Five Top Tactics for Negotiating a Business Purchase
Numbers, industry statistics, forecasts and profit margins offer a defined picture of businesses that are available for sale but the majority of today’s entrepreneurial shoppers lack the knowledge needed to interpret this data into something that can push forward their own futures as business buyers.
Half of Americans want to become business owners, yet figures and projections do little to establish a meaningful interaction when those attempting to assess them lack the experience needed to interpret them.
The negotiating process is one of the most pervasive determinants of ultimate outcome, both on a financial level and in terms of the appropriateness of the entrepreneurial landscape buyers choose to function within.
1) Analysis and Goals
During the first phase of negotiation, brokers work with buyers establish a goal-driven course. Industry speculations are often misrepresented by impressive, yet disarming, statistics.
The majority of buyers ultimately choose to enter industries they had never considered before. Brokers support the fulfilment of ultimate goals by establishing their clients’ industry preferences early on. This prevents the common but tempting practice of buying a business opportunistically.
2) Due Diligence
The weakest point in the purchasing process is generally the sub-standard practice of due diligence, yet only ten percent of buyers make use of the very tool that creates a solid foundation for meticulous research—business brokers.
These professionals ensure that due diligence is practiced at every point of the negotiation process. Books are scrutinized, profit history is analysed and paperwork is delved into by niche service providers who know how to forecast the future of a business according to its past.
3) Starting with Purpose
The goal of the initial negotiation phase is to open the field for further communication. Less successful negotiators, unwary of the phased process that negotiation entails, try to satisfy core criteria and minute details during the first meeting.
This can close doors that would otherwise lead to legitimate gains if they had been dealt with at a later date. Brokers are intimately aware of the four negotiating phases Harvard negotiation analyst, William Ury, outlined for his world-renowned program.
When buyer, seller and broker meet, data has already been collected and the second stage has been launched. At this point, only necessary data is offered to draw interest without casting aside potential deals.
4) Singleness of Purpose
When the bargaining phase of negotiation begins, anxiety levels flare and communication becomes risky. One tactical mistake can close many doors for buyers, whilst the desirability of the end result has a drastic impact on financial outcomes.
For buyers who are genuinely interested in the lifestyle a particular business offers, such losses can be life-altering. Brokers thus look for common ground between the buyer and seller so that both are moving in the same direction.
5) Closure and Red Tape
When a deal is struck, its seams must be stitched together with small print, legalities and binding agreements. Buying an existing business can be cluttered with what appears to novices as mere formalities but they are, in fact, the roots from which the new business owner will grow his market share.
Brokers have the legal backing required to seal the deal.
The success rate of company purchases lies at a dire 10 percent and it is often failures during the negotiation phase that causes those dwindling numbers.
To overcome pessimistic statistics, potential entrepreneurs benefit from knowledgeable legal and industry advice as well as the particular brand of business coaching that brokers provide.
A targeted approach that accounts for goal creation, marketplace data analyses and negotiation strength helps buyers to unveil the opportunities that best suit their pockets and passions.
This article was contributed by BusinessesForSale.com, the market-leading directory of business opportunities from Dynamis, the online media group also behind FranchiseSales.com and PropertySales.com