The Costs of The Deal

The Costs of The Deal

Many businesspeople come to me to ask me help them close multimillion and sometimes multibillion deals. They are broke but in their mind, this is not a problem. The multimillion or multibillion deal will soon settle the problem and they’ll be able to pay all of their debts.

What of deals are those ?

Most of them are import-export of all kinds of commodities, from corn to gold. But I also saw people willing to build hotels, airports, business and conference centers, bungalows, restaurants, discotheques, spas.

When they are not totally delusional as I described in one of my previous articles called “Imaginary International Trade“, they underestimate or merely ignore the following costs.

The Cost of Contact

To contact an important business person, a celebrity or more simply a large group and to get their attention is not free of charge. Most of time it involves intermediaries that in the best case scenario might take a big cut of the deal as a success fee, but in the worst case scenario might charge upfront fee and however might steal, alter, damage or ruin the deal altogether.

The Cost of Communication

Although cost of mere tools of communication such as phone calls have reduced over the last two decades, it is clear that the cost of corporate communication has drastically increased.

The goal of corporate communication is to awaken interest and to raise it until a level triggering the beginning of a negotiation.

If thirty years ago, it was acceptable to send an important businessman one page machine typed, it is by far no longer the case.

Today the cost of corporate communication involves not only written offers and corporate brochures but slides presentations, videos, seminars and more often than not, all of these combined.

The corporate communication also includes proofs of corporate representations. In this modern world where doubt and suspicions are kings. it is not rare to see experts opinions and valuations. These documents are generally very expensive but imagine what their price can be, when the deal is a multibillion deal and thus expert’s liabilities can amount to same!

The Cost of Negotiation

The cost of negotiation of a deal generally includes at least a lawyer and in multimillion deals and above, at least a law firm and a consulting firm.

While to same money, businessmen generally tend to involve these at the last minute, when the deal materialize or become rather sure from their own point of view, in large deals it can be a good strategy to do exactly the opposite to save money.

Being properly assisted during negotiation can also be very important, in order to include all negotiated points and assurances given, into the final contract.

The Cost of Due Diligence

As I have already written another article about Due Diligence, I shall not expand on it again. The Due Diligence process must answer a number of questions and provide evidences or insurances on key points of the deal.

It is obvious that said evidences or insurances will be of legal or financial nature and thus will typically involve lawyers, experts, scientists, architects and accountants.

The Cost of Conclusion

The word conclusion is used here in its french meaning. It includes the signing and closing of the deal as much as the failure to make a deal after negotiation.

The conclusion of the deal generally involves lawyers and often escrow agents, banks and other top professionals.

All professionals mentioned in this article rarely work for free or on a successful contingency basis. That is the reason why I do not understand how some low level businessmen or some imaginary traders can think that they can do multimillion or multibillion dollars deals without money.

As my mentor was saying: “for marbles shooting, one needs marbles.”