Negotiation is a part of everyday life, but for a business owner trying to sell a company, it’s an absolutely crucial point in the selling process.
Both seller and buyer are trying to get the best deal possible, so being a good negotiator will be key to success.
Negotiation requires preparation, timing, awareness, creativity and the ability to anticipate someone’s next move. It’s where a lot of sellers often fall short, but there are several ways to position yourself favourably before the dialogue even begins.
Here are five ways to close the deal in style:
1) Start early and do your homework
Sellers and buyers should have already agreed on core business terms in advance so there are no surprises once negotiations begin.
Understand both the strengths and weaknesses of your business. If the buyer learns of a problem, it will be up to you to present a solution. Have an impartial advisor review your business so you can have a fresh perspective and be able to address any potential concerns.
Having a solid outside valuation will be an additional expense, but is beneficial because it will help to justify your asking price. Throwing together a weak valuation at the last minute will put sellers at a disadvantage during negotiations.
Remember, you are the expert on your business so you should feel confident defending it throughout the negotiation process.
2) Know who you are negotiating with
Research the buyer well and understand their needs and priorities. This is just as important as knowing your own, so think about what you would do if you were in the other person’s shoes.
If you know who you are dealing with, you can better position your business to attract that buyer and make strategic decisions to maximize your strengths and capitalize on the other party’s weaknesses.
3) Be patient
Think of negotiation as a chess game. Each move should be deliberate and have your end goal in mind. Don’t give away too much information, and don’t be greedy or anxious.
Mistakes are often made when someone is impatient to sell a business. Timing is especially important throughout this process. You don’t want to seem too eager, but at the same time, don’t do anything to disrupt or delay the process which could frustrate the buyer.
Try to keep the process moving forward at all times.
4) Know what you want
Is it cash or freedom from future liabilities?
Have a set figure in mind before you get an offer, but be realistic. Negotiation is not the time to increase your sale price. If you do have to settle for a lower price, balance the concession by negotiating another advantage in your favor.
Concessions are a part of negotiation, so it’s a good idea to go into the negotiation stage with things you can give away without hurting your position.
For example, you could include some assets in the sale that may not be essential to the business’ operations. If the buyer removes those items to keep costs down, you haven’t really lost anything crucial.
5) Keep your eyes on the prize and don’t get discouraged
Negotiation is a tedious process which will require a fair amount of patience.
Stay calm, focused and be prepared to stay the course. Some sellers get deep into negotiation and simply give up and take their business off the market because it’s easier.
On the other hand, you could give in on some critical points just in order to get the sale done. Remember your goals and be patient enough to wait for the right buyer and the right price.
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