Your Price, My Terms: What to consider when buying businesses.

If you don't know how to invest, you'll never truly be wealthy.

Great Structuring Can Make You More Money. In the pursuit of financial success, one fundamental concept is often overlooked - the art of structuring your investments. At York, we firmly believe in the power of a well-structured investment approach that we call the "Terms vs Deals" framework. It's a strategy that can potentially multiply your wealth, even when faced with seemingly unfavorable deals. In this article, we'll unveil the seven essential components of this framework, revealing the process that can help you build and maintain true wealth.

“Terms vs Deals” Framework

Part 1: The Two Negotiation Levers

When most people think of negotiation, they immediately focus on one primary aspect - getting a lower price. However, there's a critical element they tend to overlook, and that's everything else embedded in the deal or contract - the terms. In our framework, we emphasize the significance of understanding both the price and the terms.

Part 2: Your Price, My Terms

The cornerstone of successful business and investment is encapsulated in a simple rule: control the terms, and you control the deal. Conversely, if you find yourself unable to control the terms, your only leverage lies in controlling the price. In instances where you can't control either, it's imperative to recognize that such situations are best avoided - no deal should be the only option.

Part 3: The Term Sheet is a Starting Point

Never embark on an investment journey without engaging in negotiations. Suppose you discover a company that aligns with your investment goals. In that case, we advise you to reach out to their current, experienced investors. By doing so, you can gain insights into their structure and potentially form a collective negotiating front with other investors.

Part 4: Best Investors = Hardest Negotiators

The ability to negotiate effectively with founders upfront can prove invaluable down the line. Whether it's navigating mergers and acquisitions, lease agreements, or partnership deals, those who establish themselves as tough negotiators early on are more likely to secure favorable outcomes. Remember, being a little "pain" now can lead to substantial profits later.

Part 5: Prove Your Value & Leverage It

To enhance your negotiating position, you must first prove your worth. Use your expertise, facilitate valuable introductions, and actively contribute to the growth of the company. Once you've demonstrated your value, it becomes easier to ask for additional benefits such as warrants, which ONLY become valuable if you follow through on your promises.

Part 6: Preferred Stock vs. Common Stock

In nearly all investment scenarios, it's wise to request preferred stock. The odds are in your favor, and more often than not, you'll obtain it.

Part 7: Have Comparables

Whether you're buying shares in a company, investing in real estate, or pursuing a startup opportunity, having comparables is your ultimate shield. These benchmarks offer invaluable insights and negotiation leverage, ensuring that you make informed decisions and secure favorable terms.

In conclusion, the "Terms vs Deals" framework is a powerful tool that can elevate your wealth-building endeavors. It empowers you to look beyond the surface of a deal and focus on the underlying terms, giving you the control and insight needed to make shrewd investments. At York Wealth Management, we are committed to helping you master this framework and achieve the financial success you deserve. Remember, it's not just about what you invest in, but how you structure those investments that truly matters.

Until next time.

Written by,

Murdoch Gatti

Private Wealth Manager | MComm Fin

IMPORTANT DISCLAIMER

Murdoch Gatti at York Wealth Management Pty Ltd ABN 46 605 610 679 is an Corporate Authorised Representative of Samuel Allgate Investments Pty Ltd AFSL No. 420170; Financial Adviser Authorised Representative Number 001007979.

This article has been prepared without taking into consideration any investor’s financial situations, objectives or needs. Accordingly, before acting on the advice in this article, you should consider its appropriateness to your financial situation, objectives and needs. Every reasonable effort has been made to ensure the information provided is correct, but we cannot make any representation nor warranty as to the accuracy, completeness or currency of that information. The content in this article was originally written by Codie Sanchez and York has incorporated the framework into their investment process. To the extent permissible by law, no responsibility for any errors or misstatements is taken, negligent or otherwise. SAI or its authorised representatives may also receive fees or brokerage from dealing in financial products, see the Financial Services Guide for information about the services offered available at York Wealth Management.