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6 essentials of negotiating the best price for your business

In a typical business sale a lack of negotiation skills can cause dramatic negative swings in the final sale price. Despite plenty of preparation, if you dont know how to negotiate, all of your hard work can be undone in a single meeting! With thousands and even millions riding on a successful sale, here are my top tips on how to increase your chance of success.

1. Never forget the principle of successful negotiation strength

The key to successful negotiation, whether you’re selling a business or a car, is to understand how to operate from a position of strength. Thats why packaging your business as a strategic sale and not just as a pure investment is always a good play. In other words, if the sale of your business helps a previous competitor or quickly adds customers to the bottom line of another synergistic business, youve just created a position of strength for yourself.

2. Avoid selling because you have to

Even though some sellers dont have a choice over when to sell their business, in most cases they do. Unless the business is about to go under, most sellers have control of when they put their business on the market. Preparing far in advance allows you to move from a position of strength to maximise your opportunity when it comes to sitting down at the negotiation table.

Long term preparation would include reducing the cost base of the business and increase the sales and revenue in strategic high value areas.

3. Valuation credibility

For a valuation to hold water in the mind of a buyer the business offer and sale price should add up in terms of it being rational and logical. Too often we see business owners who talk to a couple of business transfer agents and brokers and come up with a sale price based on some pretty flimsy assumptions.

4. Make sure you are dealing with more than one buyer at a time

I think weve all seen how the sale price of anything goes up when youve got multiple people bidding at the same time. Selling a business is no different. Thats why it’s essential that you find a way to get your business into the marketplace so that all of the right buyers see it at the same time.

Sometimes it’s best to list the business online but in other cases it’s not. The context of your sale and how strategic it is will affect that decision.

5. What to concede and when to compromise

There is always going to come a time during a negotiation where a buyer will ask you to make a concession. This may be a financial or price based concession, or a time and effort concession. Either way it will cost you.

The worst time to decide to compromise on any point is in the middle of negotiations. This is the time when you’re most tempted to say yes , especially if you feel close to closing the deal. Instead, be very clear before starting negotiations what you will give way on and what you won’t. This avoids big mistakes during the final phases of putting the deal to bed.

6. Patience and the courage to lose

Being patient always pays dividends. When selling a business, patience is often about looking patient even though you want the deal to happen as soon as possible. The person that shows they want the deal to happen sooner than the other party is nearly always at a disadvantage.

The good news is if youve set things up right, most aspiring buyers can rarely hide their enthusiasm. Thats what you’re aiming for.

Trevor Wilson is founder of Financial Power, providing advice and services to organisations looking for an exit.

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