True Value

The Downside

There are significant negatives to be weighed. Risks permeate every deal, as they do life, and as far as I know, there's no way to identify all the dangers. In certain deals, particular risks will jump right out at you; in others, they just lie in wait. Either way, deal-makers face risks from nature, current events, dishonesty, bad judgment and incompetence.

Factors-like opportunity costs-aren't just theoretical. The money you could have made by making a different deal is all too real, as are the seemingly always-greener pastures along the road not taken.

Also, don't underestimate transaction costs. The larger and more elaborate your particular deal, the more time, energy and money (think of professional fees, travel, phone charges and the like) you'll spend closing it. And deals made in one area may require further spending in another. For instance, you may buy new machinery at the right price, but then need to install it, retool other equipment and adjust your assembly line.

Finally, there's the most obvious downside of all: what the other side wants. Consider all the factors above as if you were in your opponent's shoes. This not only helps you better understand the deal's true value, but it also helps you better understand the other side so you can negotiate more effectively.

Remember this: You'll be thinking about what your deal is worth well after you sign on the dotted line. So take the time now to consider the pros, cons, terms and conditions. You'll be glad you did.

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This article was originally published in the January 2001 print edition of Entrepreneur with the headline: True Value.

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