Effective Negotiation Strategies for Selling Your Business

Entrepreneurs are sales experts who continuously acquire customers and liaise with vendors and suppliers. They improve their negotiation skills over the years and become more prudent with the sales process. However, they find themselves tongue-tied when it comes to selling their business at the time of retirement or while switching to a new career.

The reason behind this is that they have built the business from scratch and have put their blood and sweat into its progress. They want to sell it to the most capable candidate at a profitable price because of their personal bias. However, their expectations are hardly met because their approach is not realistic. Let us help you understand effective negotiation strategies to help entrepreneurs profitably sell their businesses. These guidelines are beneficial in closing a mutually beneficial deal with the buyer.

1. Determine Your Expectations from the Sale

When you decide to sell business online, you need to identify the outcome of the sale. Don’t get fixated on getting a certain amount from the deal to live a luxurious retired life. You must consider other vital factors of the sale, such as your involvement in the business after the sale, the future of existing employees and suppliers, and the vision of the buyer.

Discuss your expectations with your accountant and lawyer, who will draw up the sales agreement with all the terms and conditions. These points must be discussed with the buyer and negotiated before the contract is signed.

2. Prepare the Paperwork and Answer Buyer’s Questions

Potential buyers are looking for sustainable, high-performing entities that will continue to be in demand. Thus, entrepreneurs must have all the documents ready to provide evidence for the profitability of the business to assist in their due diligence. These include financial statements for the past 3-5 years, the business plan, industry reports, shareholder’s information, lease contract, debts, etc.

Also, you must know everything about the business and its potential to answer the legitimate questions of the buyers during the negotiation. Make sure that you ask them to sign the non-disclosure agreement before providing confidential business information.

3. Maintain An Upper Hand in Negotiations

As the seller, you should not allow the potential buyers to pressurise you to reduce the price below your decided threshold. You must have your walk-away number in mind and make it clear to the buyer that you are unwilling to proceed if the target is unmet.

Remember that you will have more buyers, and your business is worth the estimated value. Getting the desired amount may take some time, but it is worth the wait. Do not get swayed by the buyer’s negotiation tactics that try to undervalue your business.

4. Use Business Strengths to Build Value

Buyers will be paying a substantial amount for the deal and will definitely come prepared during the negotiations. To bring down the asking price, they will try to focus on the weaknesses of the business. However, you must be prepared to counter these arguments with your data.

Showcase the strengths of your entity and its market value to tempt the buyers. Also, focus on the successful track record, loyal customer base, trained staff, goodwill in the marketplace and other intangible assets that add value to the deal. Make them understand that they are getting much more at a lower price.

5. Screen Potential Buyers Before Starting Negotiations

When you sell business online through listings, you will get several enquiries. You will have to screen genuine and qualified buyers who you think can take the business forward with hard work and determination. Besides evaluating their skills and aptitude, you need to check their financing options.

There is no point in getting into negotiations with someone who does not have the funds for the deal. Thus, you must ask them to provide evidence of their credit history, outstanding debts, and bank loan approval for financing the deal. Go ahead with negotiations only when you are sure to get the entire amount upfront without delay.

6. Be Flexible Enough to Accommodate Buyer’s Needs

While negotiating with multiple buyers, you will understand their needs and preferences. Identify the pattern in their expectations and be prepared to add those terms to the contract to make it mutually beneficial for both parties. You can even ask your lawyer to create more than one deal structure to meet the needs of different types of buyers.

You may have to make amendments to the contract to offer a favourable deal to the buyers without compromising your interests. Also, ask your accountant to look into the tax implications for each deal structure and ensure its viability before signing the contract.

Wrapping Up

Selling your business at the right price requires effective negotiation that involves staying in control, putting your foot down when required and making adjustments to fulfil the wishes of a qualified buyer. Make sure you are prepared for the discussions and have professional help for support.