As someone who is genuinely interested in purchasing a business, you will start by learning the basics of that business, as well as all relevant information needed to enter negotiations with the owner. As you enter negotiations, you will have a pretty good understanding of what the business is about, what you like about it, and what questions you have for the seller to answer. While you may be prepared with that general information, you may still have no experience negotiating the sale of a business, no idea how that process works, and no idea how to get a deal done.
As a buyer, you should view negotiations and working with the seller as an audition. For example, if you are a supplier for a business, how you represent yourself, how you conduct business, and what your attitude is like, can all be the difference between losing your account or moving your relationship with the customer forward. Or, if you are an intern with a Fortune 500 company, every move you make will be evaluated, so you will have to prove that you are worthy of the opportunity and demonstrate that you are capable of taking the next step in the process. When you are in the process of buying a business, the owner is trying to sell the business to you, but you are trying to sell yourself to the owner.
Before getting down to the difficult and tense areas of negotiations (i.e. selling price, financing, etc.), it is wise to open discussions by focusing on some of the smaller elements of the deal. Some of these topics may include working out a timeline for the deal to get done, expectations for an initial deposit, and discussing the conditions of the lease agreement. By working together on these smaller, but still important issues, you will establish common ground and learn how to work together to figure out the most important remaining terms of your deal.
As you dive deeper into negotiations, your attitude will become paramount to your success. Your attitude when faced with adversity, a difference in opinion, and difficult decisions, will reveal a lot about your character and can make or break your business deal. One of the most complicated pieces of the business transaction puzzle is the selling price. Business owners love to think that their business is worth the world, and business buyers with any level of experience are hesitant to overpay for their new business adventure.
If you aren't prepared to pay top dollar, then it will help you to come prepared with evidence to support your reasoning for wanting to pay less. To be taken seriously by the seller, you will want to come prepared with knowledge of the industry, factors that go into valuing businesses in the industry, and take an educated and honest approach to negotiating numbers. You need to be able to maintain a calm demeanor, demonstrate that you understand the value of the business, and show the seller that you are genuinely interested in getting a deal done that works for both parties, to help your overall case.
It is crucial to come prepared to negotiations, establish common ground with the seller, show that you have good intentions and that you are an honest person, and find ways to give the seller small wins within the deal, to keep them happy. Constructive negotiations are truly a work of art, and require the buyer to really play to the relationship that they are building with the seller. The sooner you understand the seller and know what their expectations are, the sooner you will be able to construct a successful deal that works for both parties.