When we sell a business we really want to get the highest price possible. We need to be able to move on to the next project in life (which often costs money), we have to replace the income that we had from the business, or we need money to retire… everything is about the money.
When we turn the table, and we look from the purchasers’ side of the story, there are the same motivations; It needs to be feesable, I need to implement some changes to the business (which often cost money), we are replacing the income of my stable job that I left, we need money to expand…. everything is about the money.
Looking at both parties it seems the buyer has the upper hand in the negotiation; the price they are prepared to pay will always depend on the performance of your business! And if the banks don’t want to lend the money because of this, it may impose a really big barrier to a successful outcome…
Understand the buyer and his motivation
Unfortunately there are not multiple buyers for each business on the market, unlike when you are selling a house and there are 3 to 6 buyers for each property. This means you have no choice but to negotiate the best deal possible, but under the terms negotiated and initiated by the buyer.
This is where a good negotiator comes in. As a negotiator (read Business Broker) we employ techniques that ensure you are not getting entangled in an emotional game of chess with a purchaser. We take the emotion out of the process and work to a deal that works for both parties, with your standpoint being our focus.
Problem-solving and deal-making
When you hear the word “Negotiation”, you probably think about “winning” or “pushing to get what you want”, however in our opinion the winning mentality comes down to “finding universal solutions to a problem and making it work for both parties.” The trick is to look at negotiating as problem-solving and deal-making, instead of a transaction where someone comes off second best. In most cases a vendor wants to see a buyer succeed after selling a business.
Selling a business is a process, it is not an event. In that process, finding the buyer is only a very small part of the process. Anyone can find a buyer,… really, you can too! But it is the way the business is presented, the way a simple question is answered (sometimes with complex answers), how reliable the valuation is and the terms in the final Sale & Purchase Agreement to ensure both Vendor AND purchaser are protected from anything that could go wrong in the process (from signing the Business Sale & Purchase Agreement until Settlement and well thereafter!)
Deals can fall over when a ‘strict’ agent is alienating a purchaser by pushing the demands of a vendor. Negotiating is a skill that needs to be taken in the context of ‘a deal-maker’, not a deal-breaker. Having a good negotiator on your side, (that can see the deal from both sides) is a real asset to your sales process of selling your business; It’s ok to want anything , and it’s ok to ask everything you want… but don’t expect you get everything you want!
FREE LINK Northland downloads:
FREE Booklet outlining the sales process: Managing The Sale of Your Business
FREE Booklet outlining other options to an Exit Strategy