Negotiations can be tricky affairs. One wrong move can undo a tremendous amount of work. In negotiations, it is best to take a moment and think about where the other party is coming from.
What are their needs and how best can you meet them? Understanding your buyer’s motivation increases the chances of a successful negotiation.
When it comes to selling a business, you likely will not know your buyer personally. This means you will not know what they value most, how exacting their standards will be, and how easy or challenging they will be during negotiations. That’s why it is imperative to err on the side of caution and act in such a way that would appeal to most buyers.
Ensuring your business is in strong financial health means your business will be appealing to both a corporate executive as well as an individual buyer with a leadership/managerial background. Keep in mind that individuals who buy businesses will want a strong ROI, and often they will want the responsibilities that accompany the investment to not interfere too greatly with their current lifestyle.
Playing to Emotion
In general, buyers tend to be the most excited at the beginning of the sale process. It is at this point you can expect your buyer’s passion to be its strongest. As a result, the first stages are when you want to keep your presentation and approach the most realistic. Otherwise, once the surge of passion has worn off, your buyer may feel you have tried to oversell your business.
Being Forthcoming with Information
It is quite common that you will not at first know if your buyer has previous experience in your market. As a result, you shouldn’t assume they understand anything about your business or industry. In short, it is definitely in your best interest to be very honest about your business and what is involved in running it. If there are issues they will invariably discover, then it is best to go ahead and disclose those issues early on as it establishes trust and goodwill.
Another area to consider is what a buyer may expect of you after the sale. A buyer who already possesses a background in your niche would be very familiar with the ins and outs of your industry. Having you around after the sale may not be viewed as necessary or beneficial.
However, with that said, the exact opposite may also be true. You may be dealing with a buyer who is in dire need of your expertise. These factors could be of critical importance in what you offer your buyer in terms of your availability. Again, that’s why it’s best to not make assumptions and make sure your terms would appeal to a wide variety of backgrounds.
An Investment of Value
Invest the time in understanding your buyer’s motivation. The more you understand what it is your buyer wants out of the transaction, the greater your chances of focusing on the areas of your business that best match those expectations.
When it comes to the motivations and concerns prospective buyers may have, a business broker can add a new level of understanding. The value your broker adds to the process of selling a business is difficult to overstate.
Copyright: Business Brokerage Press
Photos: iStock, copyright StockFinland and Grady Reese