When buying a business, one would think that the pressure is on the seller to complete the sale. This is not the case. A seller is very selective about whom he or she will sell to. After investing many years in the business, struggling to build it up and making it profitable; the seller would want to make sure his or her “baby” will fall into good hands. As such, the pressure is on you, the buyer, to impress the seller that “You’re the one!” You must let the seller think that you have the ability, the desire, and the commitment to buy the business and build on its success.
First impression is critical
You must let the seller feel that you can get the deal done. During the initial stage of the business for sale process, you should factor in not just the financial aspect of the process but also the human element in the discussions.
You must be sensitive to the concerns of the seller. Study the seller. Observe where his or her emotions lie.
Be careful how you probe questions and extract the information you need. Do not be demanding.
Let negotiations unfold naturally.
Like in any relationship, establish trust gradually. Build a solid relationship not only with the seller but also with his or her advisers or representatives. While you are learning about the business you intend to buy through your questions; the seller is evaluating you to see if you are qualified and skillful enough to successfully operate the company.
Do not be a know-it-all or you will turn off the seller.
Once you walk out of that first meeting, no matter how many other prospective buyers that come in and look at the business, the seller will always have you in mind as the “one” qualified candidate to acquire the business. When you meet with him or her for the second and following times, there will be more honest and free-wheeling flow of information because you have gained his or her confidence. If the seller has bad vibes about you, he or she will screen you out and be uncooperative. This will decrease the chances for you to buy the business.
How then will you impress the seller?
Research the business.
Prepare your questions.
Ask questions based upon the Offering Memorandum.
Create some marketing material showing your credentials – a professional resume with your financial and business profile will show your good track record and potential to do well in the new business. This will separate you from other potential buyers who look but do not buy.
Build a good rapport with the seller. Once trust is established, he or she will be more likely to accommodate you. Instead of asking for a full cash transaction, he or she may agree to finance the sale of the business and offer structured payments. This is a huge advantage as it provides assurance that the seller is confident that the business can, indeed, pay for itself.
Ask broker to tell you what is truly important to the seller when selling his business.
Buying a business is an arduous complex transaction. The seller and the buyer should like and trust one another enough to be able to work through the complexities that may crop up during the negotiations. If the seller believes and is impressed by the buyer, the seller will want the deal to happen. So, be prepared when you meet the seller. Be able to answer his or her questions. Impress him or her, like you would in a job interview.
Always remember that successful negotiations usually result when both parties genuinely like one another. If you really like the business on the table, put your best foot forward.
Are you ready to do that?