Negotiation Tips for Buying a Business

Like many major purchases, buying a business relies upon some serious negotiation skills. Buyers and sellers must reach an agreement when it comes to various purchase aspects of the prospective deal, including price. While the negotiation process may differ depending upon the type of business in question, that process still requires excellent negotiating skills to obtain a desirable outcome. The following tips can help you ramp up your negotiating skills and support you in your quest to obtain a great purchase deal.

Get to Know the Market

Before entering into any business negotiations, it’s important to research the market for the type of business in question. Get to know the market fluctuations that have surrounded the business’s industry. You’ll need to rely upon these fluctuations when you nail down your price. Moreover, get to know what similar businesses have sold for and any other pertinent information you can find out about this type of business and current market valuations.

Work with a Broker

Sure you can go it alone, but why would you when you can have business-buying expertise at your side? Business brokers specialize in matching buyers and sellers. You want a phenomenal deal and brokers contribute by helping you find viable deals that are in your budget range and match your interests. Moreover, brokers have specialty expertise, as they are involved with a vast array of business sales. They can support you with advice and answer your questions as you navigate the buying process. For example, a broker will be able to use their “experience comparing prices across a specific industry in a specific region. Thus, they can determine if the asking price of a seller is a good one or if they’re attempting to take you for a ride.” (Source)

Learn What’s Driving the Seller

It definitely helps a buyer to understand why the seller is putting their business on the market. Does the buyer need to make a quick sale? If so, the buyer might be willing to accept a lower offer than if that buyer had all the time in the world to wait for the optimum offer. Providing background information about the nature of the sale is where the broker can help you as you plan your negotiation strategy. Your broker may know if the seller is looking to retire right away or just testing the market waters.

Follow a Due Diligence Checklist

Lets face it: buying a business is a huge gamble. The buyer must make a major financial commitment to purchase a business that has just as much a chance of failing as it does succeeding. That being said, buyers must do their extensive research before signing on the dotted line, making sure that they are fully aware of every aspect of the business. This is where the due diligence checklist becomes powerful tool. The due diligence checklist is a comprehensive guide for collecting every single pertinent document necessary, including everything from information of the structure of the company to leasing agreements regarding equipment. By acquiring all the necessary documents, the buyer will be in the best position to determine if the business is worth the financial risk. (Example)

*Note: The sample checklist referenced in the paragraph above is meant to act as a general example. All checklists should be specifically tailored to the business in question

The more you can find out about the business through your broker the better opportunity you’ll have to negotiate well. By brushing up on your negotiating skills and supporting them with these tips, you’ll enhance your chances of securing a great deal.

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by Tracy Watson