COMPANY SELLERS
EFFECTIVE NEGOTIATIONS
Company sellers, as well as their professional advisors, should apply the following concepts in the sale negotiations. So long as the potential sale is not distressed, the selling team can find the right buyer and terms.
- Thorough Preparation and Research – Before entering negotiations, understand your needs, the buyer’s likely needs, market conditions, and comparable sales data. Define your walk-away point (your BATNA – Best Alternative To a Negotiated Agreement) to approach discussions with confidence and avoid accepting unfavorable terms.
- Anchor High with Justification – Set the initial offer (anchor) high enough to create negotiating space, but be prepared to support it with compelling value metrics and a clear return on investment (ROI). This shifts the focus from a raw number to the overall value being offered.
- Focus on Value, Not Just Price – Instead of only discussing the price, provide support for the value of your company. These factors should include at least: a strong customer base without concentration; annual recurring revenue; clean financials; growth of current and newer products; IP, which should be valued; significant product/service margins; no lawsuits or significant liabilities; solid tier of management that will remain; and, adequate facilities for operations.
- “Trade, Don’t Cave” on Concessions – Never give a concession without getting something of value in return. For example, you might offer a faster closing timeline or an extended warranty in exchange for the buyer agreeing to the full price. Frame all concessions conditionally, using “if I do X, can you do Y?” language, to ensure a reciprocal process.
- Manage Emotions and Maintain Composure – Negotiation can be tense, but controlling your emotions helps you think strategically. Avoid taking pushback personally; view objections as opportunities to clarify value or find alternative solutions.
- Be Prepared to Walk Away – Having the genuine willingness to end negotiations if the deal doesn’t meet your minimum requirements provides significant leverage. This confidence can often lead to better offers, but requires a strong understanding of your BATNA.
- Document Everything – Get all agreed-upon terms, conditions, and concessions in writing to prevent future misunderstandings.