How to Close Deals Faster and Smoother
This is an excerpt from Tom Searcy's latest book, "How to Close a Deal Like Warren Buffett--Lessons from the World's Greatest Dealmaker" written with Henry DeVries and published by McGraw-Hill, available now.
Warren Buffet bought home manufacturer Clayton Homes in an offer-to-close cycle of less than two weeks for $1.7 billion. Lots of Buffett's deals are done fast. The typical reasons he does deals faster are because-
- He does his homework...and their homework...the industry homework...(you get the idea)
- He understands the problems the other person has and how they are trying to solve them
- He's careful to only do deals he knows he can win fast and stays away from all other types
At the time, a challenge was made to the purchase by shareholders who believed that because Warren Buffett was the buyer, the offer must have been a low-ball offer. This objection was lodged even though the offer was 12.3 percent higher than the share price at the time. The deal made it through the shareholder vote and the company is now a part of Berkshire Hathaway.
If you follow the simple recipe above for doing your own deals, you will be successful in closing deals faster as well. However, there is one aspect of the Clayton Homes deal that is instructive. Namely, Buffett should have done a better job clearing the path to avoid the shareholder challenge. For dealmakers, the lesson to be learned is that you need to go the extra step to make sure all of the following are clear for the stakeholders:
1) WIIFM—"What's In It For Me?" All stakeholders in any deal want to understand this, so it needs to be laid out in such a way that there is little doubt regarding the benefits. People have a hard time moving forward if they do not know where they will end up. They also won't move forward on the promise of a bright ending if they can't see a clear road map to get there.
2) Schedule—Uncertainty can be a dangerous enemy in organizations when you are making big deals or sales. Your buyer and associated stakeholders must understand the schedule of events. This is not just a calendar, because a calendar only presents a sequence of actions. The schedule, to be of persuasive value, also needs to include performance metrics so that all participants can assess progress by the quality of planned outcomes.
3) Off ramps—What happens if things are not working? The schedule sets out the milestones of performance. If the milestones are not met, those involved are going to want to know what the recovery process looks like. Will things halt altogether? Will there be a revision of the budget, staffing, the entire plan? Clarity in the off ramps gives confidence to the cautious.
4) Landmine map—If you do not provide an outline of the anticipated problems and your resolution to them, then it will be provided for you. The problem is that when the stakeholders provide the outline it is usually amplified outside the bounds of reasonable expectations. By showing a thoughtful analysis of the risks, you can reduce the resistance.
Your deals may not be in the billions, or even millions, but you still need to clear the path. Deals move faster when there is a detailed roadmap.