Posted by If you’ve got a successful online business, there might come a day when you want to sell it.
We’ve all heard of online startups being sold within a few months or years for thousands, millions or even occasionally billions of dollars.
Whether you need a big chunk of cash fast or you’re simply ready to move on and do something different, here are 7.5 tips to help you negotiate the very best price for your business.
1: Make a BIG List
If you’re focused solely on price, you’re going to lose. But if you have a long list of terms, then you have plenty you can negotiate away without touching your price.
Examples: Rights to your content, rights to your list, rights to your products, rights to your domain name, non-compete clauses (you don’t want this), consulting fees after the sale, a percentage of future profits, asking that your assistants be kept on board and so forth.
The more things you ask for, the more times you can give up little things to get bigger things in your negotiations.
2: Sleep and Workout
Before you enter into any negotiation, get plenty of sleep, ensure you’ve been working out daily for a while, eat healthy and skip sugar and junk food.
Why? Because you want to be at your very best when you are negotiating. Remember that what transpires in the hours and days of a negotiation can affect you long term and maybe even for life.
Ninja negotiator trick: Assuming both parties are in the same time zone, ask for a negotiation time late in the day. Then take a power nap prior to the negotiations. When you wake up, take a brisk walk and drink tea or coffee. You will be alert and ready to rock, while they’re tired from working all day. If you’re in different time zones, adjust accordingly.
3: Negotiate with the Decision Maker
In sales, one of the first things they teach you is to present your offer to the person who is empowered to make the decision, not to the underlings.
Underlings might nod and smile and say you have a deal, but because they don’t have the power to actually cut the deal, it’s meaningless.
And if you’re approaching a partnership, talk to both partners at once.
Otherwise the partner you’re talking to will always tell you they have to run it by the other partner, who doesn’t get the benefit of having spoken with you.
4: Bring Your Own Formula
This is a backdoor method to increasing the price of your business AND not having to haggle over that price. Sweet, right?
So how much is your business worth?
That is going to depend on who brings the formula for determining the business’ value to the table.
Good negotiators know that you NEVER let the other side use their formula for determining how much the business is worth.
Let’s say you’re selling your information business, in which you have several good selling products. The business clears $10,000 a month from your list and affiliate income.
If you let the potential buyer set the valuation formula, they’re going to only look at this $10,000 a month figure.
BUT…
You know that this potential buyer has a total list of 200,000 people, 20,000 of which are paying customers. (And you know how easy it is to sell paying customers another product.) This buyer can immediately sell your business’ products and services to their own customers.
Plus, this potential buy has 100 powerful affiliates in their stable who can go out and sell the product, too.
Thus your formula can take these figures into account as well. For example, your products might be worth another $1 a month per buyer, or $20,000 a month, and another $10,000 a month in affiliate sales.
Now your business’ total income is potentially $40,000 a month to this buyer, rather than $10,000.
Maybe your buyer doesn’t have these things in place, but they have their own products, and a list of buyers comes with your business. They’re going to be making bank selling their products to your customers, and you can use this as a factor in arriving at the value of business.
First agree on the formula to be used to value the business.
THEN use the formula to arrive at the price.
5: Say “No” Nicely
When the other side wants something you absolutely, positively don’t want to give, you’re going to have to say, “No.” But there is a good way and a bad way to do it.
If they ask, “Will you continue to stay on and consult with us after the sale?” And you REALLY do NOT want to, you could say something like…
“No, sorry, I don’t want to.”
Or…
“NO WAY IN HELL AND DON’T ASK AGAIN.”
Or…
“This business practically runs itself because all of the proven procedures and methods are already laid out, tested and working. And I’m happy to give you advice, too.”
Yes, I know, it looks like you just said yes. But two things just happened here:
You reassured them that they do NOT need the thing they just asked for.
And if they are truly insecure about their ability to run things, you will pick up the phone when they call.
This doesn’t mean you’ll DO anything for them or the business – you’ll simply tell them what they should do if they call and ask.
You’re not alienating them in the negotiations and you’re able to keep the process moving forward.
6: Be Open to All Possibilities
You REALLY really want to sell your business to JoeCool Marketer, or maybe Google.
But neither JoeCool nor Google are interested.
Don’t despair, and don’t quit.
Focus on finding alternative buyers and keep looking until you find the right one.
7: Consider Rolling the Dice
What if you’ve just raised venture capital for your business, things are humming along smoothly and your prospects look excellent, and some little company comes along and demands to buy you out for 1% of their company?
Most people would probably laugh and say no.
But Applied Semantics told Larry Page yes, and sold their company for 1% of…
…Google.
This was before Google went public.
Applied Semantics became Adsense, which now accounts for 99% of Google’s revenues.
And Google is worth $250 BILLION.
I’ll let you do the math.
If a company is offering you a piece of their future pie for your current business, you’ve got to make a difficult decision.
But your best bet is to ask for money up front PLUS a piece of future business. Make sure the money up front is enough to prevent any traumatic sense of regret if they go belly up, and then cross your fingers.
Who knows? You too, might become a billionaire.
7.5: The Deal is not the Deal until it’s CLOSED
A common mistake is to think that once you’ve agreed on a deal, it’s all downhill from there.
Nope. An agreement is simply the first step of THREE to cutting a deal.
Once an agreement is reached, then you’ve got signing and closing, and they’re generally not easy.
The bigger the deal, the harder they are.
Signing a deal involves all the little details that weren’t ironed out in the agreement.
Closing the deal means both sides delivering everything represented in the deal.
And the time between agreement to closing can be days, weeks and even months, during which anything can and will go wrong.
Every day after you make an agreement, touch base with your buyer. Keep them focused on the vision they have for the business, and champion their deal. Make sure the paperwork is going through and details are being attended to.
Don’t rest on your laurels until the deal is CLOSED.