Fundamentals of Selling A Business|
by Jim Brown
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.
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 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.
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.
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