How to Negotiate the Sale of a Business

Learn the art of negotiating a price for your business with Daltons Business

We all know the cliché; negotiation is an art, and one that can be tricky to master. However, despite the large amounts of money on the table, business owners should approach negotiations with confidence and a positive attitude. This will allow the negotiations of a business sale to run smoothly and fall in your favour.

Read on to discover the best way in which to negotiate the sale of your business and employ our top tips in order to ensure you optimise profit and saleability.

How Do I Negotiate the Best Price for My Business?

A few key points can help improve your technique when negotiating the sale of your business and put you firmly in the driving seat.

1. Set Your Bottom Line

Like with any kind of negotiation, you should have a concrete number in mind that serves as your bottom line. Do not waver when it comes to negotiations, even if it means walking away and trying again with a new buyer. Your final price represents not only the hard work you have put into building your business, but also the number that will propel you into your next endeavour and your future.

2. Recognise that Money Isn’t Everything

Once you’ve set a bottom line, make sure you acknowledge any other factors that are likely to sway your decision during the negotiation of your business sale. For instance, how will the final price be paid; in instalments? As one lump sum? Additionally, how will any staff be treated after the sale? Dumping respected staff members unceremoniously out of a job is never a good thing.

3. Know What You are Prepared to Lose

Concessions and compromise are par for the course when it comes to negotiating a price for your business. However, what you offer and what the buyer perceives as a compromise may be two very different things. Make sure you have a solid plan of what you are willing to negotiate on and stick to it. That way you will always be one step ahead of the buyer.

4. Research Your Buyer 

In order to successfully negotiate the sale of your business, you must have some idea of who the buyer is and what they want. Ask yourself whether you are dealing with an experienced business owner or a fresh-faced entrepreneur. Is the buyer an individual or do they represent a larger organisation, and finally, what are the buyer’s motivations.

5. Be Confident and Clear

selling a business confidentlyConfidence in your business and yourself will go a long way during negotiations, and this confidence is likely to inspire the same in the buyer. Make a list of your business’ most attractive USPs and tailor them to the particular buyer. Be clear in what your offer contains and ensure you remain assertive without becoming aggressive during the talks.

6. Remain Patient and in Control

Patience is certainly a virtue when it comes to the art of negotiation and, depending on the complexity of your business, you might need more than you think. Remember to move forward constructively and never lose your cool, even if you think the buyer is being purposely obstructive. Additionally, don’t be tempted to make promises you cannot keep.

Negotiating When Selling a Business – Due Diligence

Due diligence should always be undertaken after a price has been agreed upon. It cannot be stressed enough that your due diligence on the operations, legalities, and any other areas of your business should always be a priority and if an issue presents itself to you, or the buyer, then you could stand to lose money, or even the sale altogether.

Make sure no rock is left unturned and identify any hidden liabilities that may not be obvious to you. Additionally, check and double check, contracts, records, books, and any other paperwork to ensure any red flags are dealt with so that there can be no surprises after the initial negotiations. This will protect both you and the buyer in the future.

How to Negotiate a Business Sale – Final Word

As we have previously mentioned in the introduction of this guide, how you justify the price to the buyer is key when it comes to a successful sale. In the end, it’s the buyer that needs to be happy with the deal in order to sign the contract and hand over the cash, so remember to take a step back and try to view negotiations from the buyers perspective.

One final point to mention is when multiple buyers are involved. Here, you must tread carefully, and whilst a bidding war might be good for your potential profit, it can also be a great way to anger all parties and lose the opportunity to sell altogether. If you are dealing with multiple buyers then treat each as an individual and always show respect during the negotiations of your business sale.

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How to Negotiate the Sale of a Business