California Business Broker .com : Ten negotiating Tips when buying or selling a Small Business
Many people believe that negotiating the sale or purchase of a small or medium sized business will be an agonizing ordeal. Often times the case is exactly the opposite. Since the buyer and seller have usually worked through due diligence together, there is often times a professional relationship in place when the time comes to finalize a purchase agreement. As California Business Brokers, we have been involved with many deals where this is the case. Occasionally things can go south but this is usually the exception. Don't fear negotiation - it can be a fun process.
Here are some tips to help you work through this process:
1. Realize that this can be a long process. Most business owners would prefer to sit down and hammer out a deal. This is usually not the case. Most often it is a lengthy back an forth process from party to party.
2. Negotiate the terms and conditions first - then negotiate price. Terms drive the deal. It is best to clarify and identify how the deal is going to be structured before negotiating price.
3. Avoid stating absolutes. "I will only do x or... I will never do x...I will never carry a note...I will only take a all cash deal...I will never buy the business if..." Truthfully, most business buyer or sellers will do something if it makes financial sense. Better to clearly communicate and identify your goals rather that make it adversarial.
4. Never, never make it personal. This one is pretty straightforward. This is a business transaction - it is not personal. The best negotiations are very low-key and informal.
5. Never, never take it personally. An offer rejection or a low offer is not a personal attack. This is hard for some business owners who have poured their blood, sweat and tears into a business. Remember that value is subjective. The case may be that the buyer or seller does not have enough information. Try to supply more information or move on.
6. Keep the transaction moving. Respond quickly. Be sure to keep your team moving as well. If a deal gets bogged down it will most likely die.
7. Be honest. Concealing material facts will only cause problems later. They will be discovered and the result will be ten times worse that if you just disclosed them up front.
8. Be straightforward. When it comes to negotiating it is time to lay your cards on the table. Better to air out your concerns early.
9. Do not get the cart before the horse. The average deal will fall apart and get put back together 3 times. Take setbacks in stride.
10. Clarify your needs and goals before you start negotiating and be specific. Having clearly identified goals will help you with your decision making process.
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