You will run into common offer objections when selling your business as sure as the sun will come up tomorrow. Yet many never prepare for them. Like what? “Your price is too high.” Duh. Here are some thoughts on that and more.
Since the vast majority of businesses sold are sold by brokers, they will have helped in establishing the asking price. But everyone knows the asking price is not the selling price. You know it, the buyer knows it and the broker knows it. That’s when real negotiation often begins.
“So, what will you really take for this business?” There are two exact-opposite thoughts about price negotiation: the person who speaks first, loses; or speak first to set an anchor. Remember, this is an art form, not a science.
Why the dance? You’re hoping your counterpart will offer you more than your target. Conversely they hope you will ask for less than their walk away price. Sometimes it happens.
Bracketing the Offer
If one party offers $500,000 (anchor) and the other party says $300,000, ninety-five percent of the time the selling price will be $400,000. “After all, it is only fair that we split the difference isn’t it?”
Because of this state of nature, anchors are important. If the other person makes the first offer, they are setting an anchor or a Reference Point. Then bracketing begins and you end up half-way.
So first try to move their anchor.
Here Comes Da Flinch
This is corny, but it works. Whatever your asking price, flinch when you receive their offer. Right, visibly flinch or cringe and quickly shove the offer back across the table without considering it saying something like, “That’s too little. You’ll have to do better than that.” If you’re not in the same room, get the word back to them as soon as you possibly can.
Your goal here is to keep their initial offer from taking hold as a reference point. If they offer $300k, you reject and then they come back with $350k, you have just moved their reference point from $300k to $350k remembering if it sticks, this is the point where bracketing occurs. And since you moved their reference point from $300k to $350, you’ll probably have earned $25k just by flinching. And yes, it works that way.
Now, when you reject the initial offer, it’s natural then for them to say, “Well, what will you take.” You need to be prepared so you can come back with something like, “Has to be a lot more than that, how about you looking over it again and see if you can’t do better?”
One gambit is to hit them with a reverse flinch by saying, “No, as far as I know, that’s the least we will take,” while you physically move the offer once again back to their side of the table.
Most novice salespeople when dealing with a flinch will cave or at least start thinking that maybe their price is too high. That’s especially true if the other party scrunches up their face when delivering the flinch.
The initial part of the game is to prevent the counterpart’s Reference Point from taking hold because we normally end up half way between their reference point and ours. So any movement on their part is a win for you.
Now if you are forced into setting an anchor or reference point below your asking price (which you will be forced to do at some point), be patient. Don’t drop the asking price substantially and only do it with consideration (time) as that will indicate support of your price. Dropping the price significantly and quickly indicates you will be willing to drop it even further in most cases.
Yes, there is gamesmanship involved. However, remember the word Discussable. That’s important. Unless a discussable offer is proposed, the other side has a high probability of walking away with no further negotiation because it’s apparent that no agreement can be reached. So, if you are selling, make sure you first have good guidance on establishing your Asking Price.
If the buyer is serious, they will ask how you arrived at your price. Tell them you had your business valued. They will then ask if they can see the valuation. Tell them “no” but you will give (or have given) them access to information so they can value it themselves. And then, well, then we are into serious negotiating, where we’ll pick up next time.
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Receive daily email training messages as well as have access to our short (8 to 10 minute) printing-specific training classes on product knowledge and selling through the CPrint Academy. $495 for a year’s subscription covers everyone in your shop. Go to www.cprint.com for more information. Message Tom at tom@cprint.com or reach him at (304) 541-3714, connect on Facebook and LinkedIn and follow his business tweets on Twitter @tomcrouser. Tom is Senior Contributing Editor of Quick Printing magazine, chairman of CPrint® International and principal of Crouser & Associates, Inc., 235 Dutch Road, Charleston, WV 25302, www.cprint.com.
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