10 negotiation tips to remember when buying a business

This article will cover some aspects of negotiating when discussing the price of a business you want to purchase.

March 2022.2min read time
Everyone loves a bargain. The key to sealing a good and fair deal in a business sale is to negotiate a reasonable price with the seller, something that is justifiable and reflects the overall state of the business.
This article will cover some aspects of negotiating when discussing the price of a business you want to purchase.
Here are 10 tips you can use during the negotiation process when buying a business:

1. Firstly, you will want to open the negotiation at the lowest price possible. Your asking price must be sensible and backed up with credible reasons, so plan ahead.

2. Be cautious. If a seller quickly accepts your asking price, you may have valued the business too high. However, don't forget that the owner also has a selling price in mind, and there is a possibility your bid wasn't at the lowest it could have been.

3. Making the first offer can be a good idea. Studies have shown that the first price disclosed in a negotiation influences prices spoken about in discussion.

4. Keep a link between price and projected performance. This will then reduce the risk of failure against forecast.

5. Any reaction that you may have, keep it subtle. Whether it is good or bad news, always stay calm.

6. Keep in mind whether the goodwill of the previous owner is needed after a change of ownership. An owner can leave a business and take their customers along with them.

7. Avoid answering any questions regarding how much you can afford to pay. Answer this question at an appropriate time of negotiation, and use it as a tactic to limit the price you pay for the business.

8. Practice role-playing before the negotiation happens, perhaps with a colleague or partner. The role-playing seller should act disagreeable, helping you sharpen your negotiation tools.

9. Any threats made by the seller should be countered in an unresponsive manner. Remember, making threats yourself can be unfruitful for the whole sale.

10. All sellers have a 'walk-away' number- a final value to indicate when a seller will abort the deal. Getting this number takes a lot of research and preparation, and even still, this will only be an estimate. Sticking to your calculated value will ensure that the sellers are comfortable with the final price.