Just in terms of small businesses, there are more than 30 million in America. For those who want to join the ranks of business owners, many will start their own business.
Yet, starting a business isn’t always the best or right option. Starting a business carries a serious risk of failure. For anyone with capital to invest, buying an established business is often a better choice.
If you’re going to snap up an existing business, though, you want a good price. Keep reading for our tips on negotiating the best price when buying a business.
Do Some Preliminary Research
Before you start browsing sites that cater to those buying or selling businesses, get some info on buying a business. A business purchase isn’t like buying real estate. For example, there are intangibles like the brand or goodwill that can increase the price.
If the current owner worked hard on community relations, you’re buying those good relations as much as you’re buying the tangible assets of the business.
Enlist Some Professional Help
It might feel counterintuitive to hire a business broker, but helping people buy and sell businesses is what they do. All of those things you learned about in your preliminary research are second nature to a business broker. They’ll already take most, if not all of those things, into account as they help you negotiate your deal.
Dig into the Due Diligence
You should always do your due diligence on a business before you even consider making an offer. The process often exposes weaknesses in a company. For example, maybe the business has a lousy contract with a vendor that you’ll get stuck with for at least a year.
You can use that lousy contract and what it will cost you as a bargaining chip to help lower the price. You can take the position that your interest in owning a business won’t outweigh financial prudence.
Leverage The Seller’s Motivations
Discovering the seller’s motivation is an invaluable piece of negotiating advice If you can tease out the reason the seller wants to sell the business, that can give you a stronger bargaining position.
For example, maybe the seller needs to sell the business because of a personal financial crisis. It might feel a little cruel to you to take advantage of that fact. Just remember, they are under no actual obligation to negotiate for or accept a lower price.
Getting a Good Price When Buying a Business
Getting a good price when buying a business starts with understanding exactly what you’re getting into before you start. Research the business buying process so you’ll understand all of the things that can come up in the negotiations.
Get some help from a professional business broker. While it tacks something onto the final cost, they’ll probably end up saving you more than you spend.
Look for leverage in the due diligence and the seller’s motivations.
Ready for more business and finance tips? Check out the posts over in our Finance and Business sections.