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Negotiation Tips For Owners: Strategies For Business Sellers Selling A Small Business

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Comments & Replies: 2     Views: 1610     Posted By: Craig Osterhoudt  



Topics: Business Brokerage, Selling A Business     Tags: for sale by owner, selling a business



In most cases, a business for sale will not have several buyers submitting bids for a business. As stated elsewhere on this site only 30 percent of businesses listed for sale, actually ever sell in California. In many businesses that do sell, they only ever had one real inquiry, one true offer and of course, one real buyer. Going into the process of selling your business with this in mind, may help you when it comes to negotiating terms with a potential buyer.

When you have a real buyer on the hook, and a bona fide offer on the table, it is important not to give the buyer any reason to back out of the deal when it comes to negotiations with the buyer. If the buyer is asking for a concession in one area or another, itís perfectly ok, to flat out accept the concession with no counter offer or negotiation. I was recently involved with a deal where the seller found it necessary to "negotiate" on every point the buyer brought up or concession he requested, even when it didnít affect the seller, financially or otherwise. As we all know, time kills deals, and the more time spent negotiating back and forth over trivial items adds time to the deal process and increases the chance of it falling through, which happened in this case. Now the seller has no buyer, no other offers and has spent the last 2 months working on selling the business instead of working on growing the business.

A better method, would be to keep track of the concessions you make, and then when there is a concession requested, that might affect you, financially or otherwise, you can bring those other previous concessions up. For example, "I understand why you would request "Concession A" Mr. Buyer, but as you probably remember, I have already conceded to "Concession B, C and D" to help facilitate this deal, however, on Concession A I need to make an adjustment," et cetera and so forth.

On the contrary, just because you have a buyer on the hook, and don't want to lose them, doesn't mean you need to concede on every point. If a buyer has taken the time to submit a genuine offer, then you should act knowing they really want the business. It's a lot of work to investigate and make an offer on a business, so if a buyer has gone that far in the process, it usually means they have a desire for the business, and will be willing to make a few concessions to make the deal happen.

What other negotiation tips would you suggest when it comes to selling a business? Please reply to this post or post your comment above - thanks!


Great article Craig.

The first thing I think helps reduce the chances of a deal going sideways is to have a long due diligence period, between 10-14 days, and also right before I go to escrow I go to the landlord and get a feel if the buyer will able to be approved. I try to get the buyer to show commitment by getting a check for $10,000 to open escrow. Yes, the buyer can always back out and get their money back, but if they only want to put $2,000-$3,000 as an initial deposit, then that doesn't show a lot of commitment, because although it is $2,000, some people would just walk away from that, so at least with $10,000 they have some skin in the game.

When taking the listing I tell the seller that everything that is in the store the buyer is going to want, so if the seller says, "oh that 62" TV on the wall, I'm taking that when this place sells", I tell them to then take it out now, because if a buyer sees it, they'll want it.

Another thing I think is important, that as the broker, we set the pace of the transaction. If a buyer wants some sort of concessions, then get them to write it down, nothing "per telephonic conversation". I try to present offers and counter offers in person, because things can be easily dismissed by either party over the phone. I try to slow the process a bit. I think you can tell when a transaction is going to blow up most of the time, and so you have to ask yourself, are they really trying to get concessions or find a way to back out of the transaction.

I also have the buyer do training (2 weeks, most of the time) after escrow, not during. If the buyer starts training before escrow closes, then that opens it self up to all sorts of problems.


  Helpful Resources To Assist In Selling And Buying California Businesses

Helen Yoo: Escrow & Bulk Sale Services - Southern California

New Century Escrow, Inc. is a fully licensed & bonded independent escrow company. Over 20 years combined experience in handling bulk escrow transactions. Multi-lingual staff that speaks your language, including Korean, Chinese, Vietnamese. Call Helen Yoo direct at 626-890-1151.

Willard Michlin, CPA, Certified Fraud Examiner, Due Diligence Services

Willard Michlin, CPA #106752, offers buyers step by step training & assistance in doing Due Diligence Services when they are thinking of making an offer, or are in process of investigating a business purchase. He helps to determine the actual net profit even when there is cash. Call 800-864-0420.

Diane Boudreau-Tschetter: Escrow And Bulk Sale Services

California Business Escrow, Inc. is a full service independent escrow company serving all of California and has expertise in a wide range of escrows. Our team prides itself on providing an exceptional escrow experience. For more info phone Diane Boudreau-Tschetter at 888-383-3331 or 209-838-1100.

Mark Chatow, Esq.: Legal Services For Buying, Selling Businesses

Mark has a broad range of small business purchase & sale experience from analyzing potential acquisition targets to successfully guiding buyers and sellers through the purchase & sale of small businesses. Mark can assist with contracts, negotiations, legal matters, etc. Reach Mark at 949-478-8393.

Elizabeth McGovern: Escrow Services - SF Bay Area

McGovern Escrow Services, Inc., is a leading independent escrow company. We are a trusted partner with our clients, assisting them through the tangled bulk sale & liquor license transfer process. We provide attentive, quality & innovative customer service. Phone Elizabeth McGovern at 415-735-3645.

Janet Carrera - Escrow & Bulk Sale Services - SF Bay Area

Redwood Escrow Services, Inc. is a full service, licensed independent escrow company. We are EAFC Fidelity bonded, fully insured & licensed with the Department of Corporations. Committed to offering our clients the most comprehensive variety of escrow services available. Phone Janet at 510-247-0741.

Brad Steinberg, Broker - Laundromat Specialists

Laundry specialists - founded in 1968 by three laundry professionals, PWS is a family-owned corporation. Through the years it has grown to become the largest vended laundry equipment distributor in the United States. Call Brad Steinberg at 323-721-8832 to sell or buy a coin or card laundromat.


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