For most entrepreneurs, it is incredibly exciting to grow a business and to have the opportunity to source and close deals with strategic partners to further the company's objectives. Unfortunately, the increasingly litigious nature of the business world and the ensuing need to institute precautions to avoid substantial risk and liability has resulted in it taking quite some time to get a deal formally closed. The negotiation process often goes round and round as the parties jostle for the advantage, and then getting the agreement into an acceptable written form requires even more time. Here are 3 steps to take to help close deals faster:
Prioritize Transparency
One of the biggest reasons that a projected closing date ends up getting postponed is because unwelcome surprises crop up along the way. Although the due diligence investigation is meant to comb through many details to look for any potential issues or deal killers, some things still manage to slip through the cracks. Unfortunately, this is often due to one party's intentional or inadvertent failure to disclose material information. In other cases, the information provided may be based on faulty data or circumstances may change such that previously reviewed information has to be updated.
The key to avoiding unnecessary delays is to ensure full transparency from the beginning and to prioritize transparent communication throughout the transaction. One way to facilitate information sharing is by establishing a virtual data room. This will provide a secure, centralized location for parties to store, share, and view information germane to the deal.
Manage Expectations
In addition to engaging in open and honest communication, the parties primarily responsible for getting a deal closed must ensure that they are continuously managing expectations. There may be a small team of people representing each side who communicate with each other, but they often forget to loop back to other company leaders or personnel. As a result, when unexpected events occur that result in delays to the closing timeframe, there is more likely to be confusion and frustration.
The people taking the lead on gathering and analyzing data and keeping the transaction moving toward a successful closing must ensure that they are communicating the status of the deal with all relevant stakeholders. In most transactions, company leaders are still tasked with maintaining the business, so they may not be as aware of the deal’s progress.
Be Proactive
One of the best ways to facilitate a quick closing is by ensuring that a company is adequately prepared for the transaction before it even begins. Organizing key documents, identifying potential problems, and taking steps to get a company’s affairs in order often prove crucial to whether and how a deal plays out. It is incumbent on company leaders to be proactive before entertaining any prospective offers or engaging in negotiations.
