Anyone in business understands the importance of knowing how to negotiate. And of course, when it comes to selling your business, there’s nothing more important than knowing how to negotiate a business deal.

Negotiation. It’s an art. It’s an important business skill. It’s essential when it comes to selling your business.

So, how do you negotiate a business sale? I'm going to give you three tips on how you can negotiate the best possible deal for yourself. 

Step 1: Do your homework

The first step in negotiating the best deal is to do your homework. You want to be an educated negotiator. That means understanding the playground and who is in it - you’ll need to be aware of what’s happening in the market, the industry and the players. 

You also want to be across everything you can about your business because potential buyers will want to learn everything they can about your business.

Here are some things that can help you prepare:

• Find out what’s happening in terms of M&A in your industry. Who has been buying other companies in your space? Are there industry consolidations happening?
• What are the growth projections for your industry and how is your business positioned to capture more growth?
• Are there any hidden gems in your business that would be really valuable to another company? 
• Work with an advisor to get a  business valuation and benchmarking process done so you understand what your company is worth and how it compares to peers in the industry.

Step 2: Have the right attitude

Your attitude is critical when it comes to negotiation. Often people come into negotiations thinking of it as a tug of war. They think they need to pull a little bit, and for every win they get, it’s a loss for the other side. That's the wrong attitude. That approach completely erodes trust and deteriorates value. 

A better way is using the “principled negotiation” which was an approach developed by former Harvard Law School professor Roger Fisher and negotiation expert William Ury. They identified five steps of principled negotiations.

What are the 5 stages of negotiation?

1. Separate the people from the problem.
2. Focus on interests, not positions.
3. Invent options for mutual gain.
4. Use objective criteria.
5. Know your BATNA (Best Alternative To a Negotiated Agreement).

When you can shape your attitude around these core areas you will get a better outcome. Of course, having a BATNA could mean that you need to walk away from the negotiation if it really does not fit with your goals.

You want to present yourself as a trustworthy business owner who’s willing to listen to offers and is willing to negotiate.

Remember, the more you can do to make the buyer comfortable, the better your chances.

Step 3: Have Options

One of the biggest mistakes people make when they go to sell their company is that they're only talking to one party. The issue with this is that you may spend 6 to 9 months going through a process with somebody and they know your business inside out. They also know that they're the only person at the dance. This also means you've lost all your leverage. You've got no other options, no fallback position. You’ve been painted into a corner. This happens more frequently that people think. It’s why we also recommend you have representation in a business deal and you invite more people to the table in a competitive bid. Always give yourself options and the chance to negotiate with more potential buyers.

A great deal is waiting for you

If you do your homework, stay positive, and be willing to negotiate, you’ll be able to find the best deal for you and your business.