How to Negotiate When Buying a Business

 

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  • How to Negotiate When Buying a Business
    Nitish Khanna Image Nitish Khanna

    How to Negotiate When Buying a Business

    • Friday 14th of November 2014
    • Buying

    Are you contemplating buying a business? It’s a big move to make and one you have to be careful with, but it can also pay off tremendously well. It is therefore important you know how to negotiate the best deal and one of the main keys to this is knowing what you are negotiating for - you have to know the business you are buying inside out as well as your own demands for buying it.

    Know What You are Looking For

    First of all it’s important you are aware of the pros and cons of the business (strengths and weaknesses) as you don’t help your future.

    For example, you might want to buy a business whose product is greatly valuable in the marketplace, but whose internal structure turns out to be complete chaos once you have a look at it. Or you might find that they have just struck a deal with some other business, which you think is an outrageous deal - like paying a supplier way too much for providing a part to a new product they are about to launch. Likewise, you might find all the machinery is so old that to keep the business running you will have to invest in new machinery - and soon at that. Maybe that’s on paper provided by the business owners. Look out for any pitfalls there may be. Do your due diligence properly and hire a company to evaluate the business for you.

    Know the Marketplace

    You have to compare the value of the business to that of the marketplace - if the economy is heading for a downturn, is the business really worth buying? If so, for what price? Maybe you can get a great price and make a profit. Just ensure you aren’s no point buying a ship that’s important to them, then you can try and give them that when negotiating for what<span style="font-size:12.0pt;Avenir Book" ,"serif";"="">’s important to you in return.

    Make the Other Party Know Your Concessions

    Whenever you give up on one of the terms you consider valuable, then the other side should give something in return. Demand it. Whatever you give up in value so that the other party can have their way, you need something of equal value in return.