When buyer and seller disagree

Last updated 08:52 09/12/2013

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Q. I would like to buy an existing business but the owner and I disagree on its value. Where can I get independent advice or perhaps a mediator?

A. I love Warren Buffet's quote: "After all, you only find out who is swimming naked when the tide goes out."

It's all in your preparation, assuming you have completed a robust due diligence process, you will have engaged your accountant throughout the financial analysis and your lawyer as agreements are drafted.

To remove emotion from your negotiation, encourage their steering through the process. While engaging lawyers and accountants can be costly, it is inexpensive if an emotional decision is made as an alternative.

Also remember there are various ways to structure your deal aside from one number on the table, so work through your various scenarios beforehand with your accountant.

Often you will have colleagues or relatives in your network who are good at performing the frontline negotiation role if you are uncomfortable doing this.

You can also ask one of your professional services team.

If you have done your homework and have your valuation clear, assessing all aspects of the business, then you can walk away from the deal knowing subjectively the seller is being unrealistic. If this is the case, then go on to look for your next business opportunity.

Vanessa O'Neill, Estute Business, delivering strategic insight and implementation plans ready to go to your business frontline. Estute.co.nz

A. Purchasing a business needs to be a calculated investment decision and the price needs to reflect a measurable return on investment balanced with risk.

There are many ways to break deadlocks like this. One way is to restructure the deal to balance out the risk. For example, create an extra payment if the business actually delivers against a forecast result one year after the deal.

Hire a deal broker who has experience in this type of transaction. Likewise, be prepared to walk away from the deal if the seller is unreasonable.

Mark Robotham is a small business expert at sparkbox ventures.com

Email your questions to laura.walters@ fairfaxmedia.co.nz

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