To Walk Away or Not to Walk Away?

You just landed the deal of a lifetime—or so you think. Sometimes a deal isn't all it seems to be at face value. After doing some research, you may realize it's not as profitable as it first seemed. Maybe there's a hidden loophole you didn't fully understand. Make sure you thoroughly comprehend each clause in the contract before you sign.   

Accepting a deal without knowing all the facts and doing your own research can lead to losing your reputation in the industry, loss of time, loss of employees, and loss of money.  

Is it Time to Walk Away? 

When negotiating a contract, it's important to have a specific goal in mind.  Be firm and don't give in unless you're absolutely sure it's worth it. If tempted to make changes to the contract, ask yourself, "Is it important enough to bother with it? Will agreeing to the contract in its current state lead to undue pressure on my company?" Undue pressure could arise in the form of disgruntled employees or loss of profits. 

Pay attention to any red flags during negotiation. Does the contract match from beginning to end? Make sure the contract doesn't contradict itself or anything discussed verbally. If one party tries to continuously change the terms of the agreement, it's almost certainly time to walk away. 

A well-negotiated contract should benefit both parties. Consider the details of the contract from the counterparty's perspective. What will the opposite party have to lose by agreeing to the contract? What does your business stand to lose by agreeing to it? Fairness to both parties should be a top priority while negotiating, as this ensures each company is operating in good faith and with good intentions. 

Case Study: Bridgepoint

Private equity firm Bridgepoint researched a deal it was considering with a fruit-processing company owned by Pernod Ricard before finally deciding to walk away. The fruit company presented an attractive offer up front—the industry seemed to be growing, and the owner was more focused on alcoholic beverages than fruit. 

With further research, however, it became clear that revenue growth would only be temporary. Other competitors had more advanced technology that allowed them to produce the same product more cheaply, and competition left little room for transportation and manufacturing costs.

By understanding the risks involved with the deal, Bridgepoint was able to walk away from it, potentially saving millions of dollars.

Give Your Business the Professional Image It Deserves

A professional image is also important when presenting a contract. Traditionally, this meant having professional letterhead. Today, it could be as simple as having an accessible document. It’s simple to convert JPG to PDF to have an easily shareable and secure document.

Asking the Right Questions

The right questions can help you identify strengths and weaknesses in a negotiation, especially when there's a disparity in power. Walking away is always an option, especially when it would be more harmful to not do so. Having the right information at your fingertips definitely helps.

Joining your local chamber of commerce is a great way to network with other business owners and build productive relationships.