If you’re looking to sell your business or buy a new one, you’ll want to know how to negotiate a business sale. It’s a good idea that you clue yourself up about this aspect of business, or else you might find yourself selling your business for too little, or buying one that is overpriced. In this article, we’ll give you the best tips and tricks to negotiate a business sale.
1. Valuation, valuation, valuation
Whether you are buying a business or selling one, an independent valuation is vitally important. Without it, a business could be worth more or less than you anticipate. Guessing how much a business is worth is not good enough, because business valuations are placed on many different factors, including number of clients, talent in the team, and even the condition of the marketplace.
Hiring an independent professional to conduct a professional valuation is vitally important, because it gives you a firm figure to aim for.
2. Informal introductions
If someone is interested in buying your business or if you’re interested in purchasing a company yourself, an informal meeting is a good place to start. Legal professionals and due-diligence is obviously important but an informal meeting is a great way to set out the core terms of the agreement and determine if this is someone you can do serious business with.
Don’t underestimate the importance of rapport and a solid relationship. It’s going to make the whole process easier and less stressful if you like each other.
3. Be honest
If you’re the seller, you need to be honest about the state of the business and the valuation you’ve received.
If you’re a buyer, it is vitally important you are up front and honest about when you want to buy and how much you’re willing to pay.
Honesty is an important part of any business sale, so communicate.
4. Be flexible
You’re absolutely not going to get everything you want, so you must enter a business sale negotiation with an open mind and the will to be flexible.
Try your best to avoid deadlock over a minor issue. Keep the bigger picture in mind and be prepared to compromise. Pick your battles wisely to make sure you can request your non-negotiables on the basis that you compromised earlier on something else.
5. Enthusiasm and self-belief
Nobody is going to want to buy your business if you don’t really believe it is worth something. Nobody is going to believe you’re serious about buying a business if you aren’t passionate about it. You might feel like playing it cool is a worthy strategy, but we’d actually suggest that you’re as enthusiastic as you can be about the sale of this business without overdoing it.
If you really want a business, make sure the seller knows that. If a particular buyer really takes your fancy, tell them.
6. Measured discussion
There’s a lot to be discussed and negotiated, so it is important that both sides speak measurably about what it is they’re looking for and how it might work. If you’re selling, don’t resort to sales patter to try to get your sale. If you’re buying, be honest about what you’re looking for. Don’t over-negotiate to try to get a better deal, as this might put your seller off.
At the same time, it’s important you know your non-negotiables, and that you recognise when you’ve reached your limit. If you know that what you’re offering is about as good as it gets, stay strong.
7. Bring in the professionals
There is a lot to consider when you are thinking about buying or selling a business, so you should most certainly hire professionals to help you.
If you’re buying, you need someone to help match you to the perfect business. This broker will complete the relevant due diligence to make sure you know what you are getting yourself into.
If you’re selling, you need a professional to help negotiate the selling price, to make sure you’re not forced into selling for too low an offer, and to make sure you’re selling to the right person.
Never underestimate the benefit of employing people who know what they’re doing when it comes to mergers and acquisitions. They might cost money, but they’ll save you a lot of time and stress in the long-run.
Yorkshire Change can help
Yorkshire Change specialises in managing businesses and their leaders and teams through significant change.
Most mergers and acquisitions fail. Often, this huge change can cause significant rifts and upheaval, and leave thriving companies in tatters.
If you would like to find out how we can help you, or if you just want to find out a bit more about our approach or our current projects and clients, please contact us for a no obligations discussion.
Call 0333 090 8710, or fill in the contact form on our ‘contact us’ page.