When buying or selling a business you will have to sharpen your negotiating skills to a fine edge. The lack of an effective negotiating strategy can greatly influence the price and terms of the business and may even jeopardize your chances of completing a favorable deal.
Creating The Negotiating Climate
Despite the fact that buyers and sellers have opposing interests, negotiations can move forward if a positive climate is developed.
There are several practical ways to establish a favorable climate. The first step is to build an atmosphere of trust. This generally takes time and serious negotiations should be deferred until the buyer knows enough about the business to feel comfortable in making an offer. If seller financing is anticipated, the seller must feel equally confident about the buyer and this too takes time to develop.
The second way to build trust is to make both an open and honest disclosure. The unwillingness to provide the buyer reasonable access to financial information, for example, will force the buyer to adopt a conservative position. Similarly, a seller may speak only in positive ways about the business while there would be greater trust if the seller balances the conversation revealing several problems with the business.
Setting you Objectives
Before you can start serious negotiations you must define your objectives.
To start with, you should review the major points (or variables) to be negotiated. Initially, you should focus on:
Price
Financing terms (down payment, duration and interest).
Security for financing
Assets to be sold and asset levels
Liabilities to be assumed
Tax structure of the sale
Other negotiating points will develop once these issues are resolved and while you can add or delete items to fit your situation, you generally focus on these items.
Develop a clear perspective of each negotiating point. Set limits. What is the best you can reasonably expect on each point? Where will you draw the line on each? With a range established you can detect whether you are ahead or behind in achieving your objectives.
Negotiations, of course, are a process of give and take. To come out ahead on one point you will have to concede another. Therefore, you will want to prioritize each point so you know what’s important and unimportant in your trade-offs. Within this list you may even define non-negotiable items; although you should proceed carefully on any fixed position. Flexibility is the key for putting together deals.
Copyright 2019 BizBrokersUSA