Negotiating tips for business buyers and sellers

Selling and buying a business is rarely a simple and straightforward process.  

When I sit down and try to categorise each of those experiences, be it from my own personal experience as a business broker or the experiences I’ve heard from the 14 business brokers that are part of my office. these different experiences tend to fit into one of the categories below: 

The seller expects to:

1. Receive all cash up front;

2. Provide one week of training;

3. Provide the buyer with one day to complete their due diligence;

4. Close the offer the day after the completion of due diligence;

5. Be paid five to six times of the business or discretionary earnings.

The buyer expects to:

1. Buy a business with a 10% down payment;

2. Receive two months of training free of charge from the seller;

3. Have four weeks to complete their due diligence;

4. Work in the business for 30 days to "test drive" it;

5. Pay no more than one year's worth of business or discretionary earnings.

Where the seller and the buyer usually meet:

1. The down payment from the buyer is equal to the business or discretionary earnings;

2. The seller provides some financing;

3. The seller provides two to three weeks of training;

4. The buyer has two weeks to complete their due diligence;

5. It takes 45 to 60 days to close the transaction, if things go smoothly;

6. The business is sold between one and three multiples of its earnings. 

The golden rule that I stress to both buyers and sellers is that the best way to get a deal done is to put yourself in the shoes of the other party.

If you think about how the transaction impacts only on your side of the deal, you will more than likely convince yourself that the other party is not offering enough.  

If this happens you are not ready to buy or sell.  

For a transaction to occur, there has to be a willing buyer AND a willing seller.