Successful business people and entrepreneurs are winners. There are few who have succeeded without the key skills of determination, financial acumen and the ability to drive a hard bargain. Therefore, many people who chose to sell their business can apply some fairly strenuous techniques in order to drive up the potential sale price and terms. Likewise, experienced business buyers may push sellers hard in the process of an acquisition.
Although it is obviously advantageous to negotiate as best you can when it comes to both buying and selling businesses overzealous bartering can be problematic. Unlike dealing with customers and suppliers, negotiating a business sale is often more complex, requires more trust from both parties and needs longer to pull off.
In other words, successful business sales usually mean both parties compromising to an extent. They also require the ability to move on from minute transactional bargaining which can only lead to frustration and failure. What else do you need to know about the best way to negotiate?
It is important to bear in mind that a business sale is not a competition. When buying or selling, you are not fighting it out with the other party, but putting together a deal that is mutually beneficial. If not, then the sale will fall through.
Negotiation is not about bulldozing your point of view, but understanding and taking into account the opinions of the other party. That is not to say, of course, that you will agree with everything they say. Nevertheless, by doing so you will gain a better understanding of their position and – ultimately – their bottom line.
Few business sales – if any – are concluded at the outset. Remember that you are seeking to create better terms for yourself just as much as the other party will be doing. This requires you to both enter into a cooperative phase when negotiating. Providing data and feedback on sales proposals within a reasonable time frame, for example, is essential for forming a good understanding of one another.
Even if a proposal is put forward that you cannot accept, it is always better to decline professionally than to allow irritation and impatience to get the better of you. When putting your own point of view across, try not to be bombastic or to talk in absolutes.
By playing hardball with the would-be seller or buyer of the business, you are likely to put the other party off. Although the business world can be macho in many respects where winners are often defined by pushing hard, it is essential to focus on your softer skill sets.
When dealing with the process of a business acquisition, being personable and approachable is the key. Another good skill to use charm. In many cases, people like to conclude business with people they take a shine to and this works whether you are buying or selling.
Sticking to your guns has some merit in certain situations. You may, for example, only want to sell one part of your business. Equally, you may only want to buy a firm if the management team are contractually obliged to remain in place for a time. If you know there is a deal-breaker which may mean you have to walk away, then conceding in other areas may be the most beneficial thing to do.
Consider that if you are seen to be reasonable in areas of the acquisition process which are less important to you, then other, more important, parts of the negotiation are likely to go more in your favour. A great time to concede on an issue or term of sale is when negotiations have faltered and need some impetus to get them going again.
As with any other commercial deal that you might do in your business life, a company acquisition will only go through if you have all the financials lined up properly. However, even with the numbers looking right for both parties, the chances of completion are low without a strong relationship.
This means that the two principal decision-makers need to see eye-to-eye and to have built trust between one another during the negotiations. When partnerships are being sold, junior partners and directors with equity should also be brought in at some stage to help the relationship build naturally and with the consent of all parties.
In the majority of business sales, there is a handover period of up to a year that can last after sales contracts have been signed. This is often on top of the time it takes to find a buyer and to negotiate the deal in the first place. Pushing hard with negotiations at the outset can be an error because it causes personable relations to break down.
On the other hand, being open at the outset of the process allows the other party to ‘buy in’ to the deal and invest time and effort in it. Ultimately, people want to do longer-term deals with those they get on with and can work alongside post-sale. If you believe that a business acquisition can be bottomed out in just a few months, then it is time to rethink your timescale expectations.
The use of intermediaries and advisors can prove incredibly useful in any business acquisition process. Chief among the skills you will get by appointing a professional advisor is with high-quality negotiation. Although they bring much more to the table than a reasonable and diplomatic approach to driving the best deal possible, this particular area of expertise should not be underestimated.
By helping to keep discussions on track and by providing an impartial point-of-view, a business sale professional can take some of the emotion out of the situation and provide a much-improved chance of successfully completing the sale.
If you’re wanting to negotiate a business sale or acquisition, then speak to the independent experts, Firm Gains. We help business owners who want to exit their company on the most favourable terms by finding the right sale advisor or broker to market and manage the business sale. Our acquisition services are aimed at helping you discover the right opportunities, and managing the process through to completion. If you want to discuss how we can help you, then call us on 0333 050 8225.
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