4 Negotiation Tips for Business Buyers

Are you ready to start negotiations? Here are some great tips from Brian Knoderer, President of Sunbelt Business Brokers and co-owner of Sunbelt Indiana.

Negotiating any sale is a delicate art, especially when the seller has put ample time and effort into their biggest asset. Above all, buyers need to put their best foot forward and be as amicable as possible to win over their counterpart. It’s a seller’s market, meaning they can afford to be picky when choosing a buyer. Consequently, buyers need to place just as much emphasis on the human aspect of their negotiations as they do on obtaining the best price and deal terms. The most successful negotiators can ask for what they want while maintaining an open line of communication and a polite demeanor. Learn how to close a sale with these four negotiation tips for business buyers.

Helpful Negotiation Tips for Business Buyers
Before entering a negotiation, determine what “must-have” items are on your buyer’s checklist. Then, express those needs with these four tips for more effective communication.

Start Small
We discussed the importance of establishing goodwill with a seller, which you can build on from the very beginning. Once you jump into negotiations, try to iron out the small issues first. This will give you the chance to get off on the right foot, as it’s easier to play nice when negotiating items that are of less importance. Initial deposit percentages and post-sale transitions are a few examples of issues that aren’t always pressing. Use this build-up productively; bend where you can (and are willing) and try to forge a relationship with the seller.

Conduct a Market Analysis
No market is ever stagnant, but some are far more volatile than others. It’s imperative you research the industry you’re buying into before a negotiation. George Landegger, a managing partner of Sunbelt Westchester County, suggests using market trends and other economic factors to your advantage. For example, if prices are rising, you can use this to support your interest in staying within a specific budget. A seller should see you’ve done your homework and have data to reinforce your negotiation points. This is especially true if there is a significant disconnect between the seller’s listing price and your initial offer.

Talk Price
When negotiating, problems tend to arise when money comes into the mix. Many buyers fear they’ll offer too little and insult the seller. So, they avoid making the first call altogether, which isn’t necessary or recommended. If a buyer has done their homework on valuations, they shouldn’t be afraid to make an offer based on the business’ actual worth. Plus, leveraging the first offer “anchors” the rest of the discussion, which is among the top 10 negotiation skills to possess according to Harvard Law School. The terms of the sale can be just as, if not more, important to either party, and that’s a good thing. This gives both sides more wiggle room in deciding where they’re willing to make concessions.

Look for Alternative Solutions
It’s inevitable you will come to a stalemate at one point or another. When discussing high-caliber issues, stay as open-minded as possible. This doesn’t mean you should cave on the demands of the seller, but instead, look for alternative solutions to their reservations. To effectively rebut, you need to develop an understanding of the seller and their motives. For example, say they are juggling between your and another buyer’s offer. The other buyer’s offer is higher than yours, but it has unfavorable terms that will draw out the selling process. Your seller is nearing retirement and is looking to exit soon, so timing is of concern. You can make the argument that what they’re losing in price, they’re making up for in time gained.

As a buyer, you are the party that assumes the majority of the risk. You need to have a clear understanding of where you stand on issues that matter and be able to articulate those in a constructive manner. If you’re looking to buy a business, you can count on one of our national brokerage firms to aid in your sale. We’ll guide you through the negotiation process to ensure a successful transaction. Find the closest Sunbelt Business Brokers office near you today!

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Brian Knoderer is the President of Sunbelt Business Brokers. He has over 20 years of experience as a business owner and managing business transactions. As a seasoned intermediary, Brian has successfully represented companies in a broad range of industries helping business owners achieve their desired exit strategy or growth initiative.

Brian is also co-owner of Sunbelt Indiana and Managing Director of MMI Capital Partners, a franchisor focused investment banking firm.

Previously Brian was involved in several entrepreneurial ventures as well as having held corporate roles in Franchise Development for Prime Hospitality and Choice Hotels.

Brian is a graduate of Ball State University with a degree in Management Information Systems and earned his MBA from Butler University. He has received the Certified Merger & Acquisition Advisor (CM&AA) designation, holds both the Series 7 – General Security License and the Series 63 – Uniform Securities Licenses, and is a licensed Real Estate Broker. He has been affiliated with several organizations including the Entrepreneur Organization, a Member of the International Business Brokers Association, Venture Club, and a Board Member of The Entrepreneur Institute.