Anyone thinking of selling their business needs to be prepared to negotiate. Why? Because your goals and the buyer’s goals may be the same—to get the best deal—but that doesn’t mean the same thing for both parties. It will take time, and some give and take on both sides to arrive at an optimal deal for everyone involved. Ensuring that you are negotiating from a position of strength is vital, and the best way to create a favorable negotiation process is by understanding and following these tips:
Price is not always everything.
You want the largest return on your investment possible when selling your company. But it is essential to understand your motivating interests in selling and the buyer’s. Believe it or not, their number one reason for buying or your main reason for selling may not be money.
The truth is, there are many non-monetary ways to be compensated for selling your company. For instance, you may want to be retained as a consultant. You may want to ensure your employees’ positions are safeguarded. Or you may simply want to secure the legacy of your business. Spend some time thinking about your reason for selling and what you hope to accomplish for yourself and the company with the sale.
Finally, other areas that may matter as much, or more, than your asking price are the payment terms. Will there be an earnout? How is the payout to be structured? These are questions whose answers will factor into what you ask for your business and why you are asking that amount.
Be prepared with a walk-away number.
Negotiations are part of most, if not all, property sales. Before you start selling your business, you need to have a target price range in mind that you want to hit, as well as a dollar amount that you won’t go below.
Once you have established your walk-away number, the next step is to verify the buyer’s financial bona fides. Has a lender qualified them? Do they have the deposit money readily available? The answers to both these questions need to be yes before you proceed.
Be comfortable making concessions.
We mentioned negotiations above, and part of that process is being comfortable with making concessions to your buyer. It can help to see things from their point of view. For instance, why might someone be interested in buying your company? What could they be hoping to gain?
Additionally, you’ve devoted your time and energy to this business. Most likely, you have an emotional investment in it, as well as a financial one. If you don’t work to check your emotions, to limit how much personal feelings sway you, you will find the idea of concessions much more challenging.
Lastly, understand how to best leverage the buyer’s demands with your demands to achieve the best outcome for yourself and your company.
Understand who you are negotiating with.
Because you are so invested in your business, negotiating can be tricky. Prepare yourself in advance for the idea of negotiating by knowing your expectations. Think about what compromises you are willing to make. Imagine potential outcomes if you don’t reach your end goal. Being prepared ahead of time prevents potential pitfalls like negotiating for the sake of it or negotiating with yourself instead of the potential buyer.
That is where a business broker like the experts at Transworld can provide invaluable assistance. A qualified advisor can help you map out concessions once they know what your sacred cows are, set expectations for the process once it begins, and help you keep emotions out of the equation.
Be ready to move the deal along.
Selling a business takes a bit of homework. You need to be ready to drive the deal at specific points. Start by gathering all the outside valuation information to determine a value for your business. Are there any liabilities or other issues connected to your business that you must address to ensure the deal can move smoothly?
Delays can cause a buyer’s interest to dampen or heighten their concerns. Be prepared to quickly answer any questions the buyer may have to keep the process moving along.
Realize it is okay to say no and move on.
Not every buyer is a good fit. Sometimes the timing is off. Negotiations breaking down is a part of the process. If your buyer isn’t moving or the process has stalled, it may be time to walk away.
If you determine this transaction isn’t happening, consider alternatives that will make it easier for you to move on when necessary. And should you have to walk away, take time to reflect on why things went south so you can avoid this result in the future.
Last but not least, it’s never dead enough.
People’s minds can change over time or after some reflection. You may find that the buyer who didn’t work out a few months ago returns after their circumstances change. Be open to the process and whatever it brings.
Negotiations can be tough. And not everyone has the skills to manage them. Working with Transworld’s business advisors can help. We are trained as business brokers, meaning our expertise protects you and your business throughout the sale process. The safest and quickest way to sell your business begins with a conversation with Transworld. Reach out today to schedule a FREE consultation with Transworld Business Advisors about your next chapter.