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Develop a Negotiation Strategy when Selling a Business

When you begin to negotiate the sale of the business, you will be much better off if you have developed a personal plan and have prioritized which items in the deal are the most important to you and which items you can compromise on and still accomplish your objectives.

  • Prioritize which items are most important in the sale. In every business sale there is negotiation where the buyer and seller have some give and take
  • Understand which things are important
  • Understand which things are not as important and where you can compromise and still get the desired results
  • Make sure to analyze what the post-sale looks like. Will you have enough money, what you will do with your time?

Murphy Business Broker Explains the Process of Selling Your Business Step by Step

Anyone selling a business should be considering the elements of the sales process. Business brokers are invaluable in each of these considerations:

Think It Through – Know What You Want
Do you want to retire completely or continue to have a hand or profit in the business? Do you want to move or stay where you live? Surprisingly, some people are not clear on these basic aims. Business brokers can help you refine these goals and the ways to achieve them.

Know What You Are Offering and Why You Are Selling
Is the business growing or declining? Is the competition getting tougher? Are the facilities and equipment in good working order or are they approaching the end of their useful commercial lives. Does the business need an infusion of capital to be profitable? Are most of your customers there just because of you (goodwill)? Are you tired of the rat race or are you ready to embrace a new chapter in life? Professional business brokers know how to express each of these circumstances to your greatest benefit.

Prepare Your Records – Orderly and Understandable
If you are trying to sell your business, you have a duty to provide honest information to your potential buyer. You make the job of your business brokers (and the sale of your business) easier if your financials, net worth statements, contracts, employment procedures, etc. are organized in such a way that the reviewer can discern clear information without having to conduct overly consuming research. Your professional may choose to reorganize your information (truthfully, of course) to your greatest benefit. Easily discernible records vastly assist in this process.

The Two Big Questions – Price and Marketing
The biggest concerns of the business seller will always be, “How much can I get?” and “How and to whom should I try to sell?” Murphy Business Brokers are the consummate experts in these areas. They work for you. Their job is to maximize what you get out of the deal and to let you know, straight up, if you have unreasonable expectations. They know where to look for customers, how to package your deal and how to advertise. Will public knowledge of a pending sale hurt the business and the chance for a sale?

Professional business brokers study and are experienced in all of these situations. It’s what they do. They optimize your benefit in terms of both asset return and expedience of sale.

IS YOUR BUSINESS READY TO BE SOLD?

Two recent discussions are worth considering when thinking of about selling your business. One gentleman wants to sell his business to a couple employees in a couple of years and the other wants to sell in 10 years.

TWO YEAR GOAL: A moderately successful business owner and I discussed having a business valuation completed on his business so it could be listed for sale in two years. In the meantime, his sales person discovered a new niche market and the business has exploded this summer. He is now working on expansion into new markets and will sell shortly afterward the expansion to his employees. We are working as a team with his CPA-Tax advisor, banker, and Business Attorney to develop the proper structure for both seller and buyers, and are putting the documents together for a Business Appraisal.

TEN YEAR GOAL: A business owner called to discuss the process required to sell his business in 10 years. Being well-prepared is smart. The problem is that this owner was not only the operation of the business, but the sole employee. He makes plenty to live on, cover his expenses, and would be able to provide another person a reasonable living. The reluctance is to hire an employee or two and accept the responsibility for educating them in his field of expertise. When asked if he enjoys vacation time, he immediately affirmed that he takes plenty of time off, but that he lives with the phone in his pocket 24/7. His equipment and assets are minimal, so it is his expertise and experienced service that is of value. The name of his company is his own. You get the picture.

How do you currently operate your business? Are you concerned with short-term goals or are you planning the future? Consider the above, your industry, and your succession plans. Which is salable at a premium? We at Murphy Business & Financial are here to help.

If You Are Truly Ready to Sell, Ask Yourself These Questions

  • If I sell the business now, will I get enough money to satisfy my needs?
  • Will I really improve my personal financial position, or should I wait a little bit longer?
  • Define priorities: Do I want an all-cash deal, so that I can wash my hands and be done with the business? (This will generally result in a lower price the buyer will be willing to pay.)
  • Am I willing to finance part of the sales price? (This usually results in a higher price being offered by the buyer.)
  • Am I looking for a buyer to continue my business traditions and carry on in a similar style?
  • Am I looking to protect my employees and ensure they are retained by the new buyer?
  • Have I taken all of the steps necessary to make my business as attractive as possible to a new buyer?
  • What will I do after the sale? Do I want to maintain a relationship with the business (perhaps working for the new owner on a part-time basis or as a consultant)?
  • Have I thought about how much time I will give a new buyer for a transition and training period?
  • Have I done enough to ensure that the business is not dependent on me being there, so that the new owners can take over and be successful?
  • Am I willing to sign a non-compete agreement with the buyer?
  • Is this the right time to sell, and can I do it without experiencing seller’s remorse?