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We are looking at buying a business. Are posted business prices typically 'firm" prices or do owners bargain?

We are interested in buying a business, but we think the valuation is too high. Are business owners willing to 'dicker" on the price? What's the best format for a letter of intent offer?

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Aug 17, 2017
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Aug 7, 2017
Douglas Batts
Murphy Business & Financial Corporation
Collin County, TX
Premium Broker

PK, I think its safe to say that any reasonable seller will expect to negotiate to arrive at a final sales price for their business. As long as the buyer makes a reasonable offer for the business and has acceptable justification for the offer, serious sellers are generally receptive. Having said that, I do encounter buyers, from time to time, that lead with a ridiculous initial offer which compromises their credibility with the seller and any good standing for future negotiations that might lead to the purchase of that business.

Jun 18, 2009
Sy Sebastianelli
Sy Sebastianelli & Associates
Premium Broker

I always like to consider the asking price from a likely buyer's standpoint. But there are many factors outside of the business analysis that also affects the value of a business. Inside factors most important and obvious are the ROI ratio (cash flow) with debt service and that depends on how the 'buyer' will run the business (not the way the seller has run it) for example if it's run as a family business labor costs a significant expense will be less (husband & wife, father & son, etc).

Again it is the buyer's value of worth based on the interest the business appeals to the market at that time. I had the experience of listing a business that had a strong $100,000 cash flow profit but the open buyer market was minuscule because the business required the pre-existing skills of an experienced interior designer. Most buyers looking to acquire a business do not have this pre-requisite.

To summarize - the buyer should present rational unique reasons for an offering price that should be difficult for the seller to disagree with.

Jun 17, 2009
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Vested Business Brokers
Business Broker
New York County, NY

Generally the buyer is in control. If the seller likes you and you make an offer after meeting the seller and seeing the business. Always offer 10% below what you are willing to pay for the business. If you provide proof of funds with your offer you are in a good negotiating position. Check out our site.

Dennis Launer, Senior Business Broker

May 11, 2009
Marv White
Hartford County, CT
Premium Broker

I'm in agreement with all the responses thus far; however, there is an element I would like to add: Sellers have attachments to their businesses that may go beyond sales price although it gets neatly bundled into price.

Astronomical asking prices are a way for sellers that may not be 100% ready to sell put up a protective barrier or buffer. If someone is willing to overpay, they will see past their uncertainty, but these business more often than not never transfer.

In many cases, a business represents the life work of an entrepreneur. These entrepreneurs want to be rewarded. It's just not necessarily money, although that is an obvious important component. Entrepreneurs want acknowledgement for their creativity and business acumen.
It's their baby and they don't want it called ugly or cheap. Exercising diplomacy and recognition of past efforts of the owner can be worth a lot when It comes to arriving at the real price someone would actually pay.

Most sellers would like the legacy of their business to grow and prosper. If a buyer can demonstrate competency in the chosen business, there is a mutual goodwill that can allow you to adopt their baby at a lower price. And by all means, never insult the seller because emotions are high.

May 8, 2009
Sheila Spangler
Capital Strategies
Ada County, ID

Yes, everything is "negotiable" to a degree.

However, before knowing if the valuation is too high, you should consider a few things. One - how did you arrive at this opinion? Did someone on your team with the right experience and background on valuing and selling businesses look at the seller's financials and estimate a price? Or did someone without any business valuation experience, or credentials render an opinion?

I have seen many times where a buyer's CPA, attorney, banker or even family member provide opinions that aren't based on actual knowledge of how to value a business. So my suggestion, is to hire a professional that has the proper credentials.

For example, you could hire a Certified Business Intermediary, or a Business Appraiser (and there are several designations, and CPA's generally don't have this unless they went to additional schooling).

Check out the web link below for Business Valuation and you can find a list of qualified valuation experts in your area.

Regarding a letter of intent, when you have a professional Business Broker/Advisor on your team, he or she will be able to guide you in preparing a letter of intent. If you don't, then hire an attorney that is experienced and knowledeable in business sales. This is a specialist and not someone that handles every type of legal matter.

There really is too much at stake in buying a business to do it yourself. The fees you pay to the right, experienced and knowledeable professionals will be less than the learning experience you'll get trying to go it alone.

Good luck!

May 7, 2009
Steven St
World Business Partners, Inc
Los Angeles County, CA

There were some good answers here and one terrible answer. A business is only worth what someone is willing t pay. Just because a buyer wants a million dollars cash for his business doesn't mean anyone in the world will buy it for that much.

When looking at any business do not even consider the price first. The first thing you should consider is if you paid that price would you have enough left over to live on. Many buyers look at the cash flow of the business and think that a good enough number to support them and run the business. What many fail to do is first consider debt service and then how much will be left over.

Focus more on terms than on price if you can. A business that is a little bit out of range can be brought into a good deal with the right terms.

But the short answer to you question is if the Seller is firm on their price then unless its a really good price then run away because they will be a nightmare to work with now and in the future.

May 6, 2009
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FMI Inc.

As in everything in business from retrailing to real estate, REMEMBER. THE BUYER DETERMINES THE PRICE.

May 5, 2009
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The BAF Group LLC

In addition to my prior note to you, let me say that valulations are highly subjective. Offer what you think the business is really, truly worth!

May 4, 2009
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The BAF Group LLC

We always suggest using a Letter of Intent for an offer. But make certain the LOI is written so there is no question but that it is not a binding contract! I have seen people make terrible mistakes, in that area. Prices are always subject to negotiation. How much is a function of the nature of the business, the price relative to the Cash Flow and Assets, and the Seller's willingness to take an offer that is lower than he/she is asking. Many times, Sellers will say their offer is firm; but a well written LOI, a very qualified Buyer and a firm settlement date will frequently make them negotiate a fair amount. Some Sellers (and Brokers) will put the price 5% or so over the amount they will accept, because they feel the Buyer will not offer the asking price. They want room to negotiate. To summarize, there is no pat answer.

May 4, 2009
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San Diego County, CA

I am no expert in this area, but just thinking why not use the service of a professional broker. Evaluation is part of their job. As far as I know, buyer pays nothing to use a broker. Hope it helps.

May 1, 2009

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