Questions

After moving on from my startup, someone approached me with an offer to buy. What are some strategies for successful negotiation?

I am in NYC and the buyer is in SF. I would like to sell for $35K but was offered $15K. What should I expect as a next step? Should I be prepared to walk away?

5answers

The less you need to sell, the more leverage you have. The fact that they approached you says that they want it. If 15k was their first offer, you can simply say no thanks. If you can do that with a straight face and resist the temptation to make the move, they are likely to come back with a better offer.

The other way to move the price up is to say 15k is an asset sale "as is." You could offer a short consulting contract to provide assistance in integrating the acquisition and probably find an extra 10-15k that way.

Happy to talk in more detail in a quick call.


Answered 6 years ago

Pls clarify - you've moved on and we're actively looking to sell it or just called it a day?


Answered 6 years ago

First of all, unless you have an offer in writing, you don't really have an offer. Don't accept or make verbal offers. You asked what should be your next step. The next step is to make a counter-offer in writing. It's not unusual for first offers to be much lower than what you're asking or what you would like to have, or even what you would be willing to accept. Don't be discouraged by this. It's a place to start. Keep talking, if you really want to sell. If you don't really want to sell, make a counter offer within the range you're willing to consider. When negotiating, determine three prices you would be willing to accept: 1. A pie-in-the-sky price you don't seriously think you'll get. 2. A price you think is realistic. and 3. A rock-bottom price that you must have, or you'll walk away. Walking away is the best bargaining chip you have, but don't do it as long as your offers are above your "rock-bottom" price.


Answered 6 years ago

The start of any successful negotiations is to know what you want as one party in the transaction. If you know what you want and don't get it then you walk. If you don't know what you want then you are in the same place before you knew someone was interested so toss a coin with heads you sell and tales you don't.

Also, most sellers way over estimate the value of their business. A business is only worth what someone will pay for it. It's value is generally modeled around cashflow or how much revenue it generates or what the owner gets to keep in their pocket. If you think your business is worth $35,000 then its not making much money and sounds more like a hobby. To help you decide whether or not to sell, do you have the heart to keep going for the long term or is it time to try something else.


Answered 6 years ago

The key to negotiation is understanding what the other party wants. What aspect of the business are they interested in? Are they going to run the business in the same manner you did or are they just after the brand/trademark, domain, list of users/emails, underlying software platform, etc?

If you truly walked away from the business, then it's tough to have negotiating leverage, however you can afford to be creative, such as taking $15k in cash and then 3% of gross sales over the next 18 months.

The other often overlooked aspects of selling a business:
- legal fees (can easily consume the sale price in your case) and the cost incurred by the seller in transferring the assets.
- unless the effort is negligible (and it almost never is), a consulting agreement should be in effect to compensate for the time spent transferring assets / knowledge to the new owner.
- tax ramifications can be significant depending on how the transaction is structured; consultant an accountant and since it's December, consider delaying the close until January unless all the tax implications are fully understood.


Answered 6 years ago

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