Selling your business is a scary and emotional process, especially for small business owners. Trying to put aside your feelings as you approach the bargaining table can be hard. And sometimes, this struggle alone can give buyers the competitive edge during the negotiation process.
Arming yourself with the right information before negotiating will help you reach a better outcome, for yourself and your team. If you want to master the negotiation business and get the right offer for your company, you need to be familiar with these common pitfalls. Knowing these ahead of time makes it possible for you to avoid them.
If you don’t want to navigate the negotiation process alone, don’t hesitate to contact us. At Acquisition and Funding Services, we use our industry experience to fight for you!
First, How Does the Negotiation of a Business Deal Work?
First, let’s start with a brief rundown of how a business deal progresses. At the outset, both the buyer and seller set a few simple guidelines and make sure everyone is on the same page. Then, both parties pinpoint exactly what they each want at the end of the negotiation. After this, the research begins as both sides learn more about each other.
The buyer will want to understand your business’s industry, reputation, and performance. As the seller, you will want to learn more about the investor’s history and reputation as well. You may want to speak with other sellers who have closed deals with the same buyer.
The real work begins when both sides come back together around the negotiation table. This is when you and the other party discuss concerns, expectations, and numbers. The back and forth continues until both sides arrive at a successful deal.
The better prepared you are when you enter this process as the seller, the less you’ll find yourself making concessions during negotiations. Understanding where things can go wrong during a business negotiation will help you reach a satisfactory deal. The right outcome that can set you up for success in your future.
Pitfall One: Starting Business Negotiations Without Knowing Where Your Business Stands
Business negotiations can be tricky. If you don’t know where your business stands going into negotiations, it can give the other party an advantage. Not knowing your business’s strengths and weaknesses makes it easy for a potential buyer to use the weaknesses they find as leverage to lowball their offer.
It is important to have all the information you need before starting business negotiations. Gathering this information ahead of time enables you to enter the conversation with an accurate idea of where your business stands. It also gives you the opportunity to improve areas of your business as you are looking for buyers.
We outlined some of the things you want to know and organize before negotiating in this post for business owners. Knowing your worth and weak points will equip you with the confidence you need to reach a good deal and even add greater value to your business.
Pitfall Two: Letting Your Emotions Hurt Your Negotiation Tactics
When it comes to negotiations, it is important to stay calm. This can be hard when you are selling a family business or a business you started on your own. And although it can be tempting to let your emotions take over, doing so can derail even the most effective negotiation tactics.
The saying, “it’s not personal, it’s business” is running through the minds of the parties involved on the other side of the table. They have closed many deals in the past and are only looking at this through the eyes of business experts and negotiators.
But for you, the outcome of this will have a huge impact on your personal life. It may also impact your family members or friends who plan to continue working for the company. This all matters, but you cannot let it cloud your judgment for better or worse.
Understanding what motivates buyers will help you enter the negotiations with realistic expectations. This will reduce your stress and keep you focused on conflict resolution. Having a measured approach will help secure a better arrangement for yourself and for your team. As any successful negotiator knows, being level-headed is key when it comes to closing any deal.
Pitfall Three: Giving Up on Business Negotiations Too Soon
Some sellers make the mistake of giving up on negotiations too soon because they don’t understand how the process works. If the buyer’s first offer is low or includes terms you don’t like, it doesn’t mean a win win situation can’t be reached through the negotiation process. You may have to go back and forth a few times before you know if you can find common ground and make an agreement.
Reaching a mutually beneficial deal can take anywhere from a couple weeks to a few months. It depends on how far both negotiating parties need to come to make a deal. If you are patient and understand how negotiation strategies work, you will have the opportunity to entertain more offers. But if you tire of negotiations too fast, you may continue to turn away buyers who are a great fit for your business and your goals.
Thorough preparation before starting a business deal can help you understand what to expect. And then, you can play the game long enough to reach a better outcome.
Pitfall Four: Trying to Handle Negotiations On Your Own
Negotiating a business deal is complicated and can involve a lot of paperwork. Experienced buyers will know how to use business negotiation strategies to reach the outcomes they want. If you don’t share their negotiation skills, you could find yourself in a discouraging situation.
To protect your interests and have successful negotiations when selling your business, work with a broker who understands your industry. Having someone on your side with experience in this area can make all the difference in reaching a negotiated agreement both parties like. As a professional negotiator, a broker can help you make sure that you don’t agree to anything during negotiations that could put your business at risk.
Since a broker has led many past negotiations and closed many deals, he knows how to navigate the negotiation process as well as the buyers themselves. This means you come out on top, with a higher offer and more acceptable terms!
How AFS Leads Successful Negotiations for Small Business Owners in Fire and Security
As a former business owner himself and an experienced fire and security broker, Rory Russell is the best person to represent you when you’re ready to begin negotiating a business deal. He does all the work for you at the bargaining table, so you can continue paying attention to the other aspects of your life during the negotiating process.
If you’re thinking about selling your business, request a free business valuation through our confidential form today to get started!
Interested in learning more about the benefits of brokers? We review the advantages of working with a qualified alarm company broker to sell your business here.
Wondering where to find a broker who can aid you in your business sale negotiations? We share some guidance for finding a qualified alarm company broker to represent you here.
Weighing the option of broker vs. lawyer when it comes to negotiating your business deal? Here’s our take on what both brokers and lawyers have to offer when it comes to selling alarm, security and fire protection businesses.