You’ve decided to sell your business. Your reasons for selling are carefully considered and valid. Good negotiation skills are key for the successful sale of your business. Use the following steps as a guide to brush up on your negotiation skills.
Engage A Business Broker Professional
Engage the help of a business broker professional. A business broker understands the sales negotiation process as well as tactics for marketing your business. Gather the following information before sitting down with your business broker: profit and loss statements (for three years), current federal income tax returns, copies of equipment leases, a list of fixtures and equipment, the lease and any lease-related documents, lists of loans with amounts and payment schedule, a copy of your franchise agreement, an approximate tally of inventory on hand, and the names of any outside advisors such as an attorney or an account that you plan to consult.
Know Your Market
You must have a clear and realistic notion about the value of your business. Pricing your business intelligently is as important as impressive financial records. Your business broker will apply industry-tested valuation methods, including ratios based on the sales of similar businesses, as well as the historical data that most closely matches your type of business. Your broker will also incorporate intangibles to insure that the business will not be underpriced. At the same time, your broker will make sure you understand how the price is dictated by the marketplace and that realistic pricing is an absolute must.
Find The Right Buyer
More important than getting a high asking price, is finding the right buyer. Your business broker will help you find the right buyer for your business. Your broker will focus on prospects that are financially qualified and are genuinely interested in your type of business. It is important to discover early on how the buyer plans to finance the purchase of your business. Your business broker will do that and more. Here are some other things your business broker will do:
- Anticipate the buyer’s concerns and counsel you about being up-front about any problems that might make a buyer suspicious and therefore unnecessarily adversarial during the negotiation process.
- Guide you each step of the way.
- Follow up and keep the deal running smoothly.
Having someone else negotiate on your behalf is the smartest way to go. The “middle man” can get your thoughts across, keeping you at a distance from the words themselves.
Study An Offer Closely
You need to keep the ball rolling once an offer has been presented. Study it closely; just because you didn’t get your asking price doesn’t mean that it’s a bad offer. It may have other points to offset what you feel is a low figure, such as a consulting agreement, more cash than you anticipated, or the promise of a buyer relationship that will make life easier. In evaluating an offer, take your time and look for the ways in which the offer just might accomplish your objectives. Don’t think in terms of “punishing” the buyer because of a low offer. This is the worst reason for rejecting an offer.
Show Your Business At Its Best
Having options is the best negotiating weapon. For the seller, the mightiest one is lack of desperation. Hopefully you have not waited too long to sell and your business is sound. In preparing to sell, be sure that you don’t let the business slip. It is important that prospective buyers see your business at its best. For example, you should keep normal operating hours, repair signage and other first impression areas of the business, repair or remove non-operating equipment, remove items not included in the sale, maintain inventory at constant levels. You want to give buyers a good impression of your business.
Timing Is Everything
Timing is crucial to the successful sale of a business. Any deal has a shelf-life, and it will go stale if it sits around too long. On the other hand, sometimes ideas need extra time to jell – and people sometimes need a little time-and-space to be more objective about their own positions. Your business broker will keep the process moving at the proper pace. He or she will also provide or offer advice about the specialized contracts and forms necessary for the completion of the sale.
In negotiating the sale process, you will benefit many times over from the guidance of a business broker professional. The business broker represents you, the seller, and works toward completing the transaction in a reasonable amount of time and at a price and terms acceptable to you. The broker will also present and assess offers and, at the appropriate juncture, he or she can help in structuring the sale and negotiating its successful close – helping to create a win-win situation for everyone involved.