Making deals, stupid

One of the authors I work with is Tony Robinson OBE, co-founder of Enterprise Rockers and guru on micro-enterprise. Earlier this year we were discussing the question of what single skill most defined a successful entrepreneur. Yes, it’s an old chestnut. But Tony gave what for me was a fresh answer and one has been resonating in my mind ever since: “deal-making”.

Of course, we can argue whether that is the single, most important, skill. But that isn’t important. The important point for me is that deal-making is clearly a highly valuable skill. In fact, saying so sounds nothing more than a truism – of course if you make bad deals it’s bad news for your business (and mutatis mutandis for good ones)! Certainly, when I think back over my career in business I’m struck by the way that making a single good deal can sometimes produce a step-change, sometimes producing the anticipated benefits and more besides (typically in the form of learning and morale), while a bad deal can act like a torpedo, impeding or even sinking the whole structure. Typically bad deals not only fail to produce the anticipated value: the aftermath sucks up time and energy.

Why then, given it’s so obvious, did I find the point make such impact?

Because I find that, given the fundamental importance of the skill, it’s remarkably little discussed. When I think through the kind of advice entrepreneurs are given – on training courses, on websites, on blogs, in books and magazines, at conferences, and so on – I’m struck by the relative absence of the term and of the concept. There’s plenty of advice out there for entrepreneurs – on sales, marketing, business law, human resources, finance, intellectual property, etc., etc. – and the interesting thing is that all these aspects of business entail deal-making: yet this theme that runs through business somehow features like a mole, remaining for the most part below the surface and seen in the open only rarely.

A search of the literature of scholarly research suggests something similar applies, though perhaps the situation there is more nuanced. Numerous aspects of deal-making have regularly been investigated. They include:

  • a specific kind of deal-making, namely mergers and acquisitions (often spoken of as if that’s only meaning of the term);
  • negotiation (an important part of deal-making, but hardly the only one);
  • decision-making;
  • financial evaluation of assets;
  • sales (with a focus more on getting a deal than on how to you decide whether it’s a good one.

For a rounded understanding of deal-making, one would have to combine all of the above – and add in the question of how value is created and where, so to speak, it resides (related to asset valuation, but not identical to it, since consideration of value tend to entail considerations of business models, strategy, and stakeholder management too). If I was setting out on a career in business schools, deal-making would be my subject: guru status beckons for someone who can develop an integrated theory.

Bill Clinton famously focused his first presidential campaign by posting a sign on his office wall that read, “The economy, stupid!”. Since my conversation with Tony, there has been a sign reading, “Making deals, stupid!”.


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