Dear Joe,
If the asking price is in line for the industry and the business,
but you want to pay less, look at these issues:
Down payment
If you give them more money up front, how much will they reduce
the total price? For some people, money now can make a huge difference.
Overall price
If they want to hold firm on the price, perhaps spread the payments
longer sho it doesn't choke your cash flow.
How soon is the lease expiring?
If soon, request a discount for that.
The customer base:
What assurance do you have that they will stay with you?
So, arrange for a discount on the basis of client attrition
within a year. Hold back, say 30% of the total price and
only pay it if x% of clients remain.
What fixed assets come with the business?
What's their condition?
Can you do better by letting the owner keep them and getting new equipment?
Are they owned or leased?
If leased, you're getting nothing - just taking over payments. Negotiate.
Employees:
Are there any, or just the owner?
Who will be there to handle the transition for the comfort of the customers?
Are there employees you won't want, but are stuck with?
That's a good place to negotiate.
i.e. either the owner fires them or you pay less for the inconvenience.
Vendors
What are his relationships with vendors? Does he owe them money?
Has he been behind in payments? This will make your costs a bit
higher for supplies or materials. Negotiate.
Taxes
Does he owe any sales or payroll taxes? Buying his business or his
inventory could make you liable. Bring that out in the open, regardless.
External conditions
SCOUR the news for business information about the area.
Why are they REALLY so motivated?
Find out about construction, repairs, development, etc.
One person I knew bought a business from someone 'motivated' to sell.
He got a good price. Only the seller didn't tell him they would be
tearing up the street in front of the shop for the next 6-12 months
for planned roadwork. He quickly went bankrupt because customers
couldn't drive in. (a tire shop)
See if there is anything in the news, Better Business Bureau, Chambers,
etc. about this business. Are there customer problems, complaints,
bad blood with other local businesses? Check with small claims courts
records about suits by or against him.
Check with the police about incidents in the area.
See what you can use that won't quite discourage YOU from buying the
business, but might devalue it when brought up to the seller.
In general, find out how long the business has been on the market.
If it's been up for sale for a long time, you have some room to
lowball the offer.
Also, is anyone else interested in buying it? I mean now.
If you're the only bidder and it's been up for a while, offer
5% or up to 10% less.
If it's a good business, I wouldn't go much less.
If you really know it's a solid business, don't go more than
5% less unless you know the seller is really in a bind.
Then, it's up to you if you want to go for the jugular.
I hope this helps.
Best wishes
Your TaxMama-ga |
