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© Copyright 2002-2003. All rights reserved.
Page 19
How To Investigate Any Business Opportunity
9. Negotiation Tactics
The art of negotiation plays an important role in buying or selling a business. Differences of opinion are
inherent in the negotiation process and only realistic negotiators can find creative solutions to such dif-
ferences.
Businesses change hands most easily when the parties assume a non-adversarial posture. It is impera-
tive that the parties know the issues that are important to one another. Each should understand the
other's position on these issues.
Price is just one aspect of the transaction to be negotiated. Terms are just as important, particularly the
period of time over which the debt is to be repaid and the allocation for tax purposes of the purchase
price.
Sellers naturally have the upper hand in negotiations since they best know the business. A seller should
make full use of that advantage. A buyer should minimize the seller's advantage by learning as much as
possible about the business. The section in this guide entitled "Evaluating the Business" identifies the
key areas to be studied.
It is important to do more than study the business to prepare for negotiations. The parties must both un-
derstand each other's motivation for wanting to buy or sell the business, and each other's plans after
transition takes place. They must also understand why the other party has taken a certain position on an
issue.
Developing a working strategy means each party must not only know the other's position, they must de-
velop their own position as well. They should prepare in writing a list of reasons that validate their posi-
tion. They should also think through possible weaknesses in their reasoning. In this way, each can an-
ticipate and respond to the objections the other party may raise.
Buyers should request that the seller not negotiate with other buyers while the specifics of the offer are
being negotiated. Sellers, on the other hand, are advantaged when they can negotiate with more than
one buyer at a time. The most important thing in negotiations is to be able to see things from the other
party's perspective.
This eliminates much of the difficulty of reaching agreement and keeps the parties from wasting time.
10. Making And Evaluating Offers
Making the Offer
Before making an offer, a buyer will typically investigate a number of businesses. At some point in the
investigation process, it may be necessary to sign a confidentiality agreement and show the seller a per-
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