May 31, 2020  
 
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Negotiating and Closing a Business Sale

 

Tips For Negotiating The Sale of a Business

Negotiating the sale of a business isn't for the faint of heart. But our business sale negotiation tips will help you maximize the price you receive for your business.

A successful business sale is the result of a long and arduous selling process.

Just preparing your company for sale is a major effort. But the hard work really begins after you have identified a buyer and you begin negotiating issues like terms and price.

Maybe you're a master negotiator when it comes to selling your products and services. However, you can't count on your negotiation expertise to carry you through the negotiations associated with the sale of your company. For starters, you're emotionally invested in the outcome and that means that you're prone to make the kinds of rookie mistakes that someone who isn't as emotionally invested (e.g. the buyer) will avoid.

Whenever possible, enlist the aid of someone who can remain rational and objective throughout the process. Although you may end up handling negotiations yourself, your negotiation "team" can be a sounding board you can rely on to clarify your thinking and maintain a focus on critical outcomes.

No two negotiation processes are ever the same. Nonetheless, there are several negotiation principles that apply to the sale of any business and need to be integrated into your negotiation strategy.

  • Don't negotiate blind. Never enter negotiations until you have a clear understanding of your goals and required outcomes including the bottom line price you are willing to accept for your company. Sellers who lack absolute clarity are destined to either settle on a price that is too low or scare off qualified buyers.
  • Negotiate price last. Sales price should always be the last thing you negotiate. Negotiations should begin by telling the buyer what you need from the sale and then progress to terms (e.g. cash, seller-financing, etc.). When the conversation finally comes around to price, let the buyer suggest a figure. If it's too low, force him to suggest a higher number.
  • Negotiate with decision makers. If you're not negotiating with the final decision maker, you're wasting your time. Some buyers prefer to let their broker handle negotiations. If possible, bypass the broker and deal directly with the buyer.
  • Don't negotiate beyond your limits. After you've established your lower negotiation limits, don't consider negotiating beyond them, no matter how long your company has been on the market. If you do, you could jeopardize your retirement or your ability to acquire another business.
  • Negotiate before the Letter of Intent. The Letter of Intent describes the price and terms of the deal. If you plan on negotiating after the Letter of Intent, you're fooling yourself. All that will be left to negotiate at that point are minor details that are usually handled by the lawyers.

Related Articles

Want to learn more about this topic? If so, you will enjoy these articles:

Is Price Negotiable When Selling a Business?
Checklist For Closing a Business Sale
Closing The Deal - Tips For Selling Your Business


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