The Art of the Negotiation: Tips for Business Buyers



If you are thinking about buying a business, then you probably already know that one major step on your path will be the negotiation of a purchase price and the negotiation of the purchase contract.

 

If you’ve ever been involved with the purchase of a house or a car, then you already know a little bit about how the negotiation phase is going to go. A buyer offers a price, the seller counters – and after a bit of back and forth the deal is done.

 

The major difference with business sales? There will be many, many more moving parts. The best way to deal with these many moving parts is to prepare yourself for the negotiation process by following these tips.

 

 

Two businessmen having a discussion. Closeup image of their hands on the table

 

Tip #1 – Find and use a business broker

 

Buying a business is no small task. There are large amounts of money changing hands, a purchase contract needs to be drafted and negotiated, licensing and permitting requirements must be met, a new commercial lease must be negotiated – the list goes on. A business buyer will be far better off with an experienced adviser by their side – and your broker also acts as an all-important buffer between you and the seller. Asking the wrong kind of question, asking too many questions, coming in too low with an offer – all of these things can offend the seller. By using an intermediary like a broker you can keep the deal moving while keeping the other side of the negotiating table happy.

 

Tip #2  – Make your offer realistic

 

You absolutely don’t want to overpay for your new business, and you want to keep as much of your cash as possible to ensure you have enough working capital the day you take over as owner – but that doesn’t mean you should insult the seller by trying to only pay a rock-bottom price. Unless the business is listed as an asset sale, don’t treat it like one. An operating business is so much more than the depreciated value of the equipment and inventory. You need to remember that to the seller this business is a huge deal. Most sellers are very emotionally attached to their businesses because the business has been an enormous part of their life. Low-balling a seller will almost assuredly offend them – some to the point where they will refuse to work with you. Make your initial offer fair and be able to justify that number when asked.

 

As a side note, if you are a buyer who is making an all-cash offer, you may be in a better spot to negotiate for a lower price than someone who is looking for seller financing to be a part of the deal. If you do need seller financing, consider the situation from the seller’s point of view. You probably wouldn’t give someone a big discount on the purchase price of your business if you were going to be taking a risk and financing part of the deal.

 

Tip #3 – Be 100% prepared for compromise

 

One last and very important point to make regarding negotiations – the final purchase price and purchase contract will be a compromise for both sides. Go into this process understanding the reality that you are not going to get everything that you want, no matter what side of the table you are on. Many deals have died because one side (or both) refused to budge over something tiny, like the value of a piece of equipment or the closing date. Stay calm, patient and willing to compromise if you want to have a far better chance of reaching the closing table.

 

Are you considering buying a business but have more questions about the negotiating process? Would you like to know what types of businesses are currently out there in your price range? Ask us! Please feel free to leave comments or questions here and we would be happy to help you on your journey to business ownership.

 

 

 

Michael Monnot

941.518.7138
Mike@infinitybusinessbrokers.com
12995 South Cleveland Avenue, Suite 249
Fort Myers, FL 33907

http://www.infinitybusinessbrokers.com

 


The Other Side Of The Table: Why You Want A Business Owner, Not A Business Seller



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Why are business brokers necessary in the world of buying and selling businesses? Can’t reasonable buyers and sellers get together and get a transaction all the way to a closing table?

 

The reality of the business game is there is very little chance of success when buyers and sellers go it alone. Why? Buyers and sellers don’t buy and sell businesses for a living.

 

If you are in the market for a business then the person you most want sitting across from you at the closing table isn’t a seller at all. You want a business owner instead.

 

A business owner is someone who cares about the business they are selling. Their top priority isn’t how fast they can get out the door – it’s their bottom line. A business owner is focused on growth and getting the most money possible for their successful small business.

 

A business seller, on the other hand, is a temporary title. It involves gathering and assembling documentation and information about the business, being available to answer questions or requests and negotiation skills.

 

Someone who is a successful small business owner will not necessarily make a great and/or cooperative seller because selling isn’t their focus and it’s something they’ve never done before.

 

This is where the role of a business broker is critical and patience on your part as a buyer is a must. The person on the other side of the table isn’t a professional business seller, they are a professional business owner.

 

If it takes some time to have questions answered or get requested documents you shouldn’t be frustrated, you should be glad that they are focused on the running of the business you are about to buy. A business owner who doesn’t care about the day-to-day operation of their business will be leaving you with a train wreck the day you get handed the keys.

 

Your business broker is there to ensure the process goes smoothly, to keep the lines of communication open and apply the right amount of motivation to a seller so that they can both successfully run and sell their business. Have patience with the process and with the business owner across the table and you have a far better chance of a successful business purchase.

 

Are you considering buying a business but have more questions about how the process works? Would you like to know how long it typically takes to get to a closing table? Ask us! Please leave questions or comments here and we will be happy to help.

 

 

 

 

Michael Monnot

941.518.7138
Mike@infinitybusinessbrokers.com
12995 South Cleveland Avenue, Suite 249
Fort Myers, FL 33907

http://www.infinitybusinessbrokers.com


The NDA – Why Business Buyers Should Love This Document



Happy woman signing business contract

 

If you are a business buyer, you should absolutely love the business transaction process – especially the tenant of confidentiality and the need to sign non-disclosure agreements (NDAs). Why? Let’s first talk about why some business buyers hate NDAs.

 

When you enter the market to buy a business, many new buyers assume the process will be very much like the process to buy a house. Nothing could be farther from the truth. Buying a business does NOT involve looking up businesses for sale and then driving around to look at them before you pick one to buy.

 

Why? When you buy a business you are buying an existing, operating business. In order for that business to stay existing and operating the fact it is for sale needs to stay a closely guarded secret. Confidentiality is key.

 

A breach in confidentiality and the disclosure that a business is for sale can mean very bad things. People naturally assume a business that is for sale is a business that is on the brink of failure, although this is rarely true. When a business is for sale and everyone knows the staff can quit en masse, vendors can cancel contracts, clients can go elsewhere – the list goes on.

 

These potentially catastrophic consequences mean anyone who is interested in buying a business must sign the NDA before the name and location of that particular business is disclosed. Some buyers hate this and refuse to sign the NDA or fight with brokers about providing their own information to receive the NDA.

 

The information you provide in order to sign the NDA for a particular business is both simple and straightforward. You must provide your full name, your home address, your phone number and your email. Why do we need this information? Why can’t you use your P.O. box or a business address instead of your home address? The NDA you are signing needs to be tied to one individual – you – so the same address you use on your driver’s licence must be used.

 

If you really feel uncomfortable providing this information, you should consider that your simple identifying information is paltry in comparison to what a business discloses to you once the NDA is signed. Not only will you now know the name and location of the business that is for sale, you will likely gain access to financial information as well.

 

You should also consider that the information you provide to get the NDA is the same information you would provide when signing up for a discount card at a grocery store. It’s really not a huge disclosure of personal information when you think about it.   

 

So why should you love the NDA? The business transaction process, including the NDA, ensures that the business you end up buying hasn’t had a catastrophic disclosure of confidentiality by you or any other prospective buyer before you get handed the keys. It means your new business will transfer to you intact and still operational.

 

Still need convincing that the NDA is a great thing for you as a buyer? Do you have additional questions about the business buying process? Ask us! Please feel free to leave questions or comments here and we would be happy to help.

 

 

Michael Monnot

941.518.7138
Mike@infinitybusinessbrokers.com
12995 South Cleveland Avenue, Suite 249
Fort Myers, FL 33907

http://www.infinitybusinessbrokers.com



Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com

12995 South Cleveland Avenue, Suite 249
Fort Myers, FL 33907

Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com

12995 South Cleveland Avenue, Suite 249
Fort Myers, FL 33907




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