- ZanshibuiParticipant@zanshibuiJoin Date: 2012Post Count: 14
Freckles advice is great!
I only have 2 points to make:
- Your friends may very well become incredibly successful in this brewery. But that is NO GUARANTEE that you can make money from it.
- You are using phrases like "not fair", "being taken advantage of," "beyond hope" etc. This isn't investment language.
Thanks again. Feel much clearer now. Could you please answer my other question, re the lawyer doing the negotiating for me.
Before you can do anything you need a comprehensive business plan. That will describe how, when, how much. time to break even, market assumptions and so on. They're coming to you so they produce that. Along with comes an investment proposal; value of the business and how they've valued it, why X dollars buys X equity, other financing requirements, are there or will there be further equity sales to raise capital, does your equity dilute and by how much if any, etc etc. You have to cover all these basis before any serious negotiation can start.
They should expect you to want a better deal. You don't start to haggle until your close to agreeing on price, value, business plan/model etc. The next stage is where you start to shape the deal to where everyone is close to comfortable and you think the deal has merit. Final negotiating stage is where the hard head comes in and you agree on a price.
You never commit until the end and only subject to a lawyers and accountants appraisal. They find anything wrong it's back to the table.
Once you agree on a deal there must be protections and guarantees from all parties that everything material to the deal has been disclosed.
There must be rules of engagement when any parties other businesses do business with this one. IE this business cannot provide loans, credit etc without board approval and there should be limits. these can be included in Company Rules or a constitution. Your lawyer should fully inform you of this. This is the company playbook and defines what the company can do and what its officeholders may authorise etc.
Make sure you have a legally binding exit clause with a planned extraction if your not happy say 12 months down the track
Hi Freckie and all. Again super grateful for all the feedback. Just to update everyone, I did pull out of the deal a few days ago. citing only the inequality of the property side of the investment. I did leave the door open if they could restructure the deal to my advantage. As hoped they say they have a better proposal for me, which they intend to produce to me shortly. By the way they say it's going to be so attractive I'm going to find it hard to refuse! Not sure if they're doing this because they realize I'm not as naive as they thought, or because they were the naive ones, in the first place.
I haven't mentioned my growing dissatisfaction with in the business side of the deal yet,
They did give me a business plan, some time ago, which outlined the basic equity share. But did not comprehensively cover the value of the company and how they valued it. Not sure if you're saying that should have been in the business plan or will most likely be in the investment proposal?
I feel I'll be in a better bargaining position thanks to your recent help, but also because I've already made inroads by making them reexamine one half of the investment.
But I feel there are many bridges to cross. My worry is that I'll educate them with my recently learnt tough love, and they'll drop me like some kind of a reverse Dragons den stone. My only cards seem to be your help, help from other more experienced friends I have, my lawyers eventually advice, and my own head to heart instinct, and that they're willing to wake up or at least compromise, when I tell them they're companies valuation is a little optimistic!
I'm thinking the basic rules of negotiating go, I want 40-45$%, they say 25%, I say 35% etc etc.
Wouldn't you negotiate at all?999ivan wrote:I did leave the door open if they could restructure the deal to my advantage
The deal side should be fair and equitable. Advantage to anyone side is something to be avoided because an unbalanced deal has a higher probability of ending acrimoniously. So when you run into what you think is inequality make this statement and indicate your objective is to see everyone get what they want. A happy deal tends to be a long successful deal.Quote:As hoped they say they have a better proposal for me, which they intend to produce to me shortly. By the way they say it's going to be so attractive I'm going to find it hard to refuse!
A good start. It seems they're taking you more seriously. Something you always need to keep in mind is the more competent you appear in a negotiation the more likely you are to get concessions. You always need to negotiate from a position of confidence and knowledge. If you can't think of an answer during a negotiation you always just say, "I'll give this more consideration before giving a firm answer".
In a negotiation have a list of bullet points you want to discuss or get clarification on. Note down responses. These can be referred to in future talks.
Note new subjects for future research/consultation.
By coming prepared, writing things down, making recommendations etc you start to build a platform of confidence, project an image of competence and someone to be taken seriously. You also show you are giving the offer a serious hearing and think it may have merit. That gives them the incentive to work harder at structuring a professional deal and according you a greater level of business respect.
If you eventually agree to a deal your future relationship will be much more professional and equal. That will have a bearing on how the business is managed as a multi owner operation.Quote:They did give me a business plan, some time ago, which outlined the basic equity share. But did not comprehensively cover the value of the company and how they valued it. Not sure if you're saying that should have been in the business plan or will most likely be in the investment proposal?
A token business plan is not something you can base a deal on. Professionals do not put money into something airy fairy. Where you see gaps they have to be completely filled in. This kind of thing goes to their own business ability as well. You can get away with poor business planning when you are the sole owner but absolutely not in multi party deals. Everyone must understand the business, its goals and objectives and how its going to get their.Quote:I'm thinking the basic rules of negotiating go, I want 40-45$%, they say 25%, I say 35% etc etc.
Wouldn't you negotiate at all?
You should negotiate even if it's only for the experience. At the very least this exercise will leave you a much smarter cookie. Regardless of how things go try and take it to its natural conclusion and in a way everyone can walk away relatively happy regardless of whether you buy in or not. You can also leave the door open for a future deal if you don't commit completely or at all this time.
Hi Thanks for your patience. I realized after sending last post that I haven't been listening. So was expecting a rather different reply from you, If I got one at all!
I feel like I've got it now . Thanks again.
Happy to help. Drop me a line if you need any more info.ZacCookMember@zaccookJoin Date: 2012Post Count: 1
Nice discussions are going on! I am new here and found the forum site interesting and worthy to me. Hope I will get to learn lots of things and will get chances to share my views. Thanks in advance..