Chris Hughes, the Co-Founder of Facebook, was living in a small town in North Carolina before receiving a scholarship to attend Harvard University. Luck would have it, he would meet Mark Zuckerburg his second year of college, end up as roommates, and go on to make a half billion dollars for 3 years of work. “The only thing we can call it is a lucky break”, Hughes says on his wealth.
There’s no denying that luck plays some influence in your success. Maybe you get lucky, and in your first negotiation with a buyer you find that you’ve got the right person to take over your business and they’re willing to pay you full asking price. Unfortunately, it often doesn’t work that way and luck is not always in our favor. What we can do though, is take concrete steps before and during our negotiation to ensure that our lack of luck is compensated for with smart and informed negotiation strategy.
There are a number of variables that influence your negotiation success on Flippa’s online business marketplace. This article will delve into some of the most critical variables and provide research based advice on how you can ensure you are negotiating the best deal.
Options, options, options!
Set yourself up to have as many potential buyers as possible. To be a deal maker, and not a deal taker, ensure that you have multiple buyers that you can ultimately pick from. Increasing your options of buyers will increase your bargaining power, putting you in a better position to negotiate a great deal. If you only have one interested buyer and you are ready to sell, then they can dictate terms in their favor and you won’t have much leverage. You don’t want to be compelled to agree or negotiate a lower price due to your lack of options. In addition to being regularly available and responsive to inquiries, here are three tips on how you can ensure you have multiple options to pick from.
Whether your listing is classified or an auction, the price you choose can greatly increase the number of options you ultimately have. Aim too high and you won’t have enough inquiries or bids, price too low and you undersell yourself. Research tells us that you almost always want to make the first offer in a negotiation and when that comes to selling your business on Flippa, your first offer is your listing price. You should, however, have that offer be ambitious enough, so that if you concede, you are still in the range of what your ideal walk away price is. There’s a tension that should guide how you price your business. The higher the price, the less leads likely, and therefore less options. Too low of an asking price and you contribute to getting less once you and your buyer settle on that final number. Hence, find that magic number that will get your inbox full with messages and your auction full of bids, but make sure that the number doesn’t help contribute to an undervaluation of your business.
Opt For Video Calls Over Message Exchanges
Negotiating on Flippa often means that a buyer is sending you questions about your business via your inbox, and you are responding to their messages via their inbox. This can be an inefficient method of communicating, but more importantly research tells us that this mode of communicating is the least effective negotiation approach and is the most likely to result in impasse. Negotiating over text exchanges takes the human element out of the interaction; you miss out on tone, gestures, and people are more likely to act competitively in these types of exchanges. For the best negotation, it’s important to humanize each other and there is no better way of doing that than meeting face to face. That obviously isn’t available in this scenario, but video can be a great alternative. Video conversations contribute to overcoming unnecessary hostile attitudes, and allow both sellers and buyers to explore more carefully and to a greater extent whether they are a fit for each other.
Highlight Value and Address Skepticism
Highlight value and pre-empt and address skepticism in your listing. How you frame the different aspects and features of your business influences the value that people attribute to what you’ve built. In addition to the tips provided here on how you write the best listing description, keep in mind the following tip on the least desirable features of your business. One quick way to build trust with people browsing your listing is to identify and speak on the most apparent skepticism people will have towards your business and your asking price. By doing so, you are pre-empting people’s concerns, and giving yourself an opportunity to address those concerns. Doing this can influence people’s impression of how transparent and truthful your listing is, and can help garner additional interest and options for you. Not to mention, many buyers are searching for opportunities where they can improve your business model should they become the new owner, so being honest in why certain numbers might appear weak might actually increase your stance when it comes to negotiation as the growth potential for your business might have value.
Creating options for your listing is a critical step that sellers can take to ensure they negotiate the best possible deal for their business. In my next post I’ll explore how business buyers can ensure they negotiate the best possible deal for their next business acquisition.