Buying a business is just like buying anything else. You want to get your business at the lowest price possible. Doing that is going to require negotiating, something that even the most skilled entrepreneurs can be uncomfortable with.
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For this reason, we thought we’d share some quick and easy tips for improving your negotiating skills when buying a business. If you employ these tips, you’ll find that you’ll be able to get a better price for a business that you’re considering purchasing than you otherwise might not have.
Understand the Seller
The seller has a reason that he or she is selling the business, and you need to make that reason your business. When you understand the reason that a seller is looking to get out from under his or her business, this is information that you can use to your advantage.
For example, consider a seller that has a high degree of urgency when selling. You learn that the reason they’re selling is because they need an infusion of liquid capital and they need it now. This means you can strengthen your negotiating position by moving quickly yourself, and by making the cost of that quickness represent itself in the amount you’re offering. From the seller’s perspective, a bird in the hand is worth two in the bush.
Only you can answer questions about your current financial situation and what you are and are not capable of. When you’re purchasing a business, you may be tempted to throw caution to the wind; this is a mistake.
Instead, before you even get out there, consult with an accountant to figure out exactly how much you can pay. While you might have the credit to secure all of the financing in the world, remember that paying back those loans is going to put a lot of pressure on you once the keys get handed over. Do you want that pressure?
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If you understand your own financial situation before you get going, then you’ll know your limits. This makes it far easier when you’re negotiating, because you can say, with confidence, when what the seller is asking for is out of your range. It’s in these moments that the urgency that we were speaking about earlier can come into play.
Call in a Ringer
More likely than not, the business owner that you’re dealing with hired a broker to handle the sale of his or her business. Why wouldn’t you make the same move? This is especially important if you’re not the greatest negotiator in the world, because you can bet that a business broker will be a skilled negotiator.
Some Parting Advice
Negotiating is tough work, especially for someone who considers him or herself a “nice person.” If you’re going to be handling the negotiating, throw that “niceness” out the window. This is business, and business isn’t personal.