Looking to buy a business? This is part 5/5 of the little things, the little mistakes that people make that they keep replicating and therefore can stop them from doing deals.

If you haven’t watched parts 1-4 yet, you can do so here:

• Part 1:
• Part 2:
• Part 3:
• Part 4:

Okay. So this is the last one, part five of this little group of videos which are all around this idea of the common mistakes that people make and then they make those mistakes again and again and again, and it stops them from doing deals. Last time I talked about closing in the first meeting, so actually asking to do the deal. The next bit is really, really important and it’s probably the most common reason I see for deals not happening and that is you need to do the contract in the meeting.

Produce the Head of Terms Agreement

You need to produce the agreement that you want them to sign while you’re sitting there face to face with them. This is really easy to bottle cause they might say something like, “Oh well don’t worry, I haven’t got time. Maybe just send it to me.” Now, what happens when you send it to them is they read every single clause and every single line of that agreement as you trying to screw them in some way. That’s because just about every legal contract that’s ever been produced in the history of man suffers from what I call author bias. So author bias is basically, it’s written for the benefit of the person who wrote it at the complete exclusion of the person who’s receiving it. So, it’s not a two-way street, it’s an unhelpful document from the purpose of the person that you’re trying to do a deal with.

However, we have very cool contracts in The Harbour Club. We focus on non-author bias contracts. Every one of those key five clauses I talk about are as beneficial to them as they are to you. So they’re really easy to sell when you explain them to people. But if you just stick all those clauses on a contract and you email it to them, they’ll just read everything as being an issue.

Use Collaborative Deal Structuring

These contracts have to be drawn up collaboratively between you and the potential target. So you pretty much have to say, “Look, let’s…” You know that you’ve tried to close it. They’ve said, “I want to think about it,” which is the most common thing, or “I need to speak to my aunt or my dog or my wife,” or whatever. And you say, “Okay, well if you want to think about it, let’s give you something to think about it. Let’s draft up a quick agreement. Only needs to be a couple of pages between us. Let’s just do it now. It’ll only take us 10 minutes and at least then you’ve got something to think about. You know, because otherwise you’re thinking about an idea, you’re not thinking about an actuality. So let’s stick this onto paper.”

You can explain the five key clauses that we talk about on The Harbour Club and why they’re important to them and why they’re important to you. And within the reserved matters you can say, “Right, what are the things you’re scared about? What are the things you’re really frightened that I am going to do? You know, if I was the devil, what would I do to screw you over in this?”

You want to get their ideas and get their input. Because you can put those things into the reserved matters to give them comfort, to make them understand that this is a collaborative agreement, that you both have contributed to it. And every single one of those items when it’s explained clearly, they will understand and they will get the benefits of. Only when you have a draft of that agreement ready do you leave that meeting and do you leave it with them, because then when you’re following up, you’re following up on, you know, minor changes they might want to make to the meeting.

“Noone Leaves Until Meeting”

Remember, the next step is to book this. No one leaves until a deal is done meeting. So you just want to be following up on an agreement that’s already been put in place. You can explain it like, “Oh, let’s do a heads of terms or a term sheet, which is quite a common expression for this thing. But actually just do the agreement, the letter of agreement that’s on the USB key. Do your own version of that.

I would also recommend not just taking the letter of agreement and changing a few things around, but actually opening up a new agreement in front of them, putting their details in, putting your details in, writing that little paragraph about the business and how it got to where it is now and what the issues are and how this agreement aims to solve them so they can really see that this is bespoken it is for them.

You can then of course cut and paste the key clauses from the version that I provide into this one and you’ll say, “Oh, I’ve got an example of how we tackled this before,” and then explain the reasons why this clause is there and why it benefits them as much as you. So, just taking that extra 15, 20 minutes of the meeting. Again, this is so easy to bottle and so many people do it. Again, when I look at the people who are good at doing deals, it’s because they’re doing these contracts with the participants.

Do NOT Send A Contract To Them Via Email

If they’re really, really insistent, they don’t want to do it now, do not send them a contract on email. Make an appointment to come back and spend 20 minutes drafting the agreement with them and just say that, look in your experience, if it’s not done collaboratively, the deal never works. You know, “If everyone’s not an equal partner in contributing to it, the deals don’t stick. So, how about I come back tomorrow, I come back in a couple days?”

But yeah, it’s important to do the contract in the meeting. Really, really important. Now all of these things are in The Harbour Club. We talk about all of these five principles that I’ve spoken about but they’re just the little one degree shifts that people think, “Ah, it’s not that important. I can do it this way or I can do it a different way.” Actually as soon as you drag it back on track, it has a huge impact on your ability to do deals.

So happy hunting.