- Business Tips

Negotiate the Best Deal When Selling Your Business

Most entrepreneurs negotiate with customers and suppliers on a daily basis when conducting business. However, many are not prepared for the magnitude of negotiations that come with selling a business. When you let go of your enterprise, you are looking to make some money on top of the money you invested. While this is easy to calculate, you may have an emotional connection with the business or be in dire need of cash that you overlook some important aspects of the deal. Here are five tips to help negotiate like a pro when selling your business.

Have a threshold price

Before starting the negotiations, have in mind the value below which you cannot consummate a deal. This price is also called the walk-away number. When you advertise or show the intention to sell a business in Sydney, you are likely to receive tens of offers with amounts offered differing significantly. Therefore, if you do not know the lowest that you can take, the chances are that you are going to sell the business far lower than its worth. Setting the walk away price takes into consideration several factors including:

  • The amount of cash you have invested in the business.
  • Average sales generated by the business annually.
  • The value of your brand.
  • The projected sales volumes in the near future.
  • The values of similar businesses in the area.
  • The expected profit from the sale.

Some valuables like the sales volumes and the value of your investments remain constant. However, you can change the other elements depending on external variables. To be on the safe side, create a range within which you can accept the offer. It should be higher than your investments and value of the goodwill combined.

Be prepared to make strategic concessions

Negotiations are all about giving and taking to create a win-win situation for both parties on the table. The goal is to have a mutually agreeable deal that covers the interest of both parties. Therefore, you may have to drop your hard stance in some areas when negotiating.

Strategic concessions are reciprocatory concessions made to entice the other party to make a concession too. To make the other party make a concession, you must be willing to give up something the party sees as valuable. Then, ask for a favor by requesting the other party to concede something that you find as favorable.

Before entering into negotiations, make a list of things that you may be willing to drop. The items could be demands or tangible assets, and things that you want in return. Order the items from the most important to least important. This ensures that you do not concede an important value for something that is not half as worth.

Make the first offer

As popular wisdom goes, when playing cards, avoid tipping your hand. Let the opponent show his cards and make the first move. This wisdom plays when making negotiations. Always make the first move by giving your prospects the offer, and the allow them to make a counteroffer. In many cases, the first price that gets on the table has a significant impact on the direction that the negotiation takes and influences the final figure that you agree on.

Do some research on the buyer and the likely offer that they are going to make. Use this figure along with your threshold amount to determine the figure that you first put on the table. Remember, the final price will be less than the initial offer. Therefore, give room for healthy price adjustments.

Know when it is time to walk away

If you have stayed for so long without getting a credible offer, chances are that you are likely to hold on to any prospects who seems serious. Moreover, if the negotiations have been going on for some time, you may not be willing to let the prospective buyer go.

However, sometimes walking away is the best option. You may find buyers who are unwilling to move an inch away from their initial offer. It is not worth wasting your time pushing a prospect who is reluctant to bulge. Sometimes better offers may come on your way as you negotiate the current offer. Consider taking your chances.

It is good to give the other party time to consider your offer or concessions. However, do not pick an uncomfortable offer. Walk away when there is no room for more negotiations. This not only saves you cash, but it also saves you from the mental stress that comes with the hard negotiations.

Negotiate for more than the price

Price makes the most significant part of the business negotiations. However, the price is not everything. You need to put an equal amount of emphasis on other sectors of the deal. For example, what happens to your employees and senior management of the firm after you hand it over? What of the shareholders who have invested in the business? Are you receiving a lump sum pay or a structured payout over a period?

Each of these factors determines the future of the business, your reputation, and any interests you may have in the business. Therefore, negotiate for better terms for each of the factors before you close the deal. The best way not to leave out some of these elements is to list them in the order of importance from the most important to the least important and negotiate them in that order.

Final thoughts

Do not go into the negotiating table alone. Get a team of experts in various aspects of the business including legal, finance and tax. It is also good to have a lawyer by your side when drafting the agreement and making negotiations. The team of experts helps you stay within the acceptable limits. In addition, take your time during negotiations. Check the impact of each agreement before signing it off. This, along with the tips discussed above will ensure that you get the best deal for the sale of your business.

Negotiate the Best Deal When Selling Your Business

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