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5 Tips for Negotiating the Sale of a Business
Purchasing a new company or selling your current one can be a complicated process. This is why many entrepreneurs benefit from using a business broker, such as LINK, to assist with negotiations until the sale is complete. As a buyer you want to be sure you’re paying a price that’s reasonable and fair, and the seller wants to be sure they’re getting their money’s worth as well.
If you’re selling your business and you’ve found the perfect buyer — someone who you know will take good care of it and help it grow and profit — you’ll eventually have to sit down and negotiate the terms of the deal. What follows are five tips to help you through the negotiation process.
A mistake many business owners make is feeling as though they must talk to dominate the conversation during a negotiation. This tactic helps them feel as though they’re in control of what’s happening. Silence can also be awkward and most people don’t like it, so they’ll talk to fill it up. When the other side does talk to fill it up, listen to what they’re saying. It’s likely that during these quiet times, their real objectives will show themselves and you can use this to help arrive at a deal that satisfies everyone’s goals. Another way to be a great listener is to ask questions and take notes so you can review them later. This helps keep you informed as the negotiations proceed.
Don’t Give Anything Away Without Getting Something in Return
If you make a concession during negotiations, always make sure you’re negotiating something for yourself in return. Whether it’s more favourable payment terms or a lower price for the buyer, be sure you’re getting something back to remain on equal footing throughout the entire negotiation.
Realise It’s Okay to Walk Away
It’s easy to get tunnel vision when you’re in the middle of negotiating the sale of your business. You can get lost in the details, numbers or the terms and have a hard time seeing the big picture. Remember that walking away is better than agreeing to a deal that you’re not comfortable with making. In these cases, if the seller does walk away, it’s important to self-reflect on the process to find out what could have been done differently and what might have gone better if different choices were made. This will help a seller perform more effectively in the future.
Do Your Research
This might seem like a no-brainer, but understanding the buyer’s point of view can be essential to a successful negotiation. An experienced and skilled broker can help with this. Items you should investigate prior to the negotiation include:
- Due diligence items
- The buyer’s assets and their associated value
- Relevant market activity
- Current sales climate in the industry and comparable sales
Being aware and knowledgeable of these factors can prevent the seller from being taken advantage of in a negotiation.
There’s a lot of risk involved when it comes to selling or purchasing a new business and things become even more complicated when there’s a lot of money involved. If the seller can anticipate certain questions or problems cropping up from the other side, they’ll be better off during the negotiation because they can meet those concerns with transparency without giving up too much.
For instance, if company sales are rough this quarter, it’s important to be upfront about that and explain the situation and what could possibly be done to address it. If you don't anticipate this type of information coming up during the buyer's review, you may not have a solid answer prepared for the situation.
Keeping these tips in mind helps you negotiate for the best possible price and ensure everyone gets a fair bargain in the deal.
For Further Information about this article, contact your nearest LINK Business Broking office at: