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Buy Y our Own Business

Say the seller is asking for $600,000, three times the Owner benefi t. Most
small businesses are valued from one to three times, so that is on the high
side. Is the business worth that? If the business can continue to grow, and the
deal terms make sense, it can be. That is why you need to review all parts of

the business, financial and otherwise, to arrive at a proper valuation.
To download a terrific valuation tool, check out “Valuing a Busi-
ness” from my Art of Buying a Business at www.trumpuniversity.com/
,
wealthbuilding101 .

Step 5: Negotiate the Deal

The negotiating stage tells you a lot about the seller. Certain issues must be
covered in any acquisition. Engage an attorney experienced in transactional
law for small business sales. The attorney will provide counsel and make sure
you are properly protected, but the majority of the negotiations will be done
between you and the seller.
Win-win sounds great in theory, but it’s not always practical in the sale of
a business. As the buyer, who is assuming greater risk, you should win, but the
seller should be reasonably happy, too. Understand the seller’s “hot buttons”
and satisfy them, and he or she will give you everything you want. If you
reach a stalemate on one point, move on to the next, and come back if neces-
sary. Only take a hard stand if you’re prepared to walk away from the deal.
Don’t be a wimp, but don’t be a bully either. Look at the following example:

Edward was buying a distribution company. Stan, the seller, and his wife

Lynette, wanted to retire. He had a terrific business, one that a smart buyer
could easily grow. Stan and his wife were offering a very fair price and terms,
but Edward kept coming back to the table for more and more, right up to
the closing. He pummeled and pushed the seller on every point, and never
gave in.
On the last day, as the final documents were being signed and the money

being transferred, Edward told Stan: “I can’t wait to get in and get rid of Stella”
(Stan’s longtime, and less-than-exceptional assistant). Stan snapped. “I’ve let
you push me around since we met. I gave in to every point. Shove your money
and sue me if you want. I’m not selling to you.” And he walked out.
Edward was shocked. He lost a gem of a business. Four months later, Stan and
Lynette sold for more money to another buyer.

In a typical agreement, there are 50 individual clauses to negotiate. I’ll
discuss a few of them next.

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