Negotiating the Sale Price Of Your Business

Selling your business is a significant milestone. It’s something to celebrate but also something that can be incredibly nerve-wracking – especially if it’s your main nest egg. The key is to prepare as thoroughly as you can before you start negotiations with potential buyers. Then you will be ready to navigate the negotiation process and realise the best possible sale price.

Negotiating the sale price of your business is a journey in itself, but with the right approach, you can maximise your returns and walk away feeling satisfied with the deal and ready for the next chapter of your life.

Here are the key elements that will lead you to success when negotiating your business’ sale price.

1. Knowledge

Before you start any negotiation, you need to know 2 things:

What you need to sell. See it as a minimum target too set for your sale. The ideal person to do this is a wealth manager.

The value of your business. Understand what a fair price for your business is. This involves conducting a thorough valuation.

You should consider factors such as revenue, assets, intellectual property, market position, and future growth potential. Consulting with an expert at this point usually comes with no obligation and could make a huge difference to what you’re ultimately able to achieve for your company. If you were previously undervaluing your business in your mind this could make you a lot of money. Equally, if you perceived your business was worth more, an accurate valuation will be the catalyst to help you recognise what you need to change to help you get to the valuation that you want. Our Value Builder tool is an ideal place to start.

Once you know your business is worth more than you need you are ready to sell and as knowledge is always power you strengthen your hand by knowing where you need to be when negotiating.

2. The ideal buyer

While aiming for the highest possible price is natural, it’s essential to be realistic and flexible to facilitate productive discussions.

Different buyers will have different views on the value of your business to them. Others will have the ability to pay more up front.  What we are not saying is to accept a low cash offer, over a higher one paid over time, but opening any negotiation with flexibility helps discussions to progress, you can then decide whether to pursue the offer that results or not.

Also consider factors such as market conditions, industry trends, and the buyer’s financial capabilities and why they NEED to buy you when setting your shortlist of suitors.

3. Your Value Proposition

Once you get to the negotiation table it’s vital to have a clear understanding about the unique strengths your business has to offer to a buyer (and they may differ between buyers) and sell your value proposition. Think of it as a “Why you list”.  Whether that’s a loyal customer base, innovative products or services, proprietary technology, or strong brand reputation, highlighting these assets can serve to justify a higher sale price.

4. Perspective

Put yourself in a potential buyer’s shoes ahead of time to anticipate any potential concerns and consider their objectives. Understanding this will give you the insight you need to tailor your negotiation strategy to your benefit, the buyer’s benefit, and for the benefit of the whole deal. Mitigating potential risk matters as much as highlighting potential.

5. Strength

It goes without saying that you want to leverage your strengths and competitive advantages during negotiations to bolster your position, and it’s important to keep this front of mind at all times. Your buyer will want to focus on the issues and you will want to always be on a positive footing rather than defending your position. So acknowledge and allay their concerns, but do not be afraid to blow the trumpet!

Whether it’s multiple interested buyers, a unique market niche, or strong financial performance etc., consistently emphasising your strengths and your position can secure you a better deal.

6. Creativity

There’s always going to be most emphasis on the core elements of the deal — the price and the terms, but it’s a good idea to be open-minded and willing to explore creative solutions that benefit both parties. Especially if negotiations stall for whatever reason.

This could include seller financing, considerations around future performance, or structuring the deal in a different way — perhaps for taxation reasons.

NB – Whenever vendor financing is offered, always ask if they have a track record of successful deals and if they will provide a reference – after all they want to borrow your money.

Approaching negotiations like this could help you salvage a deal or get an improved offer.

7. Guidance

Negotiating the sale price of your business is a complex process that requires expertise and experience. Get the advice and support that you need — it will pay for itself many times over. And without it, it will likely be difficult to secure a sale at all. Find a partner that can help you.

8. Patient Persistence

Negotiations can be prolonged and challenging so mentally things can get quite difficult. It’s important to keep the end in mind and keep going. Ensure you have a trusted and experienced sounding board. Don’t lessen your goal without good reason. Stay the course.

Avoid rushing into hasty decisions or compromising your position out of desperation. Stay focused and maintain open communication with the buyer. Trust and put up with the process to achieve the best possible result.

Are you ready to start the process?

At Business Partnership we can provide you with a free valuation today.

There’s never any obligation and it’s always confidential. Find out what we could achieve for you and how we can help you every step of the way.

Call our team on 0207 145 0040 or find your local contact here.