Many business buyers and sellers tend to overlook the critical importance of negotiations. Thinking through your negotiation strategies well before the time to buy or sell is a savvy and prudent move and will generally put you ahead of the competition. Consider the following approaches to negotiations:
Negotiation Tactic #1: Take It or Leave It
In this negotiating tactic, the buyer makes an offer and the seller makes a counter-offer, then both sides leave it there. If the deal works fine. If it doesn’t work, that’s fine too.
It is usually smart to step back and ask yourself if you are comfortable with this approach and if your offer is indeed your absolute limit. More often than not, a small degree of flexibility will go a long way towards turning a proposed deal into a reality.
Negotiation Tactic #2: Consider Splitting the Difference
Another negotiating tactic is to simply offer to split the difference. This tactic is pretty straightforward and it demonstrates a good deal of flexibility; however, the financials may not always make sense for both sides.
As always, it is important to think about all the factors involved in allowing a deal to fall apart, such as how much time will it take to find another buyer or another business to buy? Showing a willingness to split the difference is often seen as a goodwill offer that can facilitate further negotiations within an environment of lower emotional intensity.
Remember, as long as the two sides are talking, a deal may be reached. But when communication ceases, then the deal is definitely finished and may be impossible to revive.
Negotiation Tactic #3: Negotiation from What is Most Important to Each Party
Understanding what is most important to both parties is usually critical for a successful deal. Important areas can range from allowing a relative to stay with the business, to moving the business to a new location, to using flexible payment terms, such as seller financing or buyer guarantees. Not all key points are directly linked to money, and it is vital to understand this all-important negotiating fact. This is not a tactic as much as an important element of other tactics.
Negotiation Tactic #4: Bring in a Pro
In negotiations there is an old adage, “Never negotiate your own deal.” Buying or selling a business invariably has an emotional component and then there is the problem of perspective. Buyers and sellers are often lack the perspective that an outsider can bring.
Opting for help and guidance from someone who buys and sells businesses for a living, can be a huge step in the right direction. Through a professional business broker, it is possible to not only establish a fair price but also address the array of intangibles that can go into buying and selling a business.
At the end of the day, deals are put together piece by piece, and skill is involved in the process. Working with others is at the heart of successful negotiation, and that means taking into consideration what the other side wants and what the other side needs. Understanding your own needs is also a primary consideration and it will serve you well if you can clearly communicate this to your representative.