Five Key Skills for Negotiating the Sale of Your Business

Negotiating the sale of your business is tough, it takes skill and determination. This document reveals the do’s and don’ts and how to reach an outcome that is mutually agreeable.

Everyone’s approach will be different and in order to achieve that all-important handshake here are five important negotiation skills:

1) Good interaction

There is nothing better than the human touch when receiving a serious enquiry about your business, it’s a good to get into the habit of touching base on an informal basis with your potential buyer before any negotiations begin.

You will no doubtat some pointneed to call in the legal professionals to assist you with undertaking the due diligence stage of the selling process, initial contact with a potential buyer should cover the basic terms and overall goals.

Its at this stage both you and the buyer should have a rough ballpark figure in mind for the sale price, however, the final price will only be discussed after all investigations have taken place, and both you and the buyer are satisfied with what is laid out on the table.

You should listen carefully to the potential buyer, don’t let your ego get in the way. Don’t be afraid to ask as many questions as you can think of this will assist you to fully understand what the buyer wants out of the deal; you will know what you can and can’t control as well.

2) Honesty

Any potential buyer will want to feel assured that the business will be a sound investment and the potential for the business is what you say it is.

Please remember that how you present the information can be as important as the facts. You also need to box clever and keep some element of control as the more you say the more you are giving away, if you disclose too much it will leave you little leverage later down the line you don’t want to give the buyer an upper hand.

3) Flexibility

Being open to compromise is important during the process of a business sale, you should be prepared to be flexible on certain issues.

If you are not flexible and you lose sight of the overall agreement when you’re in deadlock it could lose you your sale.

Having an intermediary helping you with the finer details could be important, its their job as a Broker/agent to manage the process in a diplomatic way and guide you through the process.

Educating, keeping every’s expectations within the boundaries of the other party is the job of a good broker who believes the best outcome can be achieved.

When it comes to the sale price, you should have a Plan A and B in your mind, Plan A is the best possible price you could hope for, and Plan B is where you will need to have a workable compromise. If A or B is not possible then be prepared to walk away.

If the buyer negotiates you down to B, you are still in a good position: you have allowed them to feel empowered and you’ll likely now have a little leverage on other assets and aspects of the deal.

Remember that you are both trying to find the right fit and this will involve plenty of shifting positions. Panicking or getting impatient will not help the process.

4) Self confidence

This is about knowing your worth. If you aren’t passionate about your business, you can’t expect a buyer to be. Think about how excited you were about this enterprise when you started out and how far it’s come. Take this energy into the negotiating room.

Have all your business best assets on the tip of your tongue and ask yourself what, in particular, would be of interest to this buyer.

However, tempting it might be, don’t make promises you can’t keep and be very wary of offering too much of a discount just to get the sale.

If the buyer has agreed to the full asking price, don’t get over-zealous and promise things in terms of stock and timings that won’t be achievable.

Also, don’t allow yourself to get into a situation where you can’t approach alternative buyers:

Granting a buyer exclusivity at the first meeting is another common mistake and one that your advisors will not let you make.

5) Self-control

When you want to convince a buyer that your business is better than any other on the market, it will be hard not to let your inner salesman out.

However, the art of negotiation is not an exercise in salesmanship: it has to be a balanced discussion.

Going for a classic sales pitch may well put your buyer off. Instead rattling off all your business assets, try a more measured approach: This is what we do and what we can offer. How might that work for you?

And, if you are confident in the opportunity you are offering, stand firm and don’t give in to nerves. There’s a lot more to the art of selling a business than slapping on a for sale sign and hoping for the best. Brush up on these five key negotiating skills and you will be in a good position to be successful in selling your business.