The moment you have found the perfect business to buy, it is time to start the negotiation process. There are strategic steps to take to ensure you are getting the best price. With the guidance of your business broker, buying a business does not have to feel daunting. Consider these five ways to get the best price when buying a business.
What are your requirements and limitations as a buyer and what are the seller’s requirements and limitations?
Before making an offer, you will need to fully understand what your financial limitations might be. More specifically, what you can afford to pay as a down payment and other financing needs. You will need to know what your minimum cash flow must be in order to sustain your current lifestyle and your business. At the same time, you will need to understand that the seller might like more cash upfront in the form of a larger down payment.
Familiarize yourself with current market trends
Before making an offer, do your research. It is important to study the market for the specific industry and geographical areas. When you know about the industry, you can make a knowledgeable offer, and appropriately negotiate for the right price.
Be sure to know the business you are buying
When you are at the offer stage, you have a clear understanding of the full scope of the business. For instance, its size, financial performance, operations, and even, its potential. However, you may also spot some problems that would need to be addressed once the business has transitioned ownership. This information can be used as leverage to lower an asking price during the negotiation period.
The best way to protect yourself is to ask a seller to finance at least a portion of the business. This way, they are making an investment in the continued success of the business even after it has shifted to new ownership. A seller unwilling to do this might be hoping to pass down some issues they have failed to disclose during negotiations.
Negotiate all deal points
Finally - negotiate, negotiate, negotiate. This may seem daunting or unnecessary when you feel you found the perfect business at a good price. However, someone with experience would argue there is always more room for negotiation. At this stage, seek the guidance of a professional business broker. With their expertise, buying a business can be a positive experience and not one where you have left feeling like you could have gotten more from the deal.
In the market for a new business to buy? Have questions about the process of buying a business? Schedule a consultation with Transworld Business Advisors of Birmingham at 248-590-1377 or Lstephens@tworld.com