Negotiating the price with the potential buyer

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Negotiating the price with the potential buyer

THE NEGOTIATION PROCESS

Since the sale of your business involves consideration of so many issues, you must expect negotiations to have significant ups and downs. Even if negotiations appear to break down altogether, it is best not to burn your bridges as you may be able to restart them at a later date. Your objective during the period leading up to the agreement of a sale price is to manage negotiations as positively as possible by paying attention both to the project management of the process and also by actively attempting to build consensus between yourself and the buyer as to what has been agreed so the remaining items for discussion can be gradually overcome.

 

Listen to the buyer

It is important to understand the buyers needs and wants and therefore their reasons for buying the business as well as the concerns they need to address in order to feel comfortable in doing so. In particular do not assume the buyers concerns have gone away just because they have not mentioned them for some time. However, once you have agreed with them that a concern has been addressed, you should avoid unnecessarily reopening this as an area for them to consider.

 

Whilst listening, attempt to identify any particular issues in how the buyer wants to structure the deal that may present you with a serious problem, given your objectives in the sale (for example you want to retire immediately, whilst the buyer is evidently going to want to negotiate that you stay for a number of weeks or months in order to smooth the transition).

 

The key to achieving this is to let the buyer talk so they can disclose their attitude towards the items under discussion. By contrast some sellers come so focused on the need to sell during negotiations that they appear to wish to dominate the conversation rather than negotiate an agreement between two parties. This leads onto the following.

 

Keep focused on your objectives.

Your objective is to reach an agreement to sell the business for an acceptable price and on acceptable terms so that you can keep the proceeds. It is not to dominate the conversation and you should try to avoid becoming emotionally involved (which is one good reason for leaving this process to a reputable business broker as TBAC to work on your behalf. The buyer will be doing their job by making their opening offer a low price, at which point some sellers become insulted and attempt to break off negotiation.

 

Remember that price negotiation is a process, not an immediate event, that will require you to interact with the buyer in order to attempt to seek a deal which is acceptable to both sides. Retain a clear focus on your priorities and your target of a walkaway price, avoid becoming bogged down in unnecessary details (although appreciate that all the details will need to be covered by way of the final agreement), and remember it is a process with a purpose. What is important is achieving the sale and not in retrospect the process that led you there. Therefore remain flexible so as to be able to work round any objections or problems arising and consider to make alternative proposals as part of the negotiation process. In a negotiation you should not expect to win every single battle and therefore it is important to prioritise your objectives so that you are in a position to trade concessions on items of lesser importance to you in order to obtain concessions from the buyer on items of critical importance to you.

 

Be Flexible

Whilst being flexible, remember that any business sale is not simply about the headline price for the business, but it is also about the terms on which it is done. So be prepared to trade items to do with price against the nature of payment.

 

Be Positive

Be positive and cooperative in your approach to the negotiations as at all times you are looking to increase the buyers level of comfort and confidence in your business and in support of that, in you.

 

Don’t Walk Unless You Mean It

Whilst you must have your drop-dead price and must not therefore be afraid to walk away from any negotiation if it does not seem to offer the prospect of achieving this, you should only threaten to do so if you really mean it and you have explored every other opportunity and option to try to negotiate around the problem. You should never grandstand on points of pride or ego in this process.

 

Should you be considering selling or buying a business in Pattaya contact TBAC first on 087 283 5349 or email [email protected] or visit our website www.businessbrokersasia.com We look forward to hearing from you.