Negotiating the Deal
In order to be able to lead successful negotiations, sellers must honestly be able to answer themselves the following questions:
• Would you prefer a high full price or a lower all-cash offer?
• How important is the continued employment of current employees?
• How important is a quick sale?
• What would you do after selling the business?
Even after answering all of the above questions, however, it is in the rarest of circumstances that I have seen successful negotiations, removal of conditions and due diligence leading up to a closing, without the assistance of an experienced outside party.
There are many reasons that can lead to a deal dying in this stage of the process. Some of these include: 1. “buyer and/or seller fatigue”, i.e. due diligence taking too long; 2. unwillingness of inability of seller to provide all the necessary proof for the performance of the business; 3. unreasonable expectations on behalf of a buyer or a seller; 4. unreasonable expectations and/or demands on behalf of some of the parties’ advisors; 5. animosity created during terms and conditions negotiations. While there are many other reasons, these in my opinion are some of the most common obstacles on the way to successful closing of a business transaction.
The best advise I can give small business owners when it comes to selling their business:
Finding a potential buyer is about 10-20% of the work – the hardest part of the process is the successful negotiation, due diligence and closing of a deal. However, if executed correctly and professionally, it provides good chance of selling for every business that is put on the market.