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5 ways to save money when making an offer to buy a business

Brad OConnor

Jul 29, 2021

 

Congratulations! You have found a business to purchase, done your research and initial due diligence, and are ready to make an offer. Buying a business is a big financial decision, and one that should not be taken lightly, but there are ways to make the process easier and more affordable. Before you make an offer to buy a business, consider these tips to help you save money.

1.     Never agree to the first price

When buying a business, always treat the asking price that the seller presents as a starting point for negotiations. The asking price should give you an indication of the affordability of the prospective business, and not much more. The price should be reflective of its valuation, but negotiations are expected – use that to your advantage. 

2.      Challenge the seller by asking what if questions


Once you open negotiations with the seller, you can challenge their price by asking “What If” questions. For example, “What if key employees leave the company after the sale?” or “What if the business’s largest client goes bankrupt? “. Asking questions such as these may make the seller think about their asking price, and can help you save money if you’re able to negotiate the price down as a result.


3.     Open negotiation at the lowest price possible


When you begin negotiating the price of the business, you will want your initial offer to be low without being unreasonable. Some sellers may dismiss offers that are too low without a second thought, so make sure that your offer is fair and justifiable. Once you have made this initial offer, you have a price range to work within, and you can work toward reaching a fair agreement with the seller.


4.      Waive some contingencies


Contingencies such as those for appraisals, loans or inspections are a standard element in a purchase offer when buying a business. However, if you have consulted your attorney and feel comfortable risking your deposit, you may want to consider waiving some of the contingencies. This strategy can be risky however. For example, if you waive an inspection contingency for a brick-and-mortar business, and post-purchase you discover the building needs massive repair, it is entirely your responsibility. An inspection could have avoided this, so it is important to be cautious when using this strategy. Waiving contingencies can make your offer more appealing than a competitor’s, as long as it is executed with caution.


5.     Offer to close quickly



Most sellers wish to sell their business as quickly as possible. Their desire to close the sale quickly may outweigh their desire to maximize profit. When buying a business, if you can offer the seller a shorter and more expedient closing, then that will make your offer more appealing. 



Buying a business can be a tricky and complicated process, but we are here to help. For more money-saving tips, or for assistance with your business buying endeavour, contact us today!



More questions?  We can help.

EVALUATION/CONSULTATION


If you are a business owner considering selling a business, and would like to learn more about OConnor Business Brokers and Consultants and the services we offer, please contact us to arrange a confidential business evaluation. 

You will meet one of the Directors of OConnor Business Brokers, and your requirements will be discussed. During the meeting you will have the opportunity to find out more about selling a business, and how our business brokers and M&A Advisors can assist you with the business sale process. 

Unlike many other approaches, OConnor Business Brokers start without any preconceived ideas about what is right for you and for your business. By understanding the business and your motivation we can help steer you in the right direction. This often challenges conventional thinking and comes as a refreshing change to the norm.


The Directors of OConnor Business Brokers have experience as business brokers, business consultants, M&A advisors, and business owners. We understand the challenges and pressures that face a business at any one point. We therefore use our time together not to try and sell you our services but to help you understand your options and how we can help.


An initial meeting lasts approximately one hour, and can take place virtually or in person at our office.



Evaluation and Consultation Request

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