Compromising and Countering
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VR Shows How to Negotiate a Business Sale
If you've never purchased a business before, negotiating is one of the most challenging aspects of the transaction. What can happen in many cases is that the buyer will spend more for the business than originally intended and the seller receives less than planned.
When you first consult with VR Business Brokers, we will instruct you on how the negotiation process works, what to expect from the other party and how you can be most effective. With our decades of experience and innovative tools at our disposal, we will ensure that you will be informed and well versed in how to negotiate.
The Three Ways to Deal
In business sales, there are normally three ways to negotiate the sale of a business:
- First Offer is Final – You make one offer that is your first, best and only offer, regardless of what the seller’s price and terms are.
- Splitting the Difference – This is when you and the seller split the difference between your asking price and theirs.
- This for That – An important element is determining what the seller wants non-monetarily in the transaction such as contracts of key employees, goodwill, intellectual property, etc. Work with them to see what they’re seeking to keep, and use it in the negotiation to get closer to your asking price.
It’s not uncommon for a buyer to give a verbal offer early on, which gives the seller an idea of how negotiations in the deal will unfold. A seller usually waits for the buyer to move first before getting deeper into discussing the price.
Determining the Value
In most cases, the seller is going to have better information on the business than the buyer as well as more in-depth industry knowledge. VR will assist you in preparing the business for sale, where all the information regarding the business is compiled and organized. You will have all the necessary facts and figures when examining the business as well as the industry, so that you will gain a better understanding to go into negotiations.
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Important Elements Buyer Needs to Consider in a Business Sale
By JoAnn Lombardi, VR Business Brokers/Mergers & Acquisitions, President
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Experienced entrepreneurs who have bought a business before will have an advantage over a business owner who is experiencing selling their business for the first time. That being said, most buyers have a very difficult task because of the due diligence portion of the transaction is typically an area that they have no prior experience with performing. The facts have to be uncovered through a comprehensive and thorough investigation. At VR, we will assist you in identifying items that should be scrutinized carefully.
Reviewing the Industry
When you consult with a VR business intermediary, we will review with you industries that closely match your interests and background through what is referred to as a SWOT (Strength, Weakness, Opportunity, and Threat) analysis. Here, you will review an industry’s strengths, weaknesses, opportunities and threats. We will determine through the SWOT analysis the type of customers and vendors for an industry that you will find the most success.
Examining Profit Margin
Buying a business with a high profit is important. You should perform a thorough examination of the books to discover the reasons. For example, a business with a high profit margin may have a low overhead and employees who receive marginal compensation and no benefits.
You have to ask yourself whether there will be a need to:
- Increase employee pay
- Include medical insurance in employee benefits
- Make improvements to the business location
- Replacing machinery and equipment
- Change vendors
All of these elements will factor into the profit margin as well as whether there be an additional cost outside of the asking price for the business. Therefore, it’s important to perform a complete due diligence to determine how and why the numbers are stacked the way they are, and whether there’s an area that’s not being explained.
Determining Whether the Business is Tightly Operated
Some businesses grow very quickly that they do not have time to determine whether working capital costs and expenditures are growing out of hand. The running of a business’ operations is critical because it could be losing money if proper attention is not being given.
For example:
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Corporate Development and COVID-19: What 3 Deal Pipelines Look Like Now
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The COVID-19 pandemic has thrown a wrench in business plans and deal prospects for firms around the world. We talked to corporate development professionals at three active strategic acquirers (and Axial members) to get a sense of how COVID has impacted their business, their pipeline, and their future plans.
How has COVID-19 impacted your business?
For example, National Express Company (Operates school buses in the U.S.): Obviously, no schools are in session so almost all our buses are idle, though we are helping where we can. We are using school buses to distribute food to food-insecure children in the school districts we serve and utilizing motor coaches to assist FEMA with various transportation needs. On the adult transport side, no one is doing tours or charters and universities are out of session as well. We continue to operate our fixed and paratransit routes, though volumes are down 50-75%, depending on the market.
How has your pipeline been impacted?
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Attorney Selection for Business Deals
By Neal Isaacs, VR Business Brokers/Mergers & Acquisitions in Raleigh, NC
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As a business broker I answer a lot of questions about how to sell a business. One of my FAQs that I share with all business owners planning to sell is “Do We Use My Guy Or Yours?” While the “guy” could be a “gal,” the question is all about attorney selection. The point of that FAQ is that sellers must have legal representation when selling a business, whether it’s someone they already know or someone I’m going to recommend.
Here are some considerations when picking the right advisor for legal council when selling a business.
Only Consider A Business Attorney
Attorneys normally have a specialty; they come in all flavors. Business attorneys, also called contract law specialists, “do deals” which is what a seller needs when selling a business. Family law, real estate law, or other non-business specialists are great for those needs, but business owners need a business attorney with experience in doing business deals to sell a business. Although some attorneys do have complimentary dual skill set that may help if an owner has a business that is transitioning within an estate, for example, focusing on finding a business attorney will be your best bet.
Normally Legal Fees Cost Around 1-2% of The Proceeds Of A Sale
It’s an investment to get good help, but sellers don’t have to overpay for legal council. It’s wise to invest enough to know that an attorney is “vested” in your deal and will be there for a seller if things take more attention than planned. Deals go sideways sometimes, and this can be where attorneys can make a difference. Sellers get what they pay for, so cheaper is not always better especially when it comes to experience.
Sellers Should Feel Comfortable With Their Attorney
According to a reputable survey by the International Business Brokers Association and Pepperdine University, a seller could have a baby in about the same amount of time that it takes to sell a business, and nearly half of that time will include the stages that an attorney will be involved.
A seller will be working with their legal counsel for a considerable amount of time, therefore it’s important that they feel they can relate and trust their attorney. It is important that there is an understanding of the motivations to sell, and they are comfortable asking questions. I ask attorneys to “dumb it down” for me all the time, because I know that attorneys have created their own language that “common folk” like me aren’t supposed to understand. Many people aren’t comfortable asking their attorney’s to break things down to a level that a level that a non-attorney can fully understand, but it’s important that a seller feels confident enough to do this.
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Cozy and well established Hair Salon & Spa in Miami, FL
Very well-known Hair Salon and Spa conveniently located. This is a turnkey operation. The Owner has combined hair, skin, and complete esthetic services. Excellent reputation and repeated customers. Very clean books and records and steady income. Select team of experienced Hairdressers and Estheticians.
The Salon is modern with lots of light and professionally equipped with design furniture. They provide all types of services: Hair, color, nails, massage, body and facial care, permanent make-up. This Business qualifies for an E2 visa. Very qualified and friendly staff on board. Very low turnover: 1 Front desk manager, 1 assistant salon, 3 experienced hairstylists,1 Esthetician. Elegant, cozy, and intimate space. Very neat, well equipped and organized.
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VR in Los Angeles, CA Successfully Facilitates The Sale of AFinancial and Insurance Company
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Established Insurance Brokerage specializing in Property & Casualty Insurance. With current and active business carriers such as Infinity, Foremost, Kemper, and Others. Consisting of Personal and Commercial lines – accounts. Specialty services also available i.e. - SR22’s, Motorcycle coverages. Sole Practitioner, No Employees, Buyer May Consider Growing and Adding Staff. Buyer is a Licensed Insurance Broker, Seller helped train Buyer in Transition.
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Thinking of selling your business or looking for an established
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Have You Ever Considered Selling Businesses?
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