There is a school of thought that in a price negotiation, the buyer should point out every fault, weaknesses, minor flaw and imperfection of the acquisition and talk down any strengths in order to justify giving the vendor a lower than expected price.
This negotiating strategy may seem like a logical way to communicate your lower appraisal of the asset in question. It may be honest feedback and it may even work when buying assets like a second-hand car from a used car salesman. However, when buying a business from someone who has owned, worked in and built it up for years (sometimes decades) this type of negotiation is more likely to be completely ineffective and counterproductive.
Why is a different approach necessary when dealing with a business? Effective negotiation involves putting yourself in the shoes of the person on the other side of the negotiating table. Trying to think like them in order to offer them something that will be attractive. A car salesman doesn’t have any emotional connection with the product he/ she is selling and may be able to see and discuss the product he is selling objectively, faults and all. A business owner that has owned the business for any significant period of time is likely to be very emotionally involved with the subject of negotiation and will not have this same level of objectivity in his discussions.
Where a buyer sees the 4 walls, equipment and cabinetry…the vendor sees the inner workings of their life. When a buyer is talking to the vendor/owner about plans for the staff and patients, the vendor is not talking about faceless people. The vendor is talking about people who are often like family. People that have supported him and his business with their trust and loyalty for years.
Granted that a business owner selling his business wants money…it is after all a financial transaction. Sometimes (too often) they want too much money. However, if you cannot give them the price that they are after it is worth asking yourself what else they want. Believe it or not, a small percentage of business negotiations concern price alone. What else does a vendor want other than money? What is the psychological currency that you can offer?:
1. Appreciation.
For a vendor who has owned and run a practice for decades they have nurtured and cared for the patients and staff for all of that time. Their practice is their baby. If the practice isn’t worth what they think it is they don’t want someone to tell them that it is because their baby is ugly.
They want someone to tell them that they have a beautiful baby and that they should be proud of what they have built.
2. A Caretaker
They want someone who is going to take good care of their baby when they are no longer here. They want someone who will keep the practice to high clinical standards and takes their role and the trust of their patients seriously. They want someone who appreciates the staff who have often become like a second family to them. They want to feel that they are leaving their patients in safe clinical hands.
3, Ego/Relevance
A vendor wants to see that the purchaser appreciates the decades they have had on the job and isn’t going to treat them like a new grad or a fossil.
Yes… change is expected post sale and a vendor needs to realise that a buyer will have a different (sometimes better) ways of doing things…but in turn… if the purchaser acknowledges that a vendor has some wisdom to impart and asks for (private) feedback and input, it would help the relationship.
Conclusion
In almost every practice acquisition, there are things that can be criticized and things that can be complimented. If you are wanting the vendor to compromise on their price in a negotiation you have two choices:
You can have a conversation where you tell the vendor all the reasons why they and their practice is unworthy of more money. OR
You could tell the vendor how much you appreciate them and their practice, and that if entrusted with it you will take good care of it BUT that you and your finances cannot justify a higher price.
Time and time again I have seen a vendor be more likely to bend their expectations for the purchaser who expresses appreciation and respect for them and their baby than the one who does not.
To read more articles about buyer negotiation please click the following articles: