While much of the negotiating for purchase of a small California business is conducted at "arms length," meaning that the principal is not present when his or her offer or counteroffer is presented to the other party, there are times when buyer and seller find themselves at the same table, where they attempt to come to an agreement on a deal.
That was the case when Emilio was trying to persuade the family who wanted to purchase his sandwich shop to accept his price and terms. There had been a number of proposals and counter-proposals without satisfactory resolution, and the brokers felt a face-to-face meeting should be the next step in a "last chance" effort to achieve agreement.
Emilio had a fiery personality, becoming emotional when thinking and talking about how much money he’d receive for his business. His angry words might have discouraged productive discussion in this tense situation, ruining chances for an agreement. But Emilio, for once, had the good sense to remain quiet as the broker spoke on his behalf, and established positive communication with the buyers, concluding with a satisfactory deal.
An objective party is able to remain calm and logical, undistracted by inconsequential, emotion-packed issues, when involved in the battle concerning the price and terms for a business purchase. And that is one of the reasons for a principal in a small business transaction to let his/her broker handle negotiations.
EXPERIENCE AND STRATEGIES
Another reason to suppress the urge to communicate directly with the other party--to ask the broker to step in, is simply because professional intermediaries have experience in negotiating transactions. Many have developed various techniques for reaching agreements that satisfy all parties.
Lauren, for example, kept insisting she needed a specific price for her florist business, until her broker pointed out that if terms were set correctly, Lauren could accept a lower price and still receive the net proceeds she wanted. And Fred was able to get the extended payoff schedule he wanted in the purchase of a machine shop, when the broker recommended that he lease some of the equipment from the seller, rather than buy it outright.
And there are a number of strategies business brokers employ to aid in the satisfactory completion of negotiations, such as the "trial balloon" and 'I'll get back to you.'
A conflict in discussions can sometimes be resolved with a fresh idea: "What if the buyer agrees to purchase all the inventory, but pays for some of it with a promissory note rather than cash?" "Suppose the seller gets the terms and interest rate he wants, but is willing to wait till after the holiday season before you start payments."
These are examples of suggestions offered by brokers to open discussion on matters in conflict, without committing any of the parties to the proposal. If buyer or seller thinks the idea is a bad one, there is no increase in hostilities because the blame goes to the broker, and the principals can continue to try for an agreeable compromise.
A variation is the handling of discussion about a recommendation for solving a negotiating problem. When the broker tells one of the principals “I’ll discuss your proposal with the other party and get back to you on it,” he, or she is making sure there is some time for people to consider what is being discussed; making sure that no answers or actions are expected immediately, without benefit of some careful thought beforehand.
IMPORTANCE OF ESTABLISHING GOOD RELATIONS
In these examples, the principals to a transaction must, of course, make the final decision as to whether to enter into a contract for sale of a business, and if so, they must be in agreement on all the terms. It is never up to the broker to bind either party to a business deal. But the broker’s skill and experience are very useful in managing the process--sometimes a contentious one--of negotiating the details of a business purchase.
And if broker involvement has successfully minimized direct conflict between the parties, it means they have a better chance of working together harmoniously in completing the escrow and managing their contractual relationship following transfer of the business.
|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.
|Joe Sandbank, Esq. - Legal Services
I have provided legal counsel to business buyers, sellers and brokers for over 17 years. With prior experience as a business broker and SBA loan officer, Joe brings both a practical and legal approach to all aspects of the business acquisition process.
|Ranvir S. Sandhu, Esq. - Legal Services For Buyers And Sellers
I've worked at top Bay Area law firms and have extensive experience with business entity formation, mergers, dissolutions, conversions, employment matters, including experience in reviewing and negotiating transactional documents such as leases and purchase agreements.
|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.
|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.
|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 805-428-2063.
|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.
|Related Articles, Events, Blog Posts, Discussions, Videos, Interviews|
|5 Myths About Selling A California Business: Best Tips For Sellers & Brokers
Peter Siegel, MBA (at 866-270-6278) - BizBen Director discusses myths associated with the process of selling a business and some of them can actually cause deals to fall through. Don't let your sale be comprised, be aware of these common misconceptions related to the process of selling a business.
|Top 100 List: This Week's Top Motivated Business Buyers & Their Requests!
If you're trying to sell a business - check out this week's top 100 business buyers - one of these buyers may be looking to buy your type and location of business! This list is updated weekly - make sure you check it frequently! Are you searching to buy - get on this list and reach seller direct!
|Is There Such A Thing As Paying Too Little When Buying A Small Business?
We all understand the idea of paying too much for a small business. But is there such a thing as not paying enough? That seems like an odd notion, but I'm familiar with situations in which a buyer acquired a small business for a figure substantially under what probably was market value.
|How To Determine Whether The Buyer For Your Business For Sale Is Sincere
A problem owners encounter when offering a CA business for sale is that not all so-called business buyers are qualified to make the purchase. It's frustrating and costly to waste time showing non-qualified buyers the business. Here are ways to identify time wasters so the focus is on real buyers.
|Absentee Run Small Businesses - Is That Really A Possibility For Buyers?
Is buying a absentee run small business really a possibility? Peter Siegel (BizBen ProBuy Director) gets asked this question a lot in his consulting sessions with business buyers. Read more about what other Advisors and Intermediaries feel about this topic on this popular BizBen Discussion!
|Buy A Business Or Start From Scratch? 5 Key Differences For Business Buyers
Some buyers believe it's better to start a business from scratch rather than buy an existing enterprise. While this may be good advice in some cases, usually it's not the best strategy. Here are five tips to help a buyer make the right decision from from Peter Siegel, MBA (BizBen Director).
|Before Buying A California Business, 10 Questions You Should Ask Yourself
Before buying a business, all serious business buyers should ask themselves some key questions about possible buying a small California business, franchise, or opportunity - from Peter Siegel, MBA (Business Purchase Financing Expert, ProBuy & ProSell Program Advisor with BizBen) at 866-270-6278.
|How Many Months Should I List My Business With A Business Broker?
It's important to remember that selling a business takes time. Unlike selling a house, which can be sold relatively fast, a business can take up to six months to a year to sell. Joe Ranieri (Orange County Business Broker) at 714-292-5448 explores this topic from a Business Brokers perspective.
|See All News, Tips And Events|