Essential Negotiation Skills for Selling a Business

by Vanessa Lovie 14th of August, 2023

Mastering the Art of Negotiation: Essential Skills for Selling a Business

One of the most important skills when selling a business is to be a good negotiator!

You need to be able to coordinate communications with the buyer and their team. The negotiations will essentially begin once the buyer first contacts you, as you need to set a good example from the start. Being organised with an NDA and business memorandum are the key to getting the buyer effectively down the path to sold.

Once the buyer has reviewed the business and wants to make an offer, they will begin the process of due diligence and negotiations. You can read all about the selling process here if your a bit uncertain of the steps involved.

Negotiations generally occur after the due diligence when the buyer wants to establish terms of the sale that can range from price, to inclusions to time frames on settlement and more. These negotiations will generally be done via a term sheet or heads of agreement, that once finalised will be used to create the Contract of Sale.

This is often why people engage a business broker to assist them in selling their business, so that they can handle the negotiations. But as the business owner you may be want to handle the sale yourself, especially if your business is valued under $300,000.

So how can you be a good negotiator as a business seller?

1. Be Prepared

Buyers are saavy and they know what they are looking for (generally!).

To ensure you remain in the power seat and can guide the sale through to completion, you need to be prepared for what you can face. This includes:

Understanding the sales process
Having your documents and information organised for due diligence
Having a business memorandum to provide the buyer
Being ready with an NDA, term sheet and draft Contract of Sale
Having your team ready to support you during the process, i.e. solicitor, accountant.
Being ready to hand over the business, you need to know what happens once it is sold
Being wware of the settlement options and how you will accept the payment.

Being prepared is one of the most important aspects of being a good negotiator so that you can be in control. The worst thing you can do during the sale, is lose control of the conversation or make a buyer wait whilst you 'sort something out'. You need to be organised and on your best game.

2. Be an Effective Communicator

If you're an introvert it may be a bit harder for you to effectively sell a business yourself. But not impossible.

The most important part of the business sales journey is keeping everyone connected. This includes solicitors, accountants, buyers, lenders and advisors. Your communication needs to be quick and effective.

A good negotiator knows when to speak, when to make requests and when to be quiet. Having good systems in place can help with this process of managing multiple parties.

Communication is not just what you say, but how you say it. Email, phone calls, text, and in-person are all important aspects of securing the deal.

3. Think Strategically

You need to think of the end-game. What are you actually trying to achieve by selling your business?

It could be driven by a number of factors such as making a good profit, being able to exit the business successfully, finding the right buyer to care for your clients or simply just wanting to just walk away. What is it you want to achieve?

Once you have established this, you can think strategically about how you will get the buyer to that point. Working backwards is a great strategy.

Leave room in negotiations for price, inclusions, training periods, hand-over, buy-outs etc. So you know where your bottom line is. A buyer will always want to negotiate which is part of buying a business. So leave room for your goals, so you can reach the end point as you intended.

4. Control Your Emotions

As the business owner you are connected to the business and emotions can be involved.

A key here is to be in control of your emotions. Often business owners will utilise their accountant, business advisor or solicitor during the negotiations phase so there is another voice in the room. It helps keep the negotiations professional and in neutral ground.

5. Be Flexible and Adaptable

Working with the buyers needs is important. Being stuck on small issues will not help get the deal over the line.

Say for instance, the buyer doesn't want to buy the vehicles in the business - they would prefer to get car loans under the business when they have settled. You need to look at alternate options to help get the business sale over the line. Selling the vehicles could be an easy way to help move the dial.

So its important you listen and can adapt. Too many deals fall over because the seller is stuck on an idea and not willing to adjust or 'move the dial'.

6. Engage Professionals to Assist

Just because you are selling your own business, it doesn't mean you are going about it solo.

Negotiations are best when a team is there to support you. Talk to your accountant, solicitor, business advisor, business broker and ask them how they can assist you. They could give you an hourly rate to be present for the negotiations. They can also provide a neutral ground to conduct the conversations - so you arent meeting at the business. It can also make 'more people' in the room which is important if the buyer brings their team and you may feel 'out numbered'.

So How do You Start the Negotiations?

Remember both you and the buyer have something to gain from this transaction. You are not looking to 'offload' or get rid of your business and you are not doing them 'a favour'.

Its important you go into the negotiations with the right mind-set. Be prepared and know your worth, and don't hesitate to engage professionals to help you.

Tags: selling selling a business negotiations