Buying A Manufacturing Business – The Art Of Smart Negotiation

⏱ Reading Time: 2 minutes

negotiationThere are times in life and business when negotiating the lowest price possible is the smartest thing you can do. With certain types of business purchases, that strategy is like shooting yourself in the foot. But when is it appropriate to bargain hard, and when if ever should you consider paying a premium? Certainly each strategy has its place, but for today let’s examine when it’s best to pay the premium.

If you are making a strategic purchase to gain a geographic or market share advantage, you might want to ask yourself the following questions before insulting a seller with a low-ball offer:

  • Will this acquisition help me gain an advantage over my competition?
  • If my competition made this purchase, would it hurt my company?
  • How long would it take me to build the same type of operation organically and at what cost?
  • Do I need the cooperation of the acquired company’s staff to make the acquisition successful?
  • If I do need staff cooperation, what is the staff’s opinion of the selling employer? Will insulting the Seller with a perceived low-ball offer turn the opinion of the staff against me, in favor of a beloved employer?
  • If I’m buying the company as a long-term arm of my existing operation, how much does the additional purchase price really mean over the life of the company?

Answering these important questions will determine how hard of a price negotiation is appropriate. We all love the thrill of getting something for less than the perceived value. But sometimes it’s just plain smart to beat the competition to the punch. If the target company’s numbers and fundamentals are strong, and their business, geographic location and everything about them makes them a likely acquisition target of every last one of your competitors, why take the risk of insulting the Seller and their staff?   In situations like this, Sellers have choices. They might just choose to tell you where to shove your offer, and then thoroughly enjoy selling to your fiercest competitor. When that happens, and it will, you’ll wish you quickly agreed to pay a fair and reasonable price.

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