Psychology and its role in business deals

Psychology and Its Role in Business Deals

Psychology plays a role in business deals, yet many people don’t take this into account. They question why deals fall through on a regular basis when they have the answers right in front of them. How can individuals use psychology to increase the odds of a deal being finalized successfully? Psychology and its role in business deals is a topic that is not explored enough when it comes to success in mergers and acquisitions (M&A).

Find Common Ground

To successfully close a deal, personalize the message so it speaks to the other party. Create a connection, as people who feel this link with the other party are more willing to part with their money.

Throwback Thursday on social media shows how something from the past can bring people together, even those who don’t know each other. A picture triggers a memory in the other person’s mind and creates a social connection.

Establish this connection and seal the deal. This doesn’t require the use of Throwback Thursday influences. Each person needs to make the other party feel nostalgic and establish this bond.

Stick with a Decision

Buyers and sellers must come into the deal well prepared. Indecision regularly sinks business deals, as a person who is undecided could disrupt the momentum of the deal. Any delay could derail the deal.

Each party must come into the deal well educated about all aspects of the transaction to prevent these delays. When all information is on hand, it becomes easier for either party in the transaction to decide without delay.

Get Into the Other Party’s Mind

The buying or selling of a business changes a person’s life forever. Each party in the transaction must recognize this and attempt to see things from the other person’s point of view.

Deals of this magnitude come with a significant amount of stress. How can each party work to keep this stress to a minimum and ease the process?

Determine what the other party values and how you may incorporate this into the deal to increase the odds of a successful close. Craft the deal to satisfy each party’s interests, as this helps to ensure it is a sustainable deal. Each party remains motivated by their self-interest to complete the transaction.

Work to find creative solutions that maximize value for each party. Never make a proposal with little or no value, as this type of proposal leaves both parties frustrated and they may walk away from the deal.

Going Solo

Business owners take on countless tasks every day that they don’t feel confident turning over to other individuals within their organization. However, they delegate when they need to and turn to professional advisors when they require information or advice about an area they remain unfamiliar with. They don’t handle tasks alone when a professional can be of help to them.

During a business deal, for example, the owner might find the other party questions the value of the transaction. Having a financial expert on hand allows each objection raised by the other party to be addressed immediately.

Furthermore, having a professional business broker on hand allows the business owner to focus on daily operations within their organization rather than on minor details associated with the deal. The deal moves forward without the owner’s constant attention, and a successful close becomes more likely.

Distant Partners

Silent partners often derail business deals, as they have different motivations than the person heavily involved in the transaction. Divergent goals among partners present challenges, which is why understanding the perspective of each party in the transaction remains critical. Sadly, there also have been cases where a silent partner initiates a business deal without the authority to do so.

In addition, the silent partner may have third-party consent. They must give their approval of business deals before they can proceed. Partners need to establish the level of consent needed for different business deals when the agreement is first signed to prevent problems in the future. However, if third-party consent is needed, the person responsible for handling the deal on behalf of the business must understand the perspective of those individuals with third-party consent.

Having a business broker on hand when third-party consent is needed becomes of great help. The broker determines the perspective of each silent partner and works to find value in the deal for these individuals. When they do so, the business deal will probably progress with few obstacles.

Speech Patterns

People often use jargon when conducting business deals, only to wonder why a deal fell through. They want to appear smart, when in fact they appear condescending. The jargon leaves them looking untrustworthy, leading to the deal collapsing. A study conducted in 1968 by Robert Zajonc, a psychologist, found that people like those things they are already familiar with.

People need to use plain language when conducting business deals of any type. Avoid jargon at all times. Explain the deal in easy-to-understand terms, as a transparent deal is one that is more likely to close. Tailor the message to the other parties involved in the transaction for excellent results.

Limit the Options

While men and women appreciate having choices, an abundance of options can lead to a business deal stagnating. The individual simply cannot choose between the many options offered to them. As a result, the deal doesn’t go through, and the process starts anew with a different lead. Minimize the choices to keep the transaction moving smoothly from start to finish.

Determine Parties with Influence

Individuals conducting a business deal remain susceptible to outside influences. These influences range from lawyers and accountants to family members and friends. Each party in the deal must identify those people who may sway the other party in a particular direction.

Once these influencers have been identified, their viewpoints must come into consideration during the process. Make every person who may play a role in the process feel valued and that they are being heard. If they believe they will benefit from the deal, they are more likely to support it.

Human psychology plays a role in every aspect of a business deal. Each party must consider the deal from all sides if they want it to come to a successful conclusion. A business broker serves as a great advisor throughout the process, as they get to know everybody involved and will work to ensure all parties walk away satisfied when the deal is complete. To avoid broken M&A transactions, one must explore psychology and its role in business deals.

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