This guide to negotiating and maintaining business deals and relationships in the fitness industry outlines six important steps to produce a win/win relationship.
"The only good deal is a win/win deal,"says Robert Dedman Sr., founder of ClubCorp, Dallas, Texas, in the book King of Clubs. In his mind, dealmaking is both an art and a science, a process of bringing multiple parties together in a business relationship that produces success for everyone involved. This may seem counter to what is often seen in the news today, or what many people may have experienced in their professional careers. In recent years, far too many business leaders and politicians measure the value of a deal solely in terms of what they receive from the arrangement, no matter what the results end up being for the other parties involved. This modern-day approach to deal-making is counter to the philosophy and business practices of insightful organizational leaders who understand and accept the value of creating business relationships that result in positive outcomes for everyone involved. A win/win approach to deal-making drives long-term business partnerships and helps foster continual growth and profitability in an organization. The relevance of such a precept could appropriately be summed up in another quote from Dedman: "In the deal-making business, we are also in the repeat business."
What is deal-making?Deal-making is the process by which multiple businesses or individuals negotiate a business relationship that provides each group with certain desired benefits. A deal can range from the negotiation of a lease to the establishment of working conditions between employers and their employees.While the term "deal" is most often associated with real estate transactions and the purchase and sale of businesses, a deal is really a process involving a situation in which two or more parties come to a mutual understanding regarding a working or personal relationship. In the fitness industry, deal-making can include such business transactions as purchasing a fitness center, selling a facility, negotiating a lease, negotiating out of a lease, negotiating an independent contractor agreement, settling a member dispute or negotiating purchasing agreements with vendors. The art of doing a deal is about negotiating a business relationship that produces win/win results for all involved, both from a process perspective and an outcome perspective.While simple in its definition, it is a complex and challenging undertaking few professionals ever have the chance to fully develop.
A framework for deal-makingDeal-making involves six important steps, each of which is critical to helping produce a win/win process and outcome: 1. Establish a relationship. Far too many business deals fail or succeed at this first step. All too often, deal-makers want to discuss the terms and conditions of a deal before actually getting to know with whom they are getting into business. It is absolutely critical that all parties who are considering doing a deal together get to know each other. In some cases, the first several months of talks can revolve around getting to know each other; only after that can discussions proceed to talks about possible terms. The underlying moral is that great deals are often the result of building a trusting relationship with the other party. As Dedman so aptly puts it, "Deal-making needs to be a courtship, not just a transaction." 2. Discuss the deal's social context. Before jumping into a discussion of the business-related terms of the pending arrangement, reach a clear understanding of the underlying social contract of the potential business relationship - and the ongoing social contract. In essence, each party must be able to clearly delineate two key points: what is the real nature of the deal (e.g., what, if any, are the hidden expectations and agendas attendant to the relationship that might not have been put in writing); and what do the parties to the potential business relationship want the ongoing social contract to be (e.g., how will they deal with each other and how will decisions be made, beyond the legal nature of the deal)? After weak relationships, this factor is probably the second most common reason that most deals fail. Individuals who enter into a business relationship must understand what the other party expects from the relationship and how they want to be dealt with beyond the standard legal verbiage of most deals. Individuals should not allow their perceptions of the social contract to cloud their level of objectivity concerning the deal. An effort should be made to discuss these important issues and arbitrate any areas of potential disagreement or misunderstanding. 3. Do the due diligence on both sides. Fitness professionals should determine what it is they are really negotiating, whether it is a purchase, sale, lease or simple contract. In other words, you should know everything you can about the other business and the people involved with that company. An article that appeared in the Harvard Business Review in 2004 noted that "deal-making is glamorous, but due diligence is not. "Many deal-makers fail to do their homework, and, as a result, don't have a thorough understanding of the deal. In this regard, a list of the key elements that should be addressed before entering into a business relationship includes the following:
- Know the customers of the business with whom you are considering doing business.
- Know the competition for the business.
- Verify the economics of the business with your own people; don't depend on the data you are given.
- Verify the cost economics of the deal.
- Take stock of the core capabilities of the other party (core competencies).
- Determine the stand-alone value of any deal as if it was not going to be a part of your business.
More than a handshakeSound deal-making involves adhering to certain precepts, concepts and principles. The days are long past when deals are consummated with a heavy dose of trust and a simple handshake. Rather, deal-making should be the systematic process that leads to a fair and appropriate business relationship between the involved parties.Ultimately, the basic foundation of the process will be the underlying elements of the proposed relationship and the people who are part of it. Perhaps no one states this critical connection better than Dedman: "It takes two things to make a great deal - the deal and the people who come with it!"