Business Sale Negotiations Start At First Contact with a Prospect

A through interview of a prospective buyer of a business before negotiations start provides the negotiating ammunition needed to increase the final sales price.

By properly interviewing a prospective buyer you can learn what he values and will pay for. Effective negotiation based on those increased benefits to the buyer will increase your business’s sales price.

For instance a buyer with great experience and business sense may not have deep cash reserves. That buyer is going to value financing as much as a low price. This may provide opportunities to increase the price in return for creative financing.

Once you understand what the buyer values you look to see how your business aligns with those values. In a perfect world the buyer that values what you have the most will pay the most for your business.

An example is when a delivery company buys a competing firm that operates in the same territory. Because of the nature of delivery routes the closer each delivery stop to the next one the lower the cost. A purchase like that should lower costs for both the acquirer and the acquired company. If handled properly this buyer will pay more than other buyers.

The key to unlock this potential value is to ask questions that allow the buyer to tell you about themselves and the criteria they are using in trying to find the right business for themselves.

Start with simple questions like, “What interested you in this business?” People will tell you whether it was price, location etc. Maybe they say it was the location. Then you can ask, “What about the location made it attractive to you?” Maybe it is that it is close to their home and they have a young child.

Now, if there are only a few other businesses in the area the buyer wants to be located in, we can start to build a case for the value of this business based on location.

This really becomes important later in the negotiations when the buyer is saying, “Why would I pay that price?” It is simple. “It is where you want to be located, isn’t it?”

Careful buyer prospect interviews are just one step in the sales process necessary to collect the full sales value of your business. Experience does count.
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When you are ready to sell, make sure your broker provides this type of service. Better yet, contact Greg Caruso at Harvest and increase your Return on Exit. Learn more at www.harvestbusiness.com