Prepare Yourself for the Negotiation Process
In order to get the best price possible when buying a business, like it or not, there will be negotiation involved, a skill that even the most experienced entrepreneurs often need help with.
For this reason, we thought we’d share some advice for easing the negotiating process when buying a business. If you employ these tips, you’ll find that you’ll be able to get a better price for a business that you’re considering purchasing than you otherwise might not have.
You Don’t Have to Go It Alone
Most likely, the seller has hired a business broker who will handle the sale of his or her business. If you really don’t feel comfortable with negotiations and don’t want to go it alone, enlist the help of someone who is skilled at it.
Find Out the Reason for the Sale
If you do decide to go it alone, there are a few things to keep in mind. The seller has a reason that he or she is selling the business, and you need to make that reason your business. When you understand the reason that a seller is looking to get out from under his or her business, this is information that you can use to your advantage.
For example, consider a seller that has a high degree of urgency when selling. You learn that the reason they’re selling is because they need an infusion of liquid capital and they need it now. This means you can strengthen your negotiating position by moving quickly yourself, and by making the cost of that quickness represent itself in the amount you’re offering.
Know Your Limits
While you might have the credit to secure all of the financing in the world, remember that paying back those loans is going to put a lot of pressure on you once the keys get handed over. If you understand your own financial situation before you get going, then you’ll know your limits. This makes it far easier when you’re negotiating, because you can say, with confidence, when what the seller is asking for is out of your range.
Stay Focused on the Big Picture
It’s important to remember that there is much more to negotiations that just the price, and payment terms. On average, a purchase agreement has over 50 individual clauses that need to be negotiated, such as the lease, employee issues, non-compete clauses. All of which are important to the deal, some more than others. Which ones are you willing to bend on and which ones are potential deal breakers if you don’t get what you are asking for?
You’re now armed and ready to begin negotiations. Good luck!