Buying a Business: How to Negotiate


Do you have the best negotiation skills? If so, the process of buying a business will prove this. If not, you’ll need to make some improvements. Well, unless you want to pay exorbitant rates for your business.

As an entrepreneur, the biggest skill you can have is that of negotiation. You’ll need to use it before, during, and after the purchase. Once you identify the best business for sale, you’ll have to employ the best negotiation skills. That’s the only way to get the best value for the payment you make.

The negotiating process will be different depending on the specifics of your business purchase. Do you want to acquire the rights to the business? Or do you want the contents or business assets?

How to Negotiate Buying a Business?

As a buyer, you need to be certain that you’re done negotiating before appending your signature. These tips will help you get the best deal:

1. Vet the Purchasing Market

In which industry do you intend to invest? The approach you take will differ depending on the industry in which you want to trade. For example, if the business you want to buy offers industrial services, you’re talking points will depend on market fluctuations. The business will also depend on its location. For instance, if the business is located in Miami, and is a Miami business for sale, then you need to base your valuation partially on that factor. Prepare for this by attending workshops and seminars in this industry. You may also want to read publications or journals.

When conducting the negotiations, it’s important that you use the economic factors to your advantage, especially when there is uncertainty in the industry.

2. Make Your First Contact

Here, you’ll need to identify the businesses for sale. Different techniques are present in the market. If you reside in a small town, you may seek this information from the local dailies and business listings.

But remember, not all businesses for sale will be on their respective listings. As such, you may consider doing cold calls or pitching for sales. A certain owner may not have his business for sale; however, your offer could possibly change his position on that. Also, it’s not unusual to find businesses for sale through the common marketplace.

You can probably locate these owners through social media. Once you make contact with the owner, determine whether or not they are bona fide in the industry. You can check their profiles on the various social media platforms. If you confirm their legitimacy, plan a face-to-face meeting. Don’t make your offer yet. Wait until you have a professional expert like a broker to help you.

3. Hire a Broker

You’re probably thinking, “I’ve already identified the business- why do I need a broker?” Well, you can’t substitute experience with anything in the market. The buyers who choose to go alone always face a number of challenges out there.

Don’t make the mistake of going solo only to realize the price you paid for that was higher. The brokers know the areas that are of interest in the industry. With their skills and experience, you can evaluate whether the process is profitable for you and your company or not.

For instance, how much value will you place on the goodwill of a firm? Without the necessary knowledge, the chances of overstating this are high. Also, there could be machinery and other immovable assets in the company. There is no specific rule on how you’ll determine the value of these components. This is why the services of a broker become handy.

4. Make an offer

Before you make an offer, make sure you have the availability of those funds. You may need to better understand the specific components of this offer. For instance, you’ll have to determine if you are buying the inventory. If so, is it obsolete? Don’t make the mistake of buying outdated stock. You’ll have nowhere to take it.

The offer needs to be reasonable, a price that the seller can accept. If you lowball them, there is a chance they won’t proceed with the negotiation and call it off. They may give a counteroffer, expecting you to then raise yours. They may also accept this offer.

Conclusion –

If you are buying a business such as a small enterprise, the process could be slightly simple. The main reasons are that the owners are either retiring or want to get completely out of the business. As such, they won’t have a problem selling at a lower rate. That can’t be said of a larger company.

I started my journey as a Photoshop & HTML designer, my hunger takes me to the next step for PHP, Java, angular, CMS, Python, etc. Till now, I have worked on many software, mobile, web development & design projects. I want to inspire others, that's the only reason I am here to share my experience & knowledge. Let's connect on LinkedIn.