For many business owners, the negotiations are the most stressful part of a healthcare deal. Negotiating is just not something that comes up that often in the healthcare industry. At the same time, the stakes are extremely high as you want the best outcome to make up for your years of hard work. To make sure your negotiations go smoothly and lead to a positive result, there are a few negotiating tips that can really help.
Base your asking price on market research
Your asking price plays a huge role in whether or not your negotiations are going to be a success. If your price is fair and appropriate for the market, you will enter the negotiations in good shape. On the other hand, if you come up with an asking price that is way too high and not based on realistic conditions, your deal probably won’t close no matter what you do.
Before meeting with buyers, be sure to research the market and look at similar sized deals that have recently closed. This will not only help you figure out your asking price, it will also give you valuable ammunition during negotiations. If a buyer delivers a low bid, you can show them the research showing them why they need to offer more.
Focus on good communication
During your negotiations with a buyer, make sure to clearly communicate at every part of the process. If you’re unhappy with part of their offer or have some specific conditions that need to be met, make sure the buyer knows. If you just assume they do or hope they will catch on, it will lead to frustration for both of you. Overcommunicating rarely leads to problems but undercommunicating could sabotage the entire deal.
Keep your emotions under control
As you go back and forth on prices, it’s easy to get caught up in emotions especially if you have a personal attachment to your business. It can be hard to hear a seller laying out problems or telling you that the business is not as strong as you may think. In these cases, you have to stay calm. This way you can push back with a reasonable counteroffer rather than cancelling everything out of frustration.
Beware going too far
When you negotiate, it might seem like you should always push for highest price possible. After all, wouldn’t that mean more money for you? You need to be careful because even if the buyer agrees to an above-market price, they still need to pay you that money. Your deal will likely include some kind of debt financing arrangement where the buyer pays off your loan using your business’ future cash flows.
For this to work, the company has to still be in business. If you lock in too high a price the debt payments could put too much pressure on the buyer, especially if they run into other problems like a recession. If they declare bankruptcy, your debt will be subordinate to other obligations, meaning you get paid last and might not receive any money at all. Make sure your final price is manageable for the buyer so they can survive to pay you in-full.
Hire a professional
Negotiating is a skill that takes time to learn. Your healthcare deal is probably not be the best time to practice. It may be worth hiring a professional to help with the sale, like a business broker or investment banker. Their full-time job is to negotiate deals so they can make sure that the process goes smoothly. Their negotiating expertise might also win a few more points for your final price, which can more than make up for their fee.
By keeping these pointers in mind, you can make sure your negotiations go smoothly and that both you and the buyer will be happy with the results. Wyatt Matas offers advisory services with varying levels of support based on clients’ needs. For more information, email us at firstname.lastname@example.org.