What’s negotiable? The short answer, as you’ve probably guessed, is “everything.” I’ve never seen any deal close without some back and forth between the parties. The seller is always in charge, of course; you have the right to decide who buys your company and what terms you’re willing to agree to.
I always have a conversation with sellers about their goals and priorities before we list the business for sale. Identifying what’s most important to you in advance will save lots of time and stress during the negotiations and closing. It’s critical to understand which conditions and terms would be nice to have, which are important to have, and which are non-negotiable.
But it’s also important to understand that buyers will have their own priorities, and every item you’re standing firm on has the potential to eliminate a buyer from your pool of prospects. That matters because having multiple buyers bidding for your company is the only sure way to know you’re getting the most value from the sale.
Some sellers are focused on the size of the offer, making sure they reach the number they need to fund their retirement. Even getting the offer you want, though, can be more complicated than it sounds. Terms matter as much as price, and sellers who aren’t willing to hold part of the note may find they have fewer buyers who can pay full price for the business. Many sellers are unwilling to accept earnouts over time, understandably wanting to eliminate future risk under a new owner. Risk is often why, in part, they’re leaving the business.
For some owners, time is the most important factor. If a seller is burned out, has family or health issues, or simply doesn’t have any more passion or energy for the work, the transition period may be non-negotiable. Many owners find it very challenging to stay on and run the company when they’re no longer making all the decisions. They prefer to make a short and clean transition to the new owner and move on to the next phase of their lives.
Some sellers get stuck on specific terms that can kill a deal. Whether a financial buyer also acquires the Accounts Receivable or working capital along with the other assets. Refusing to lease the building, insisting that the property be included in the sale. Retaining key staff (or family members) when a buyer is set on achieving economies of scale. Insisting on retaining or taking advice from trusted professionals who may not have the right experience to get the deal done. (This is especially true of lenders and attorneys without specific industry experience.)
Every seller has a set of goals for selling their business; being clear about them up front helps buyers decide whether this is the right opportunity for them. But if your number one priority is to get the business sold, you may have to adjust your thinking on what is – and isn’t – negotiable. That’s where an experienced broker can be your most valuable asset in a deal.
Your broker will understand which terms are reasonable and which might not be in your best interest. Your broker will also de-personalize and de-escalate emotional responses during the diligence and negotiation process, helping you make clearer and more informed decisions.
My advice? Stay as flexible as you can, and keep your eye on the prize – a sold business.
