The art of negotiation plays one of the most essential roles in the act of buying or selling a business. It can be a long and difficult process but there are ways to speed it up whilst achieving a successful outcome.
Firstly, differing perspectives must be taken into account. Differences of opinion are inherent in the negotiation process and only realistic negotiators can find creative solutions to such differences. Buyers will not be able to easily see from the perspectives of the sellers and vice-versa, which is why it is helpful to have a third party, such as a business broker to negotiate in their place.
Secondly, all the elements of the transaction should be considered. Price is just one aspect of the transaction to be negotiated. Other terms are also important such as the period of time debts are to be repaid and the allocation of the purchase price for tax purposes.
Thirdly, give yourself the best advantage. Whilst sellers usually have the upper hand because they know they company best, buyers can gain advantage by learning as much as possible about the other company. The parties must understand each others motivation for wanting to buy or sell the company and each other’s plans after the transition. This saves time and lessons the difficulty of coming to an agreement.
It is in the buyer’s interests to ask that the seller not negotiate with other buyers at the same time. On the other hand it is to the seller’s advantage to negotiate with more than one buyer at a time.
Lastly, have a good strategy. A good start for a buyer or seller in any negotiation is to develop a negotiating strategy. This means that each party must know the others position as well as their own position, preparing a list for why they hold this position. In doing this, each party is better equipped to anticipate and respond to objections from the other.