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Negotiating Strategies to Protect Your Interests

dempseylawfirm — Thu, 12 Nov 2009 23:25:13 +0000

The person who thinks, plans and prepares is almost always going to come out ahead of the person who does not. Planning (coupled with a minimal amount of common sense) is the single best advantage in successfully concluding a negotiation.

Imagine this scenario: you recently sold three new and very expensive products to your best customer. You have just taken a long, angry call from the same customer. The products you sold are not meeting the performance specifications in the application. The customer has demanded the following:

1. three new, larger size products as replacements (more expensive than the original units)

2. the change-out costs for replacing the units; and

3. a “project management fee” to cover the customer’s management time.

You agree to meet with the customer to resolve the problem. How should you prepare?

Get All the Facts

The first key to leverage in a negotiation is an understanding of all of the facts and what the other side really needs out of the situation. There may be facts that you do not know about. There may be facts about how the products were applied or how they were maintained. Prior to having the meeting with the customer, think about a “pre-meeting” the night before in a more informal context, such as over drinks or dinner. If you can have such a meeting, probe about the facts, about timing and deadlines, and about the personal and business situations surrounding the customer’s claim. Did they make an error when they ordered the products or is someone at the customer looking to possibly shift liability away from themselves? This is not the time to negotiate a resolution, but this is a good time to make sure you understand all of the facts.

Try to identify the individual decision maker at the customer that you need to convince and try to separate that individual and his or her personal interests from those of his employer. Do you have a long history together? Have you done favors for him or her in the past? Now is the time to also leverage the personal working relationship. You have been working over time on personal relationships with your customers, haven’t you?

Develop Going-in, Fall-back, and Walk-away Positions

Prior to the meeting, develop a plan, including a “going-in” position and a “fall-back” position. Consider all of the possible options, from doing nothing to meeting the other side’s full demands. Improve the most promising options. Decide on the most appropriate option if you determine that you cannot meet the other side’s full demands. Importantly, know your “walk-away” position. This is the pre-determined economic tipping point, beyond which you think it makes no sense to go. Given the value of a matter, and the prospect of litigation, this economic tipping point may not be exactly the point you may have initially considered.

Practical Tips:

When looking at options, and when presented with demands by the other side, the best response is never to simply say “No.” Instead, try to draw the other side into a creative partnership with you. Never close a door; keep opening new ones. Be creative. suggest that the matter be approached on a more constructive level. If you choose to react openly to the other side’s anger, say that you find it unproductive, and suggest focusing on a specific, non-emotional issue. Understand the Logic of the Other Side’s Proposal

Sometimes there is great leverage in understanding the logic behind the other side’s proposal. Instead of focusing on the demands, focus on the logic underlying the demands.

Practical Tips:

Assert your needs. Concentrate on problem solving that seeks to satisfy both parties. Commit to a solution only after it is certain to work for both sides. Try using hypotheticals. In other words, try some “what ifs.” “What if we did A and B, but not C, but did D, too? Would that work for you?”

Invite Criticism

Ask the other side to critique your proposals. What do they like and what don’t they like? If you ask for an explanation of what is wrong with your proposal and they cannot adequately explain their position, you will get a little more leverage. A related tactic is to ask the other side for “advice,” such as “What would you do if you were in our shoes?”

Practical Tips:

When under attack, listen. The best response is to keep the other side talking because new information can increase the room for movement and the number of variables.

Listening without defending helps to defuse any anger. And, if you are listening, you are not making concessions. Invite the customer to help shape the proposal.

Remember, no two fact circumstances or negotiations are exactly alike. In addition, whenever you throw in the “human” factor, i.e., personalities, the personal dynamics are often what drives the success or failure of the discussion. Our lawyers can ably assist you in considering the possibilities, determining the most appropriate options, developing reasonable positions, and sitting at the table with you to represent your interests.

Employing Your Children

dempseylawfirm — Thu, 03 Sep 2009 20:50:22 +0000

If you own a business, you may want to employ your children. Not only will this provide them with valuable work experience, but it presents a way for you to offset some of your own income. But the IRS may closely scrutinize these payments. So what can you do to avoid the IRS finding a deficiency during an audit which may result in additional tax, penalities and interest?

In general, if you wouldn’t compensate a non-child employee in the way you plan on compensating your child, you need to take a look at a number of factors. You should attempt to treat your child, to as great an extent as possible, like any other employee. For instance, failure to actually give your child the money, and put it in their own bank account, or making payments at opportune times, such as holidays, birthdays, and dates when tuition is due, can be very damaging. If you fail to provide a detailed arrangement or formula for compensation, the IRS may also disapprove. Not keeping adequate, contemporaneous records of the child’s hours worked and the tasks competed can potentially destroy the arrangement in and of itself. Failing to pay employment taxes and file returns on behalft of your child is also viewed negatively. And remember, wages must be “age appropriate.”

If you would like to discuss this tax matter or any others, our tax specialists would be more than happy to assist you so that you can, to the greatest extent possible, avoid potentially expensive tax bills in the future.

For more information about our firm, please go to www.dempseylaw.com.

Keys for Successful Non-Compete Clauses:

dempseylawfirm — Thu, 03 Sep 2009 20:49:12 +0000

1. Have a legitimate business need;

2. Be reasonable in terms of time, customers and geography;

3. Be as specific as possible;

4. Provide reasonable cash or benefits to the employee in return for the non-compete.

For more information about our firm, please go to www.dempseylaw.com.

New Standard for Non-Compete Clauses

dempseylawfirm — Thu, 03 Sep 2009 20:46:42 +0000

The Wisconsin Supreme Court adopted new standards that tend to save contracts designed to prevent ex-employees from competing with their former employers. In Star Direct v. Dal Pra, the Court determined that portions of a restrictive covenant may be enforced even after another section is deemed unenforceable, so long as the surviving provisions remain understandable and capable of independent enforcement. Although restrictive covenants are generally disfavored, non-compete agreements are lawful if the restriction is “reasonably necessary for the protection

of the employer.” The employer must show a legitimate protectable interest.

Dal Pra, the employer had restrictions covering ex-employees competing with its business (“business clause”), contacting its customers (“customer clause”), and protecting proprietary information (“confidentiality clause”). The Court found that Star Direct had a protectable interest in the special knowledge of its business practices and customers accessed by its salespeople. Although two clauses were held to be overbroad because they prevented an ex-employee from competing in a business “substantially similar to” Star Direct, the confidentiality clause was held to be reasonable.

The question for the Court, based on precedent, was whether all three clauses should fail because at least one clause had failed. The answer was a new standard: “Whether, if the unreasonable portion is stricken, the other provision or provisions may be understood and independently enforced.” The answer in

What does this mean for employers? The Supreme Court has now given employers in Wisconsin an even better chance of successfully enforcing a non-compete clause with a former employee.

Our experienced lawyers can assist you with planning, drafting and implementing non-compete provisions if you believe that they are necessary to protect your business.

For more details, or if you have any questions, please feel free to contact any of our lawyers to see if you can gain through our experience.

For more information about our firm, please go to www.dempseylaw.com.

A GREAT TIME TO SELL YOUR BUSINESS?

dempseylawfirm — Thu, 03 Sep 2009 20:39:28 +0000

Thinking of selling your business? Of course not. Our economy is in a significant recession, credit is tight, markets are down, and buyers are scarce. But, it is an excellent time to start thinking about selling your business, if that is consistent with your long-term plan. There are several questions that you should ask yourself now – in anticipation of the economy rebounding – so that you are well prepared and in a position to act quickly when the time comes. Our experienced lawyers can assist you with determining the right questions to ask and how to prepare to cash out and maximize the value of years of your sweat equity.

Things to Keep in Mind

There are several things you should keep in mind when you decide to move forward with a sale. Arriving at the difficult decision to sell is just the beginning. Preparing your company for sale requires an exit strategy set up months and, perhaps, years in advance. If you have been a careful planner, you likely have a succession plan in place, or at least the outline of your sale strategy. Thinking through a sale now, while you have ample time, will almost always pay big dividends down the road.

What is Your Company Worth?

What is your company worth in today’s market? And more importantly, what may it be worth in a better market when you are prepared to sell? There is no handy formula that can neatly and accurately predict a business’ value. Most private transactions are based on a multiple of cash flow. There are other methods as well, but if your company has a stable cash flow, that is a good starting point. You can also pay attention to what the market says other businesses comparable to yours are worth. Although there are often few direct comparables, similar business of similar size can be a helpful predictor. Gather as much data as you can about sales of businesses in your area. Trade associations and business groups also sometimes have very good data on how their members’ businesses are valued.

More Profit or More Taxes?

Look closely at how you are running your business and paying your taxes. Small companies often reduce profits so that they pay less taxes. If you show more profit and pay the tax on it now, you will be more than compensated for it with a higher valuation later. Also, if you are running any expenses through your business now that either the IRS or a potential buyer may question, now is the time to identify these items and plan to phase them out.

Financial Statements

You may also want to invest in either audited financial statements or, at least, financial statement reviews by a reputable accounting firm. Audited statements provide a potential buyer with a level of comfort that could translate into lower deal costs and a higher purchase price for you, with less chance of a future claim that your financial statements did not properly represent the financial results of the business.

Pending Lawsuits

This is also a good time to resolve any lawsuits or potential lawsuits involving your business, since any potential buyer will be keenly interested in any litigation where your business is the plaintiff or the defendant. Legal strategies and settlements are sometimes complicated and require time to set up, so planning now to extricate your business from any pending litigation will make things easier later.

Selecting Your Deal Team

You may think you can sell your business on your own, but the prudent owner recognizes the value that a team around him or her can provide. At a minimum, you will want your lawyer and your CPA with you from the beginning. Depending on the circumstances, you may also want to consider a deal advisor or business broker. The type of advisor you may add will likely depend on the size of the deal. Smaller deals may benefit from the use of a business broker, particularly where the broker knows the type of business and has a ready list of contacts. Usually, brokers are paid on commission, on a sliding scale basis. Larger deals may require the services of a regional investment banking firm. Often these arrangements call for a cash retainer and a success fee based on a percentage of the purchase price. They can be expensive, but offer you the benefit of significant experience, resources, and obtaining multiple bids or purchasers. After you and your team have determined a targeted price range for your business, you should then develop a list of targeted buyers. You may already know of someone who has expressed an interest. You may know of strategic buyers that can see the benefits and synergies that might come from the acquisition of your business.

After the Sale

Lastly, you may want to think preliminarily about what you want to do after the sale. Do you want to have a role in the business after it is sold? Do you want to buy a boat and sale around the world? Often, if the buyer does not have the expertise, they may be willing to pay a premium to retain you in the business, either as an employee or consultant. Most buyers desire the seller to remain for a period of time to “transition” the business. This may range from a few months to a year or more.

Plan for Success

Timing of your sale is critical. You want to sell in an up market, with up trends. However, now is the time to plan to meet that goal.

Our experienced lawyers can assist you with every phase of your planning and sale, be it pre-sale planning and advice, tax advice, pre-deal legal audits, real estate advice, or assisting with an offering memorandum, letter of intent, purchase and sale agreement, or other deal documents.

For more details, or if you would like to discuss selling (or buying) a business, please contact one the lawyers in our business practice group.

For more information about our firm, please go to www.dempseylaw.com.

Welcome to the brand new Dempsey Law blog!

dempseylawfirm — Tue, 25 Aug 2009 22:19:01 +0000

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