“The buyer paid 8x my client’s EBITDA [a revenue-related financial calculation often used to help evaluate a company’s market value]. He didn’t have to pay this, as he had extremely strong leverage because he was my client’s largest retail outlet and one without whom my client’s company would be worth a ton less. But he did.”
“Why?” I asked my friend who shared this story, a successful former investment banker.
Two reasons, he told me. One, he knew my friend from a previous deal and didn’t want to screw him over. Remember the proverb “What goes around comes around?”
And two, which I think is equally if not more important, the buyer just didn’t do business that way and felt it was appropriate to pay what he felt the company was worth.
We’ve all had this same feeling, as it often arises when deciding how much to tip in various service-oriented circumstances. Of course, there are standards and expectations as to the amount. But we aren’t required to leave anything (meaning you have the leverage).
We tip anyway, though, often a significant amount. We also do it regardless of whether we might see that service provider in the future.
Why? Same reasons – because it’s appropriate and it feels good.
This is the fourth reason we might prioritize other factors as more important than leverage (see my previous three Latz Negotiation Columns for the others).
Latz’s Lesson: It just feels appropriate sometimes to leave some extra value on the table – so just do it.
* Marty Latz is the founder of Latz Negotiation, a national negotiation training and consulting company that helps individuals and organizations achieve better results with best practices based on the experts’ research. He can be reached at 480.951.3222 or Marty@LatzNegotiation.com.