Billionaire investor Warren Buffett knows how to strike a good deal. The "Oracle of Omaha" has amassed $78 billion in net worth and owns more than 60 companies including Geico, Duracell and Dairy Queen through his Berkshire Hathaway (BRK.A - Get Report) (BRK.B - Get Report) , Forbes reported.
Here are some tips to close a deal like Warren Buffett himself. Always remember Buffett's favorite deal making maxim: "Rule number one: Never lose money. Rule number two: Never forget rule number one."
Get Right to the Money.
Buffett's book, "The Essays of Warren Buffett," outlines the very real need to start talking about money from the start, no matter how uncomfortable it could make the conversation. It's both unrealistic and unwise to start talking about any transaction before a starting price is established.
Know what you're dealing with on the other end, too, and not just the party's budget, "How to Close a Deal Like Warren Buffett," authors Tom Searcy and Henry Devries wrote. Buffett has been known to ask for business plans and standard financial documents that a company would submit to a bank in applying for a loan. These aren't wildly specific or obscure requirements, but they can paint at least a preliminary picture of the other party's financial situation ahead of the nitty gritty.
As for Negotiations...
Wait until it's the right time. Just as Rome wasn't built in a day, deals aren't closed in one meeting. Searcy and Devries wrote that negotiating too soon reduces details to nothing, according to Buffett's philosophy. Remember that the whole is not always the sum of its parts. Allow a broader picture to be established before jumping to conclusions, even if it means several meetings and discussions before negotiating on price and specifics. Buffett has also said not to confuse price with value. Price is what you pay, while value is what you get, Buffett said.
Buffett probably thinks he negotiated great deals on these stocks.
One of Buffett's top picks is Apple Inc. (AAPL - Get Report) . The investor has never sold an Apple share, and said last month that he sees Apple becoming the first trillion-dollar company. Other big Buffett holdings include Coca-Cola (KO - Get Report) , Wells Fargo (WFC - Get Report) , American Airlines (AAL) , American Express (AXP - Get Report) , Bank of America (BAC - Get Report) , Costco (COST - Get Report) , Kraft Heinz (KHC - Get Report) , Southweat Airlines (LUV - Get Report) , Moody's (MCO - Get Report) and Restaurant Brands (QSR - Get Report) .
Ranges Are Important.
Searcy and Devries also wrote that Buffett does his deal-making in ranges. When it comes to prices, cost structures, yields and performance metrics, speak in ranges to establish the high and low ends each party is willing to accept. That also keeps both parties on the same page and avoids an awkward realization that there are too many irreconcilable differences when it's too late.
Never Go Where You Aren't Wanted.
Buffett has long made a pledge to stay away from deals that don't want him there. Earlier this year, Buffett's Berkshire Hathaway put down $15 billion to aid Kraft Heinz Co. (HNZ) , which it owns a majority stake in, to buy out consumer goods titan Unilever Plc (UL) . When Unilever rejected the proposal, Berkshire and Kraft Heinz pulled out of the deal without contest. Buffett called the Unilever situation a "misunderstanding" in August and said Berkshire withdrew immediately after realizing they weren't wanted.
Buffett isn't your normal rich guy...
Looking to Trade Like the Oracle of Omaha? Here's Everything You Should Know About Warren Buffett: