Solid negotiation skills can be the difference between a successful sales negotiation and a failed one. If both parties are skilled negotiators, the process will go smoothly and respectfully. But if there’s a lack of trust on one or both sides, it’s unlikely either of you will find satisfactory terms.
Successful negotiators possess many different skills, from knowing how to stand firm to having the ability to concede a point. And, of course, you should always anticipate what the other party will be asking and have the proper documentation to answer any questions.
At the end of any successful contract negotiation, both parties’ needs will be met and each party will be more or less satisfied with the terms. But you shouldn’t take this process for granted. Here, we’ll discuss strategies before, during and after the negotiation phase.
How to prepare for a negotiation
Whether you’re the prospective small business owner or seller, you have equal responsibility when negotiating the terms of the sale. The key component of all sales negotiations when selling a business is trust. If one or both parties feel they are being taken advantage of, it’s unlikely the negotiation will be successful — or, at least, not as successful as it could be. This means always aiming for a win-win scenario in which both parties walk away satisfied. In addition, it’s important to do this in the minimum amount of time necessary to prevent any unwanted setbacks.
While making time a factor is vital, that doesn’t mean you should rush to complete the deal. Moving too fast and hastily accepting offers can cost you tens of thousands of dollars. Be efficient, but patient and practical — and don’t be afraid to make counter offers.
Prepare your documentation ahead of time. You’ll likely need invoices from all consultants and clients, lease agreements, a copy of the title and your sales history. The more information you have, the better — and potential buyers will feel far more comfortable if you have documented answers to any questions they may have.
Understand the importance of unconditionality, or expected guarantees, if they’re offered to you. When deliberating offers, it’s best to give priority to unconditional terms, even if it may not be the greatest deal. Each party will want guarantees in some parts of the deal, and points that can’t be budged on should be the most carefully respected.
How to find the right buyer
Your first priority in any business deal should be to find several qualified prospective buyers. Using the right channels can help accomplish this. The better you know what parts of your business are in demand, the better you’ll be able to negotiate prices. Keep your advisory team busy trying to understand how serious your buyers are.
Don’t neglect doing research into a prospective buyer. You’ll want to know how many potential buyers exist in the market and how well they understand your sector. If you predict your business will be in high demand, you should be thinking of ways to enhance its appeal.
Potential buyers need to prove they have the loan money or cash available to complete the transaction. They should also have the necessary business negotiation strategies to follow through with the deal. If you get the sense that the buyer isn’t qualified in these regards, they’re probably not worth considering.
Open communication is essential, as it will encourage trust between both parties and help ensure there are no unwanted surprises during negotiation.
The negotiation process
Subtlety in a business negotiation can get you far when you want to be firm without being rude. Body language is a key component of communication both in and outside of a business sale. Use it to your advantage: If you’re presented with an unsatisfactory offer, show it with body language. The other party will pick on these cues and consider their future options carefully.
At the same time, don’t be afraid to concede on a point that may be important to the other party if it’s not equally as important to you during the sales process. This will show sensitivity to their needs, and they will likely consider such gestures as a sign of respect.
How to finalise the negotiation
By the time you reach the end of the negotiation, you should have worked out all the particulars, including the period for settlement, arrangements for existing employees, and of course, a sale price.
Make sure you understand your legal obligations and follow through with them completely. Knowing and fulfilling these requirements directly ties into achieving mutual trust. Lease agreements and other corporate contracts need to be worked out, and both parties should be prepared for this. If you or the other party doesn’t take the legal side of things seriously, you may need to use the courts to settle financial or legal issues, which can severely erode trust.
Finally, pay any taxes you owe and meet whatever insurance requirements you owe, if any. You might be liable for capital gains tax or goods and services tax.
Negotiate your business sale like a pro
Even when you know exactly what you want from a business sale and prepare everything in advance, if you can’t communicate your wants and needs with trust and respect to the other party, you probably won’t achieve your goals. However, if you take the process seriously and do your due diligence, you’ll get a better price while also keeping both parties satisfied. By the end of the deal, each should have found that win-win scenario every successful negotiation aims for.
Hopefully, you now have a better understanding of what separates a successful negotiation from a failed one. Ready to try your hand at it when selling a business? If you’re ready to sell your business online, list it on BusinessesForSale.com today.
