5 Things to Remember When Negotiating a Business Deal
I founded Viking Mergers & Acquisitions 18 years ago, and have assisted in the sale of over 500 businesses across the Southeast. I have seen my share of business transactions, some being seamlessly smooth and others being slightly more arduous. I always try to emphasis the importance of communication to first-time buyers and sellers. Negotiation is part of communication, and most people are familiar with basic negotiating skills. We use these skills every day while conducting business and even in our personal lives. However, when it comes to the emotional decision to buy or sell a business, all business owners could use a refresher on communication. Here are the 5 Things to Remember When Negotiating a Business Deal:
1. Know yourself.
What are your aspirations? What is your plan for achieving them? What are your financial limits? Are you willing to lose the deal over money, terms, etc.? What are your deal breakers?
If you are willing to lay out your expectations, then you have a better chance of getting most, if not all, of what is important to you. If you are selling, have you identified the weaknesses of your business? Are you willing to discuss them with the buyer who wants to offer less money because of these certain issues? How do you address the buyer’s concerns?
2. Know who you are working with.
Once you establish what is of importance to you, find out what is important to the other selling, how can you be confident that the buyer is financially and professionally qualified to continue the success of your business?
Communication is key in getting to understand the needs and wants of both parties. Asking questions that are a little deeper than “Why are you selling?” can reveal a lot of information about the other party. Start by listening more than speaking. The more you both communicate, a relationship will begin to form and in the long run, that will ensure a smoother business deal.
3. Build a relationship.
Buying or selling a business is emotional and both parties will have separate opinions and desires. Building a relationship can pave the road for a smoother transaction; rapport allows both parties to feel more comfortable and decreases the possibility of tension. Arranging a meet and greet or casual lunch prior to discussing business can help alleviate tension and build rapport as well. Remember that you are working with a professional and should always be honest in all of your dealings. Misrepresenting or hiding information to get ahead will only prove to be detrimental to you later.
4. Be willing to compromise.
Finances are one of the most important parts in buying a business. Every deal is different and both parties must be willing to compromise on ways to structue and define the deal. Training, consulting, non-compete, down payment, seller note, interest rate, amortization on the note, security, etc. are all important issues than need to be addressed.
5. Dedicate yourself.
Buying and selling a business is one of the most important life decisions you will make, only third to marriage and parenthood. Dedicate yourself to making the deal work. You will want to exhaust all options in an attempt to close the deal. The process of buying or selling a business can be extremely hard, but the long-term results are very rewarding and you will thank yourself for putting in the time.
If you can keep these guidelines in mind when buying or selling your business, the experience should be very painless, maybe even a little enjoyable. Try to rememeber that the other party is taking a risk as well and is learning to trust you while making one of the most important decisions of thier life. There are many steps to buying and selling a business, do not let communication with the other party be a burden on the experience.
-Jay Offerdahl, Vice President of Viking Mergers & Acquisitions