Executive Deal Making Advice from Warren Buffett

Warren Buffett says, “You don’t have to swing at everything -- you can wait for your pitch.” Buffett is fond of baseball and often uses the game to illustrate his philosophy. In deal making you get to stand at the plate all day, and you never have to swing. A business leader can wait for the dream deal.

In our book How to Close a Deal Like Warren Buffett we discuss that sometimes the best deals are the ones you don’t make. Marquee names on the client list are nice, but to be honest, money doesn’t care where it came from. Like Buffett, the best way to measure your business success is not by the logos, but by the zeros.

As a business leader, how do you guide your company to land a dream deal?

First, know your strike zone. It’s great to not swing at everything, but to win you do have to swing at something. Ted Williams, arguably the greatest hitter of all time, broke down the strike zone into 77 cells, each the size of a baseball. He calculated that hitting pitches that crossed the plate in just 8 cells rather than all that crossed in the strike zone was the difference between a .400 season and a trip back to the minors. What is your perfect strike zone? Define that by the types of criteria ideal for your company and ignore the rest. Our experience is not much different than that of Mr. Williams - about 10% meet the criteria, the rest you should stay away from.

Second, you need to know what your prospect needs. We’ll use Walmart as an example (Tom recently made the trip to Bentonville, Arkansas as part of a big hunt team). Walmart looks for the following in its vendors:

1. Proven ability to deal with sophisticated supply chain management systems that you don’t control.
2. Proven ability to work on a national basis.
3. Proven ability to handle fluctuations in volume requirements by store, by city, and by region.
There is no sense in stepping up to the plate with a golf club, a crochet needle or a badminton racket - you’ll never hit the ball even if it is in your sweet spot. You have to be bringing the exact right offering to the plate to win.
Third, swing with safety for your customer, not just desire to win the sale. Most big deals get held up for a lack of safety for the customer. They may really want what you have, but they cannot buy it if it puts them at risk. Have you represented clearly to your buyer that buying from you in this Buffett-sized deal:

• Won’t put that person at personal risk for their job if things go wrong
• Will be a defendable later when challenged by others in the company
• Won’t be trumped by the usual suspects of options – cheaper offer, bigger competitor or “we can do it ourselves”

When closing your biggest deals ever it is very important to know what deals you don’t want. The second thing to know is what deals your buyer can explain and support when you are not in the room.