How To Negotiate The Sale Of Your Business For The Best Price!

Getting the best price and sale outcome starts well before you get the initial offer from a buyer. The way you copywrite the advert, the way you speak and relate with any buyers, the way information is presented, the quality of any inspections and meetings and the timely manner all the steps take can all contribute to a successful negotiation which should include not just the price but also the terms and conditions.

There are many steps to negotiating the sale of your business

  1. Preparation
  2. Timing
  3. Marketing
  4. Transparency
  5. Know The Buyer
  6. Closing The Deal

 

Preparation

Preparing a business for sale with thought and consideration can be the most important part in setting your business up for successful sale. Grooming the financials to demonstrate stable and consistent revenue and/or profitability can take years. Building a strong team and culture with systems can also be important for a buyer. Paying down debt with creditors, the ATO or the assets can help with your Net position.

Covering everything you could and/or should do to prepare comes down to working with your accountant and solicitor where appropriate and having all the areas of your business ready. Buyers don’t know your business even if they do know your industry. They will be nervous and will be looking for information, clarity and confidence.

 

Timing

Many sellers ask when is the best time to sell my business?

The timing can have a lot to do with the business and how well it is operating, how well the last year two or three has performed financially, how stable the team and the industry is etc

When it comes down to it, the best time to sell is when the business is in growth, financially strong and consistent and there are no “issues” that will be showstoppers for buyers.

If it is making the owner good returns that is a great starting point as buyers will often be looking for a replacement wage and also an acceptable return on the asking price. Some businesses are seasonal or manage cycles so timing may on a case-by-case basis need more thought. Is it easier to find a buyer in the highs or lows of trade? When does the business need large injections of capital and would this effect a buyer?

The time you list may also have no bearing on when you find your buyer. It may take 2 weeks or 5 months to find a buyer so really it comes down to considering many things, make a calculated decision but when you are ready is often the default position. Make sure you are in a good place and are not forced to sell. Selling when you still enjoy or even have passion for your business can have a significant impact on the buyer engagement and have them feeling like it’s a good thing!

 

Marketing

Marketing can best be described as “everything you do” and also “everything you don’t do”.

Marketing is both the tangible and intangible aspects of what a buyer will learn, see and discover about your business. If you operate from a physical site the visual impact, cleanliness and organisation can set the tone as can the exterior signage, car parking and access.

The way your business is marketed online with a professional concise and confidential advert can induce good even quality enquiry or see little to no enquiry. The way you provide further information through a well presented and detailed information memorandum that covers all the key areas of the business is often an important way for buyers to review and consider what is for sale, where is the value, where is the opportunity and so on.

Marketing can extend to the other areas of the business you don’t necessarily control such as online reviews, the atmosphere and energy your business creates for customers, the way staff handle themselves, the look and feel of your website etc.

The more coverage and discovery a buyer can get on the business opportunity the sooner they will make progress and make an offer. The more confident they are the more likely they will make a strong offer. Missing pieces of the puzzle, things they expect you to share that you cant or wont and time delays can all kill deals.

 

Transparency

Have you ever heard the expression that people do business with people they “know, like and trust”?

You must be able to engage with the buyer and for some this will be easy almost natural and for other it may start off awkward and slowly develop. Be yourself at all times, be honest, authentic and genuine.

The reality is many sellers evade and dismiss the weaknesses or issues of their business almost in a way of being embarrassed or feeling like a buyer will run away if they find out.

Get on the front foot and share these issues as weaknesses and problems. For the right buyer these are possibly their strengths. If you get to know your buyer well and find out more about their skills and experience, you may even softly sell the notion that your weaknesses are their opportunity for growth in the business.

Your disclosure of such “issues” upfront will be seen as transparent and provide the buyer with much more confidence. Your business should be priced according to the risk or reward and where the value lies.

If both seller and buyer are equally honest and genuine through the process the sale will progress and if it doesn’t at least the process was built on transparency. A good business broker will from experience manage every business in a similar way.

 

Know The Buyer

Getting to know the buyer is an extension of the above process. Transparency needs to be a two way process and usually exists once each party is getting to know each other and comfortable. However, getting to know the buyer goes a little deeper and learning more about the buyer can help the broker or the seller with the process.

Understanding what the buyers history, skills and experience has been will mean you can share the aspects of the business they can relate to. This builds instant repour and the buyer can start to relate to the business and feel more comfortable. Also, any weaknesses in the business may be identified as strengths for the buyer where their previous employment or skills can be adapted into the business and help with systems, marketing, sales, technology etc

Getting to know the buyer extends well past their credentials and be sure to avoid the interview style and approach to this and aim for a more organic and natural discussion. People can also connect by discussing where they live, family, other interests and even wat they want out of the business (lifestyle, income, achievement etc) and the timing around when this might happen.

If this process is managed well and communications flowing between the parties the deal will become more of a win win scenario. If the buyer doesn’t connect with the seller, doesn’t relate or care then it is much easier to provide a lower offer or with less favourable terms. By knowing the buyer the seller will also be able to asses the fairness of the offer and be able to equally counter offer with the same level of consideration and respect.

When people like each other the negotiation and the result is likely to be thoughtful from both parties.

 

Closing The Deal

As a seller there is nothing worse than sharing your heart, your soul, your time and all the emotion and information that goes into the process and then wondering what next and are you still my buyer?

Don’t be afraid to ask the buyer at any point you think is reasonable for a commitment to feedback or an offer. If they have all the information and finance is the last step seek a commitment or even an offer subject to finance and keep communicating.

Business Sales are all about transitioning a business from one person to another and it takes preparation, marketing, time management, communication and is a process requiring authenticity from both parties.

When the opportunity for an offer is close or coming make sure all the communications are in writing and keep your accountant and solicitor involved. If you are using a business broker they will manage this process for you.

Next Steps

Selling your business can be tough, but so are you.

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