Selling your business doesn’t have to be stressful. You might think that the ball is in the buyer’s court, but first time sellers have many of the same opportunities to negotiate prices for top dollar as a serial entrepreneur.
The trick is having the right team to help you navigate the process. If you’re looking to sell your business fast, take a look at these 7 tips to negotiate prices like a pro.
1. Ask Around
It might seem counterintuitive to reveal your plans to sell your business to a stranger. They don’t know your company or you for starters.
But there are strangers who will offer advice to you through a program called SCORE. These are retired business executives who volunteer through this program run the Small Business Administration.
They’re a helpful bunch to meet with before you’ve engaged a business broker. They’re helpful because they have absolutely no stake in whether you win or lose with your business transaction
They win if you can use the information they give to meet your goals. Expect to meet executives with 20 years or more in the business.
They’ve seen many different scenarios and can advise you of how to steer clear of red flags. You might even find someone to offer referrals to other entrepreneurs interested in buying an existing business.
2. Shop Around
The next thing you need to do is shop around as if you were going to buy a business in your industry. Notice how sellers approach you.
Look into how they arrived at the prices they’re quoting. This information might not be readily available on a website. Expect to have to do a little digging and maybe sit in on a few conference calls before you’re able to get good information.
3. Talk to a Broker
A business broker is a person that helps you sell your business. This is a salesperson that specializes in getting you a good deal on your business.
But it’s never a good idea to engage a business broker before you actually understand what you need. You can guide the business broker to negotiate prices that meet your goals.
The problem with talking to a business broker before you can make the determination of what you’ll need is that you might get swept into their monthly quota.
You don’t know if you’re simply getting swept along so they can quickly close a deal and get the commission or whether you’ve got the best possible price. Arm yourself with information so you’re not at the mercy of your broker-seller.
4. Provide Documentation
A business is sold based on its valuation. Get an independent assessment of what your business is worth.
Potential buyers will use this as one of the ways to decide whether your business is worth buying. Don’t be afraid to get more than one valuation if you’re not comfortable with the first.
Again, you’ve already heard what other companies in your industry are asking. If you notice your business has many of the same characteristics, don’t sell yourself short.
Talk to your broker about getting a second valuation so you have the documentation to support your pricing.
5. Organize Paperwork
You might hate the idea of organizing your files from the past few years. But it’s a courtesy to the incoming business owner to have all your data in a well-organized format.
How can the new business owner quickly retrieve client information if your filing system is a wreck? Now isn’t the time to step away from a mess.
This is especially the case for small businesses with only a few employees. You may have gotten used to organized chaos, but if a buyer asks to tour the business and there’s no explanation on how you’ve been tracking customer data, they might walk away.
Your administrative strength is a selling point for your business. Use it to negotiate prices.
6. Know Your Industry
You should be able to educate a buyer with ease when selling your business. If you’re going to sell a heating and air company, make sure the jargon you use in your business sell sheet makes sense.
Provide quick tips to buyers about how your business has been successful over the years by explaining industry demands. Buyers expect there to be challenges for your specific industry.
When you’re forthcoming about what these challenges are, you put the potential buyer at ease. It also shows you run a tight ship and care about the business you’re running.
Always put the buyer at ease by teaching them how your industry works so they feel more confident entering to a venture like yours. You’ll negotiate prices that are much higher than you might have stated on your sell sheet and possibly create a bidding war if you’ve got more than one offer.
7. Set Boundaries
When you negotiate prices for a business, the main factor is the valuation. You can still be flexible despite what’s in writing.
Throwing in additional assets might increase the value of the business beyond what the valuation service might claim. You can also adjust to what you think the market might be like in the near future.
If you know a drop is coming, selling your business at a discount is a no brainer. It protects you from losing money on a business you no longer want.
Take a lower price upfront to ensure a quick closing. It protects you financially and gives the buyer the deal they need to make it through the coming storm.
Negotiate Prices When Selling a Business
You need to know the basics on how to negotiate prices when selling a business. Most of the communication is handled by your business broker, but knowing what’s going on helps you set appropriate boundaries.
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