With an annual growth rate of 3.6%, online businesses have become a great investment venture. However, starting a business is not easy, as it requires a unique idea, action plan, sales development, marketing, and more. Therefore, the best financial move for investors is to buy an already-established company.
One of the most critical factors in the process of buying a digital business is the negotiation of the sales price. Buyers focus on making a valuable, long-term deal, and sellers aim to sell their assets at top-dollar rates.
In this guide, we will explore some strategies to help you negotiate a deal to protect your interests, whether you’re a buyer or a seller.
The Sales Price Negotiation Techniques – For Buyers
With the help of these techniques, buyers can strike a favorable deal when buying an online business.
Anchor The Price
Anchoring is a negotiation tactic in which one party states a price, as a reference point, to begin the discussion. If the buyer is the first party to state the price, the seller provides a counteroffer to start the negotiations or vice versa. This starting point is called the anchor, as it sets a base price for negotiations.
It is beneficial for buyers to set the base price, as you can close the deal at the rate you are comfortable with. Your anchor rate should be lower than the price you’re willing to settle for. This will open up more room for negotiations.
Know “The Walk Away” Point
Although the primary goal of negotiations is to reach a price agreeable to both parties, sometimes things don’t work out. If a seller has a fixed sales price, it is perfectly fine to bow out of a deal. Offer the highest price point you can afford and inform the seller about your final budget.
Suggest Additional Benefits
The price should not be the sole focus during negotiations, as you can use various ways to increase the value of a sale. If the seller refuses to lower the price, include additional assets in your contract to compensate for the high price. You can also push to include certain assets, such as office equipment, office furniture, and other valuable aspects, to balance out the sale.
Separate Facts from Emotions
Sellers may use emotional manipulation to tip the deal in their favor. However, it is imperative to make a decision based on objective analysis. Keep the facts at the forefront of making a deal. Think about the business as a long-term investment and stay informed of all the potential costs the purchase can bring.
Consult an Expert
Partnering with a buyer-side broker is one of the most effective strategies for negotiation. These individuals work as a representative for the buyer to ensure you make the right decision with your purchase. A buy-side business broker evaluates your needs for purchasing a business. These include your budget, business type, industry, size, and location. Next, they provide a list of prospects and conduct due diligence to ensure you make a wise investment. These individuals also review financial statements, analyze market trends, and identify potential investment risks.
A buy-side broker also leverages industry expertise to help you negotiate the sale price, ensuring you pay the best rate for the business.
The Sales Price Negotiation Techniques – For Sellers
Like buyers, sellers also need to use negotiation techniques to get a good deal on their business. As a seller, you can achieve that by using these practices:
Conduct a Company Valuation
Company valuation allows sellers to determine the exact value of their business and related assets. Conducting a valuation before creating the listing can help you learn your company’s current market worth.
This information can also be of significant value during negotiations. If the buyer proposes a lower price, you can show the numbers to maintain your asking price. If the buyer doesn’t agree to it, you can move on to another interested party.
Separate Selling Price from Asset Price
Knowing the exact price to push during negations can be challenging for first-time sellers, as market research and company valuation provide the business’s collective value. The company’s collective value also includes business assets, which can include resources, machinery, inventory, vehicles, staff, and office space, among others.
When you’re making the sale, be sure to separate the cost of business assets from the sales price, as you can individually sell these assets at a later date.
You can also price tangible assets, including vehicles, property, computers, furniture, and intangible assets like intellectual property. Make a list of all assets with their depreciated market value to share with the buyer. If the buyer does not raise their suggested price according to the business asset rates, you can sell them on their own to individual buyers.
Identify the Value Proposition
As a seller, you must identify and highlight the business’s value proposition during the negotiation. This includes emphasizing your brand’s unique strengths and selling points like a loyal customer base, high website traffic, and one-of-a-kind product/service, among others. Showcasing your business’ value can increase the price of the sale.
Evaluate the Buyer’s Market
Sellers can research the buyer’s market and use it to suggest an agreeable sale price. This initiative reduces the risk of losing a buyer by offering a reasonably-priced listing. Conducting buyer’s market research even helps you secure the price your online business deserves, as you can stay informed of the market demand for your company.
Be Ready to Compromise
You must be ready to compromise on some aspects of the sales negotiations. As a seller, you may have to reduce the price or settle on some of the buyer’s terms to reach a mutually beneficial agreement.
Understand the Buyer’s Perspective
Understanding the buyer’s perspective can play a pivotal role during negotiations. This can help you identify and resolve the buyer’s concerns, allowing you to justify the sale price.
Established online businesses have become a great investment opportunity for entrepreneurs to acquire a business without starting from scratch. Still, there are certain difficulties that come with purchasing an established digital enterprise, such as sale price negotiation.
Buyers and sellers can use the preceding negotiation tactics to ensure they reach a mutually-beneficial agreement. They can also take assistance from an online broker to streamline the sales negotiations.
Find Out How Much Your Online Business is Worth
Flippa’s intelligent valuations engine is the industry’s most accurate tool, taking into consideration thousands of sales and live buyer demand. Find out what your business is worth with our free valuation tool and plan your next move.