Buying and selling a business is not a common occurrences for most people, and therefore there is not always an opportunity to practice negation skills or tactics. Here are some simple tips for both buyers and sellers on how to bargain confidently and effectively.
For the Buyer:
- Haggle on the first quoted price – never accept the first offer. It seems obvious but there are a multitude of reasons for doing so. Most importantly, the seller will know that you mean business and will not surrender at the first hurdle.Â
- Begin with the lowest possible price that you can – this will weaken the sellerÂs expectations. However, this low bid will need to backed up with sufficient reasoning which can only be produced with detailed research into the business.Â
- A buyer will need to take into account that the seller will have supreme knowledge regarding the business. Acceptance of a low offer may suggest that there are hidden defects or pitfalls within the business that are not apparent at first sight, and may need to be investigated further.Â
- The seller may have an emotional attachment to the business and may be unwilling to drop the price from the first quote. Researching the objective business thoroughly is essential for a successful take over. Understanding the financial position, the value of the brand and the market conditions will strengthen your position as a buyer.Â
- Undermine the sellerÂs confidence by asking lots of questions that will raise doubt about the business. Try to forecast potential problems that will decrease the expected value of the company and allow you to barter more efficiently. It is also important however, to remain positive and not be too overly critical, as you do not want the seller to become too defensive. Take into account that you may need the sellerÂs goodwill or advice after the sale and you may not want any bad feelings to occur.Â
- Enter negotiations with a confident outlook. This can be achieved by rehearsing your argument and planning what you will say during the process.Â
- Stay tough! This is business!
For the Seller:
- Imagine the business is a present that will need to be packaged effectively for maximum impact. Invest the time into ensuring the business is in a good condition, perhaps repositioning the business to make it more attractive for buyers. Produce a comprehensive, detailed report that the business can be managed profitably and eliminate all potential weaknesses or dangers that could be identified by future buyers before they can.Â
- Seek advice from professionals, including lawyers, accountants and estate planners. This will help in being objective about the sale and refrain from personal emotions entering into the discussions. Acquiring advice and knowledge from experts will also give you leverage in the negotiations, and will be there to offer you support when the heat is on!
- The buyer will expect you to know your business inside and out. You must be able to answer any question that they may have, confidently. Putting in the time before the sale will ensure there will be no hidden surprises that you were unaware of.Â
- Prepare a question and answer sheet of any questions that you may be asked by the buyer. Ask an objective outsider from the business to overview the credentials of the business to spot any potential issues that you may have overlooked. Anticipating the buyerÂs next move or bargaining tool will ensure you are always one step ahead in the talks.Â
- Before entering negotiations you must have a realistic expectation of what you want/need. Always start the asking price at a higher one that you are willing to sell for. Establish your priorities that you want from the sale and will not budge from and decide on the issues that you may be happy to concede.Â
- Similarly, know what your buyer wants from the sale. If you prioritise your buyerÂs expectations and again repackage the business in a way that makes it look more appealing, it may be easier to close the deal.Â
- If you have a buyer that is interested in your business, then you have a business worth selling. Stay strong in negotiations and donÂt settle for less than you want!