With the pandemic forcing people to consider how and where they work, more businesses are going on the market now than in recent years. So, to ensure you succeed in negotiations and get the very best deal, it is crucial to have all the necessary skills required to close your sale. Selling a business is a process that takes finesse and sensitivity, as well as grit. In this article, Simon Tomkins, a Regional Partner with Business Partnership, gives his five key skills for negotiating the sale of your business.
1. Set out a plan of action
As with anything in life, if you fail to prepare, you may as well prepare to fail. So, setting out clear negotiating goals for selling your business is massively important. By creating a plan, or a set of goals, you will answer critical questions that will guide your negotiations when selling. Think of it like this: if the buyer plans and you do not, who will likely have a better outcome?
To find your negotiation goals, consider the best possible outcome for you. For example, what is your business worth, and what could you sell it for? What’s the cost of a new business and what makes your business re-sale more attractive? It is essential to be honest with yourself at this stage – there is no point in valuing your business at a ridiculous price because it just will not sell. However, you do not want to undersell yourself either. So, establish what you could realistically ask for, and once you have this number in mind, decide on your bottom line. This is the number you will not go below. By doing this, you create a target in your head to aim for.
The final step is to identify a plan B. This is your best alternative to a negotiated agreement. I would recommend getting this in place before you begin serious negotiations because if negotiations fall through, you can still protect yourself, your family and your business.
2. Perfect your sales strategy
Once you have ascertained that your buyer is qualified financially to buy your business, it is time to put together a negotiation strategy. This strategy is vital because when you get your negotiation strategy wrong, you can lose the sale instantly. By being proactive and planning a strategy, you will stay ahead of the curve in negotiations.
First off, make it clear that you are always willing to walk. So, do not go and grant a buyer exclusivity at the first meeting. If a buyer knows you need a sale, they have leverage and can squeeze you until there is very little value in a sale for you. But if you are willing to walk and have other options, and a buyer knows it, you start on a more level playing field. Your time is important. If you are getting pressed, communicate to the buyer that you look forward to working with them, but you do not need to.
Next, try to lead the negotiation. Many sellers sit back and wait for the buyer to drive the sales negotiation. But top-performing sales negotiators are almost twice as likely to take the lead. The rest often play catch-up and react instead of leading the negotiation to a successful conclusion. Sellers should lead. They should set the agenda for meetings, go first with offers and ideas, and go first with sharing objectives and concerns.
3. Keep your cards close to your chest
When looking to sell a business, you must be honest about the condition and potential of your business. However, how you present information will be integral to success. Remember – the more you say, the more you give away. So, whilst everything you say must be truthful, you do not need to say everything. Being too open can leave you with less leverage. And because the initial meeting with potential buyers is key – making a mistake by saying too much at this stage is hard to rectify and will generally result in failure or receiving a lousy offer. There is a real skill at disclosing all salient facts, especially the tricky ones, without losing the attraction of the business for sale.
Picture this: You are selling your business with the aim of moving away in six months to start a new life, but to do this, you must sell the business. Suppose you accidentally share these post-sale plans with your potential buyers. What is preventing them from holding up negotiations until the last minute and offering a reduced price that you may be forced to accept? There is a fine line between reassuring your buyer that you are offering a bona fide opportunity and giving them the upper hand.
4. Establish your buyers’ needs
Once in negotiation with a buyer, you need to get to know them. Don’t worry, this doesn’t mean becoming their best friend. But understanding your buyer’s needs increases the chances of successful negotiation and will help you leverage a better deal.
When it comes to selling a business, it is rare that you will know your buyer personally. This means that you will not know what they value most, how exacting their standards will be and how easy or challenging they will be during negotiations. So, to gain the upper hand, I recommend asking questions to find out the buyer’s motivation to purchase your business, their readiness, willingness, and ability to transact, and the time frame in which they hope to do the deal. Also, ask if they have prior experiences in the market and what they understand about the market’s trends. The more you know about the buyer, the better you can negotiate.
I suggest asking these questions early in the negotiation when the buyers’ enthusiasm is high. If you leave these questions too late in the process, you may come across as trying to oversell the business and damage negotiations.
5. Believe in yourself and your business!
Believing in yourself and your business is perhaps the most important thing a seller can do when entering negotiations. Why? Because no one is going to want to buy your business if you are not passionate about it. Keep in mind all your business’s best assets and ask yourself what would be of interest to your prospective buyer. So, do not doubt yourself and let the business’s success do the talking.
There is a lot more to the art of selling a business than hanging a price tag on it and hoping for the best. Work on these five negotiating techniques and you will be well on the way to selling your business.