The Art of Negotiating

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The Art of Negotiating

By Steve Michaels

When people are contemplating selling their answering service, they may wonder if they should hire a broker.  There are several advantages, such as being visible to a larger pool of buyers, making sure the paperwork is done properly, the escrow is handled - and maximizing the selling price.  Even so, some TAS owners still opt to go it alone.  If you do decide to sell your answering service yourself, here are a few tips from my thirty years of experience:

 It is common for the buyer to initially flatter you with compliments about your business.  Flattery tends to soften you so that you drop your guard and offer tidbits of information that will aid the buyer's negotiations, resulting in a lower price and less favorable terms for you.  Sometimes the buyer may state that certain multiples are industry standards and tell you that your answering service is not worth what you are asking.  Some buyers may also assure you that because of their years of experience in purchasing businesses, all deals are done a particular way - that is, their way.  Sellers with less negotiation experience can fall prey to their pitch and sell their TAS for less than it's worth.  Having someone experienced in these matters makes all the difference, plus it provides peace of mind, knowing that you are getting the best return from your many years of hard work.

Here's another buyer's tactic that has worked in the past.  If you have hired a broker or an attorney to do your negotiating for you, then let him or her do their job.  I've seen buyers try to sidestep the broker, calling the owner directly to finalize a transaction.  Remember, there can only be one negotiator.  Any house divided is a house that will fall.

Here are some other ideas to keep in mind:

• Never fall in love with a deal - or the buyer.  A deal is just a deal; there will always be other deals and other buyers. 

• Listen carefully when engaged in serious negotiations.  Don't be in a hurry; nobody ever got poor by listening. 

• Use silence as a negotiating tool; silence is disconcerting.  People tend to fill silences with chatter, often weakening their bargaining position. 

• If you're in a hurry, you're in a position of weakness.

• Choose a rogue element that is to your advantage, like a voicelogger or a new account about to sign up, bringing it into the negotiation at a late stage.  You'll be amazed at how often this tactic produces positive results.

• Empty yourself and act like you do not care; it is only a business.  You need to convince yourself that you do not care what the outcome of the negotiations will be.  Cling to this illusion of emptiness while you negotiate.  This attitude will help to strengthen your position, demonstrating to the buyer that you have something of value for sale and are not selling out of weakness or desperation.

• Set a price that you will not deviate from; this is where a skilled negotiator can help.

• The buyer's job is to downplay your business and lower its worth.  You need to keep talking about how well your answering service is doing, the value of the equipment, the growth of the company, and even the possible acquisition of a competitor should the deal not come to completion.  This will show the buyer that you are not desperate to sell the business and that you have backup plans. 

• Be willing to walk away when the price is not met.  Remember that your answering service is not for every buyer; you just have to find the right one.

• Establish where the balance of weakness lies in any serious negotiation.  Most strengths are self-evident, especially like cash position and existing infrastructure.  Weaknesses are usually hidden; ferret them out and make a battle plan.

• Whenever you have the chance to sell an asset at the zenith of its value, do so.  Things do not keep increasing in value forever. 

In the final analysis, the answering service owner is the final arbiter.  That remains true whether you are a good negotiator or a bad one, whether you have hired a broker or not.  The final decision is yours.  Just remember that whatever you agree to during a negotiation, fulfill your commitment.  Nobody wants to do business with a weasel or a chiseler.

Negotiation Tips for Buyers

When in the buyer's seat, do your homework, and do it rigorously.  What you don't know or haven't bothered to find out can greatly hurt you in a serious negotiation.  Do a lien search on the business.  Check out equipment service contracts and rental or lease agreements to see when they expire and if they are assumable.  Even if you are contemplating purchasing the accounts only, you may want to pay a little extra and take the seller's equipment out of the picture - simply to keep the seller's staff from buying it and opening a competing service.  Also, buyers should avoid auctions if at all possible.  You could end up paying more than the answering service is worth.  (Auctions are generally good for the seller.)

Guest Blogger Steve Michaels
tas@tasmarketing.com