit you and you can simply walk away.
Likewise, if you are the buyer and the price is higher than what you projected, you can walk away from the deal too.
3. Get a Lawyer
If you are looking to make a small and informal deal, you most likely won’t need to involve a lawyer in the process.
But if it is a big-time formal deal that will involve contracts, then you need to consult a lawyer.
Unless you have enough experience with the legal aspect of business deals.
But if you don’t, then a lawyer is an absolute must.
This is to ensure that your rights are fully protected.
A lawyer is your best bet at getting a fair deal.
With a lawyer, you also have the chance of adding some clauses that will be beneficial to you to the contract.
Finally, a lawyer can take care of the paperwork and even serve as a mediator during the negotiation process.
Read this to learn how to hire a business lawyer.
4. Know the Dynamics
Before going into a deal, it’s best you know and understand certain dynamics.
For instance, you should know how important the deal is to every party involved.
One party may need the deal and may need it urgently.
Whereas, you on the other hand do not particularly need the deal.
Even though it may bring you certain benefits, you can still do okay without it.
Knowing how important the deal is to the other party can give you more negotiation power.
You can leverage this to get more benefits from the deal.
Competition, deadlines, and alternatives are some other vital dynamics you need to consider before entering into a deal.
5. Be Specific
Once you start negotiating the deal, you need to be as clear as possible with what you expect from it.
There’s no reason to beat about the bush or waver with your decisions.
You already know your priorities, so, it should not be difficult communicating them to the other party or parties involved.
Do this in a clear and specific way.
This will show the other party or parties that you know exactly what you want from the deal.
It will also ensure there’d be no complications or confusion down the road.
For instance, if you are offering a price for the service you want to offer, clearly give a figure.
If it is negotiable, tell them what you are willing to go down to, and do not keep wavering with your decision.
You also need to listen to everyone else involved in the negotiation.
The same way you have your priorities is the same way they have theirs.
So, you won’t just list out yours and expect them to nod yes to them.
You need to actively listen to them to know what matters most to them.
Actively listening to the other party or parties will also ensure the whole negotiation process goes smoothly and positively.
When you take note of the other party’s priorities, you will be showing them that you care and that you want to make sure the deal is beneficial to all parties involved.
7. Ensure Your Tone is Collaborative and Positive
You need to be cautious of your tone while negotiating.
It won’t do to use a demeaning or condescending tone with the person you are negotiating with.
Likewise, you should now be in the habit of cutting off or interrupting the other person while they are speaking.
Instead, you need to ensure you maintain a collaborative and positive tone.
You can do this by actively listening, asking questions, and giving ideas that will make the deal more beneficial for all parties involved.
When you do all of the above, the other party will most likely notice your effort to be collaborative and they will likely reciprocate it.
8. Maintain Balance
You will surely need to give up things when negotiating the terms and conditions.
However, you should always ensure balance whenever you give up something.
It does not matter how small what you are giving up is; you should aim to get something else in return.
Let’s say you are offering a particular service to the other party.
And the other party wants you to increase your working hours by just 30 minutes.
Don’t give in and think well it is just 30 minutes more.
No, aim to get something back that will match the value of the additional 30 minutes.
Doing this will let the other party know that you are willing to give up certain things but you still have your limitations regardless.
9. Ask Questions and Clarify Details
There may be some aspects of the deal that you may not understand.
Trust us, the other party may be banking on you not clarifying certain aspects of the deal so that they can benefit more.
This is why you need to ask the necessary questions and ensure you clarify even the tiniest detail.
Avoid misunderstandings and miscommunications.
10. Have a Timeline/Deadline
Any deal you make should have a timeline and deadline.
If there’s no agreed deadline, it may be difficult to get the other parties to follow through and complete their part.
So, ensure you and any other party involved discuss and conclude on a timeline and deadline.
Both of which should be appropriate for all parties.
11. Ensure Everyone Benefits
Although your benefit should be your priority, you also have to make sure that everyone involved benefits from it.
You may think it’s not really much of your business whether the other party benefits or not.
But this is a rather selfish way to think and it may likely come back to bite you later on.
For instance, if you rip off the other party, they may avoid doing business with you in the future.
They may even know someone else that can do business with you and rather than recommend you, they end up advising the person to avoid you at all costs.
And just like that, you’d end up losing more opportunities.
So, always make sure every party involved benefits the way they should.
12. Seal the Deal
Once everything has been put in place and the parties involved have agreed to the deal terms, it will be time to seal it.
Typically, this will involve signing the contract.
If it is an informal deal, then you likely won’t need a contract to codify it.
However, you should ensure you codify it; using a less formal method, like an email will be fine.
Just ensure you properly document the details somewhere.
Conclusion on How to Make a Deal
Making a deal is not rocket science.
Anyone can do it if they have the right guidelines and tips.
In this article, 12 sure tips on how to make a deal have been discussed.
Now, all you have to do is take advantage of these tips to start making the best deals for your business.