|
Fundamentals of Selling A Business - Negotiating and Closing the Deal
Prior to
negotiating the deal, you must establish clear and achievable
goals. Ten practical tips for successful negotiations are as
follows:
- Focus on goals.
- Do not expect to win every battle.
- Understand the other party's wants and needs.
- Do not get emotional.
- Be flexible.
- Listen to the other party.
- Never be afraid to walk away from a deal.
- Never threaten to walk from a deal unless you mean it.
- Deal honestly and openly.
- Do not over negotiate.
Letter of Intent
Once both parties agree on
the major terms and the price for the business, they customarily
enter into a formal agreement known as the Letter of Intent. This document outlines the
general business terms between the buyer and the seller. These terms should include
the names of the parties, the business for sale, the agreed
purchase price, and the terms and structure of the agreement.
This is not a binding contract, but it is used to provide information on mutually agreed upon
terms that are to be incorporated into the formal, legally binding
contracts. At this stage, a deposit is requested from the buyer, which would be held in
trust.
Due Diligence
In this last stage, the buyers would have the opportunity to verify the
information provided to them by the seller. Buyers focus on areas such as:
- Corporate organization and ownership
- Products and inventory
- Customers and suppliers
- Management and employees
- Sales and marketing
- Facilities and equipment
- Reporting and control systems
- Financial results and balance sheet
It is likely that the buyer's accountant
is involved in the due diligence process to perform a financial audit and verify all past financial
records. If the business is incorporated, the buyer's attorney may thoroughly review
your corporate documents and legal standing.
Purchase Agreement
The purchase agreement
details all the legal and financial aspects of the deal as well
as the business terms and structure of the deal that were outlined
earlier in the Letter of Intent. This contract is legally
binding.
Click here to Sell a Business for free.
Click here to return to the Seller's Guide.
|
