7 Negotiating Tactics When Selling Your Business

You might feel after years and years of running your own business, and dealing with endless suppliers and customers, that you’d be fully prepared when it comes to negotiating a good sale. However, more business owners come a cropper at this stage than you would ever think.

Selling your own business, understandably, requires an enormous amount of preparation and can be a hugely emotional task, especially when you have spent countless hours building it up from the ground. Selling your business as an entrepreneur is very different from a corporate business sale for many reasons, but the main one being that the sale is incredibly personal because your business is your most valuable financial asset.

Both you, the seller, and whoever is buying your business will want (and probably need) to get the deal done as quickly as possible. However, this puts added pressure on you, as you will want to get the best price possible and the buyer, will want to get the lowest price possible. To aid you in your mission to sell your company and achieve the best possible deal, here are 7 key factors to keep in mind:

1. Whilst important, money is not everything!

This may sound like the oddest piece of business advice; however, it is a key factor to consider when negotiating the sale of your business. Whilst the end price is of great importance, there are a large number of other negotiation factors that you have to consider. For instance what will happen to your staff, how do you want the pay-out to be structured and will you receive any additional payments based on your company’s future performance (earn-outs).

2. Ensure you have a set price limit in mind

It is really important to enter into negotiations with an idea of what your absolute bottom line is going to be, i.e. your “walkaway number”. It is crucial to stick to this in order to ensure you’re comfortable with the final sale. You will need to dedicate a lot of time to consider this properly and make sure you understand the market, as well as reflect on what you truly value your business at.

3. Think reciprocally…

Business sales are all about negotiating. As such you will have to make the odd compromise here and there; as will the buyer. However, as the seller, it is crucial that whenever you make a concession, you get something back in return, i.e. ensuring there is a reciprocal arrangement. You can do this by ensuring you make it clear to the buyer exactly what you have given up and how valuable it is; in doing so, you might suggest how they can reciprocate and give you something in return.

4. Research your potential buyers

An effective part of any sales strategy is to intimately understand what your buyer is interested in. The same is true when selling your business. Take the time to research your buyers and find out what is driving their interest in your business. It is also a good idea to find out what their goals are and if they have expressed interest in any other companies that are similar to yours. Gaining this in-depth knowledge into your buyers will give you an advantage when it comes to negotiations and will also increase your bargaining power.

5. Understand the market

Following on from point 4, where it is vital to understand your buyer, this point is focused on understanding the marketplace in which you plan to sell your business. Understanding the market will give you increased perspective as far as your buyers are concerned and will help ensure you are not taken advantage of. You should pay particular attention to any relevant market activity such as sales of similar businesses and make sure you understand the associated value of your business assets. All in all, doing so will make you a much better informed seller.

6. Don’t be scared to make the first move

In almost every aspect of our lives, we are taught it’s not a good idea to let the competition see what our cards are before we play them. However, when it comes to selling your business, there can be an advantage to laying down the first offer. This is not only because it can get the conversation started and anchored a lot earlier but because it can set the tone for the entire deal and ensure you always have the advantage.

7. It’s OK to say no

It can be very easy to get caught up in the swing of things when it comes to selling your business. It’s therefore really important to make sure you don’t get tunnel vision as this could lead to you making the wrong business decision. Sometimes it really is better to walk away from a business deal than make the wrong business deal.

You should know what your bottom line is and therefore stick to your guns. You have to make sure you are 100% comfortable with the deals you are making, else you face having to live with a number of regrets. Remember that with every deal rejected or walked away from comes a certain amount of knowledge that you can learn from and apply next time.