How to Negotiate on Price When Selling a Business

2misi.com

http://www.2misi.com/article/2012/07/how-to-negotiate-on-price-when-selling-a-business

Any owner can put a business on the market, but selling successfully is another story. In a typical business sale, the negotiating skills of the buyer and seller can result in dramatic swings in the final selling price - regardless of how diligently the seller has prepared the business for sale. If the seller isn't up to the task, almost all the work that has gone into the listing can be undone in a single negotiation session.

Unfortunately, this undesirable situation frequently becomes a reality for many sellers in the marketplace. The good news is that by equipping themselves with a basic understanding of the negotiation process, sellers can learn how to stand their ground and get they deserve.

The overarching principle of successful negotiation is to negotiate from a position of strength. That's sometimes easier said than done, but in today's business marketplace there are many ways for sellers to favorably and accurately position themselves before the negotiation process even gets underway.

Avoid a Distressed Sale

A stressed business is easy prey. Although sellers don't always have a choice about the timing of the sale, many times they do. Unless the business is in imminent danger of going belly up or is being forced to be sold by family circumstances such as death or divorce, sellers should plan for the sale far in advance and be prepared to list it when market conditions are ripe.

Leverage Valuation

The valuation process is designed to provide a rational basis for the selling price. Sellers who throw together a flimsy, guesswork valuation at the last minute automatically put themselves at a disadvantage during negotiations.

Create a Bidding War

Almost everyone knows someone who sold a house above the selling price because more than one buyer expressed interest at the same time. It's possible to create a similar scenario in the sale of a business, but to do it the seller needs to maximize the attention the business receives in the marketplace.

One of the best ways to maximize exposure is to list the sale online. The majority of business buyers conduct their search themselves, and increasingly, the place they do so is on the internet. By listing online, sellers have the ability to customize their listing in ways that can make it truly attractive and boost visibility to stir up competitive interest among buyers, all of which can give the seller the ultimate upper hand in negotiations.

Be Patient

Patience may be a virtue, but when it comes to selling a business it's also a necessity. The owner of a well positioned business should have the ability to wait until the right buyer - and the right price - comes along. If the business absolutely must be sold in a short time period (six months or less), then the sale begins to exhibit the qualities of a distressed sale and the seller will be at a significant disadvantage in negotiations.

The patience factor really comes into play during negotiations when it impacts who wants the sale to happen more - the buyer or the seller. Even though the seller may be anxious to seal the deal, the person who appears to want the sale to happen the most is at a disadvantage.

As more business owners seek to sell their businesses on their own, negotiation skills will continue to become more and more critical. The better sellers can prepare in advance and stand firm on the terms they desire, the greater success they'll have for a smooth and satisfying sale.