How to Negotiate When Buying an Established Business

Solid negotiation skills are key in many facets of life—especially when it comes to buying and selling. If you’re looking at buying an established business, lengthy negotiations are a sure part of your future. In order to get the best deal possible, it’s crucial to formulate a negotiation strategy to guide you as you make decisions around the monumental task of purchasing a business.

Whether or not you consider negotiating to be a personal forte, you’ll benefit from reviewing some time-tested negotiation techniques before you begin the process of buying an established business. Read on for some tips from the professional business brokers at Murphy Business.

Nail Negotiations with these Tips and Techniques

    • Consider the whole deal—not just the price tag. Would-be buyers often get caught up on a single number rather than considering the many terms and conditions of the deal in question. Factors like first refusal for future transactions, seller financing, and recourse against the seller in certain circumstances each have a value in their own right. By negotiating terms in addition to price, you and the seller can come to a compromise without sacrificing your top priorities. That being said, it is important to come to the table with a well-researched “walk-away” number to ensure that you don’t stray too far from your comfort zone.
    • Be prepared to make concessions. Making concessions can be a strategic move if you do it right. What’s important is that the seller understands that you’re giving up something you believe to be of value. After making this known, you can ask the seller to reciprocate by making a concession of equal value or meeting a certain condition. It’s also key to make concessions over time, not in one go, to stretch their potential for appreciation further.
    • Don’t be afraid to make the first offer. While you may think it best to wait for the seller to make an offer that you can counter, you can actually gain a significant advantage by being the first to make an offer. After all, doing so enables you to determine the point around which future negotiations will revolve. Just be sure to do plenty of research before naming a number, or you may make the mistake of overpaying for the business.
    • Avoid letting frustration cloud your judgment. If you feel that negotiations are turning into a never-ending process, you could be tempted to settle for a deal you’re not actually happy with. After spending so much time and energy navigating obstacles and making compromises to get to this point, it can be painful to think about walking away empty handed. However, in many cases, that’s simply the best move to make. Keep a clear mind throughout the negotiation process and stay realistic about the possibility of having to walk away.

How the Experienced Negotiators at Murphy Business Can Help

It’s not always wise to jump into the process of buying an established business without any previous experience. At best, you might get a deal; at worst, you’ll be stuck with a dud of a business that you paid too much for. When you turn to Murphy Business, you can have confidence that you’re making business decisions that are in line with your personal and professional goals as well as your budget and the current market.

Not only do we offer access to a wide range of opportunities that you may not find on your own, but we also bring experience and expertise to the table. You can count on us to consult with you in-depth about what you’re looking for in a business purchase before negotiations ever begin. That way, we can help ensure you stick to your priorities as you consider different options.

As we’ll negotiate on your behalf, you won’t have to endure the tunnel vision that often comes with making stressful decisions during what is often an intimidating process. With the ability to maintain perspective, as compromises are made and terms are agreed upon, you’ll increase your chances of finalizing a deal that you’re satisfied with.

If you’re considering buying an established business, it’s best to have experience on your side. Call (888) 561-3243 today to learn more about partnering with a local business broker from Murphy Business.  

How to Sell a Company for the First Time

Unfortunately, it’s all too common for small business owners to make mistakes when they decide to sell their business. Not only can these mistakes lead to leaving money on the negotiating table, but they can also result in the loss of years of long-term investment opportunities. If you’re an entrepreneur, you may know how to build a successful business, but are likely unsure about how to sell a company for the first time. 

If you find yourself in this position, you’ll want to ensure that the decisions you make enable you to enjoy the benefits of all the hard work you’ve put into building your business. With the help of a business broker, you can have a successful business sale that matches the success you’ve had as a business owner. 

At Murphy Business, we understand the ins and outs of the selling process and are committed to helping our clients make the best sales possible. Read on to learn more about how to sell a company with the guidance of one of our business brokers.

Selling Your Business, Step by Step

If you want to sell your company with no regrets, make sure you don’t skip any of the following steps:

Step 1. Gain a big-picture understanding of the process. Before getting started with a business broker, it’s worth doing some research to understand the process for mergers, acquisitions, and business valuations. While you don’t have to learn how to sell a company completely on your own, you’ll only benefit from putting in time to gain a big-picture understanding of the process you’ll be going through. Key terms to get your head around include the following:

        1. Valuation
        2. Offering Memorandum
        3. Letter of Intent
        4. Term Sheet
        5. Due Diligence

Step 2. Give yourself plenty of time to find the right buyer. Selling a business doesn’t happen overnight. If you set an unrealistic deadline for yourself, you may find that you end up selling to the wrong buyer. Simply completing a business valuation and drafting the Offering Memorandum can take a month or two. After a business is on the market, it often takes 6-11 months to be sold. Negotiating a close also requires plenty of time—budget 2-3 months for this important step.

Step 3. Get your financials in order. Prevent red flags from popping up during negotiations by dealing with your financials now. You can enlist the help of an accountant to gather business tax returns for at least the past three years and ensure that all income has been accounted for. As you’ll need to have clean financial statements ready for potential buyers, doing this in advance of listing your business is sure to save stress and complications down the road.

Step 4. Complete a professional business valuation. In order to have a realistic estimate of what your business is actually worth, you’ll need to employ the services of a business appraiser. They’ll create a review of your business that covers a wide range of factors, not just current revenue. The appraiser will consider everything from inventory and assets to outstanding debt, threats, and potential opportunities. With Murphy Business, you’ll have access to professional valuation services that provide an accurate understanding of your business’s value.

Step 5. Prepare an Offering Memorandum. The Offering Memorandum is a full presentation of your business, including operations, staff and management, significant accomplishments, current risks, and financial details. This is the file that potential buyers will be looking at when making the initial decision to seek more information about purchasing your business. Our business brokers will help ensure that your Offering Memorandum is a robust portfolio that will appeal to serious buyers.

Step 6. Focus on the deal, not the selling price. Once you’ve found a buyer, the process moves to the negotiation stage. Many small business owners fall into the trap of setting an unrealistic price tag that brings talks to a standstill and causes buyers to drop out. At this point, it’s crucial to understand that a high selling price isn’t the only benchmark by which a successful sale can be judged. There are other important details to consider, including the overall structure of the agreement, tax treatments, and intangibles. With the guidance of a business broker, you can settle on a deal that leaves you satisfied in the long run, even if the selling price isn’t quite what you’d hoped it would be.

If you’re ready to learn more about how to sell a company for the first time, Murphy Business can help. Don’t hesitate to call (888) 561-3243 today to speak with a business broker near you.