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How to negotiate on price when buying a business

May 5, 2018

Everybody loves a bargain, don’t they?

You may think it’s easier to haggle at the local market than with solicitors and business brokers, but actually negotiating on large transactions is often possible – if you know how. Buying a business is a complex process, but in most cases, there is some “wiggle room” similar to when buying a house.

Valuing a business is very difficult, because there are many factors outside of everyone’s control. For example, the business may be very profitable at the moment – but an economic crash in the future could send it into trouble. It is up to the buyer to assess the risk involved in purchasing a business, which is why they have every right to negotiate on price.

Here are a few considerations which could play to your advantage when buying a business.

Leverage

In many cases, the reason behind the business sale could offer you some invaluable leverage. If the business owner is selling for personal or health reasons, or needs a fast sale, then you’ll have negotiating power as an interested buyer. If the seller has waited until the business is at its peak, and isn’t in a rush to sell, then there may be a few potential buyers so you’ll have more competition. The trouble is it can be tricky to determine the seller’s reasons for sale – so it’s a gamble if you’re not sure about the leverage you have.

Reason for buying

Your reason for buying the business may be just as important to the seller as the price you offer. Many business owners have put in hard work for many years to make the business a success, and they want to be sure the new owners will continue its legacy. If you can persuade the seller that you’re the best person for the job, they may be willing to sell to you for a lower price.

Compare with similar businesses

Take a look around at similar businesses in the area and the prices they have sold for. If you think the price is unusually high compared to other businesses, explain that you are offering a lower price because of the market. Having data to back up an offer is a great idea.

Respect

It’s really important to maintain respect on both sides during the negotiation process. The last thing you want to do is to offend the seller in any way, because then the sale will be off the table. Your attitude and manner, and how you present the offer, is just as vital as the offer itself.

You’ll want to make sure you have a top business broker by your side during the negotiation period! Speak to our buying team for more information or click here for more information.