Do you have the negotiation skills and know-how to sell your business for the right price? We’ve put together some tips to take the stress out of your business sale.
This article is published by Modoras Accounting (QLD) Pty Ltd ABN 81 601 145 215
Walk Away Happy – How to Negotiate the Best Price When Selling Your Business
After pouring your heart and soul into your business for years, you may have recently decided that it’s time to sell and move on to your next adventure. You’ve worked hard to build a strong and profitable business and you’d like to realise the true value of what could be your most valuable financial asset to set you up for the future.
As a business owner, you have likely developed a wide range of skills that has helped your business grow. You’ve probably even negotiated a deal or two. But negotiating the sale of your business can be a significantly different experience. Your preparation for the sale and your negotiation skills could mean the difference between you walking away happy or accepting a lower price than expected.
We understand that selling your business can also be an emotional process, so here are a few tips that can make it just that little bit easier.
Know What Your Business is Worth
One of the most important considerations when preparing to sell your business is to find out what your business is worth. This is when you should engage a business advisor or accountant who specialises in business valuations. Going through the valuation process helps you understand the value of your business and how it compares to the current market or other businesses in your industry. It will give you information that allows you to set a fair sale price and consider what additional items may need to be included in the sale such as stock or equipment. Having an expert prepare your business valuation can be invaluable to the negotiation process.
Planning is Key. Prepare Early.
Planning ahead for your sale allows you time to consider all aspects of the process and also helps you feel confident during negotiations. Planning has been the key to many successful business sale transactions in the past. A business advisor can assist with a sale strategy that puts you in a position of confidence and makes it easy to share accurate and succinct information with a potential buyer. Prior planning also saves you time which means you have the opportunity to vet prospective buyers and weed out any competitors that may just be looking for inside information. Use this planning time to anticipate buyer questions and be ready with up to date and organised data to support your discussions.
Know Your Numbers
Your accountant will be your greatest asset during the sale process. They can do a lot more than just prepare financial statements – although these will be critically important for your sale negotiations. Share your plans for selling with your accountant early and get the benefit of their business know-how and industry experience. Obtain financial statements that outline all pertinent information for your potential buyer. Knowing the ins and outs of the numbers will also help you lay the groundwork for future growth predictions for the business. Your confidence will increase, and your negotiations will only be made stronger with your in-depth knowledge of the company’s finances and how that relates to the market.
Keep Communication Lines Open
Negotiations don’t need to be a battle. Building a relationship and rapport with your potential buyer could edge the deal towards the finish line. Listen carefully to what the buyer is saying during pre-purchase discussions or during negotiations as you may be able to identify underlying objectives that can assist you in the negotiation process. Be open and honest as this will give the buyer confidence in their decision to purchase. Propose possible solutions to issues you may have identified to build trust.
Find Some Common Ground
There may be some concessions required to ensure the sale goes ahead so it’s important to know what yours and your buyers’ needs are. A mutually beneficial agreement can mean a positive end to negotiations and both parties happy with the outcome.
Be Prepared to Walk Away
By planning your sale in advance, it’s likely you’ll have some idea of what your ‘walk away’ figure is. Be prepared to do this if the negotiation isn’t meeting your requirements. It’s important to be aware that returning to discussions after this may weaken your negotiating position though.
Increase Confidence for the Best Outcome
In any buy and sell transaction, the value is ultimately what the market is willing to pay. However, you can put yourself and your business in the best position to achieve a favourable outcome by following these tips. Being prepared will give you confidence in negotiations and help to turn your most valuable asset into years of financial security.
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IMPORTANT INFORMATION: This blog has been prepared by Modoras Accounting (QLD) Pty. Ltd. ABN 81 601 145 215.The information and opinions contained in this blog is general information only and is not intended to represent specific personal advice (Accounting, taxation, financial, insurance or credit). No individuals personal circumstances have been taken into consideration for the preparation of this material. The information and opinions herein do not constitute any recommendation to purchase, sell or hold any particular financial product. Modoras Accounting (QLD) Pty. Ltd. recommends that no financial product or financial service be acquired or disposed of or financial strategy adopted without you first obtaining professional personal financial advice suitable and appropriate to your own personal needs, objectives, goals and circumstances. Information, forecasts and opinions contained in this blog can change without notice. Modoras Accounting (QLD) Pty. Ltd. does not guarantee the accuracy of the information at any particular time. Although care has been exercised in compiling the information contained within, Modoras Accounting (QLD) Pty. Ltd. does not warrant that the articles within are free from errors, inaccuracies or omissions. To the extent permissible by law, neither Modoras Accounting (QLD) Pty. Ltd. nor its employees, representatives or agents (including associated and affiliated companies) accept liability for loss or damages incurred as a result of a person acting in reliance of this publication. Liability limited by a scheme approved under Professional Standards Legislation.
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