Negotiation – Should you Go First?

The Pros or cons of Providing a Purchase Price to a Potential Buyer

THE PROS OF PROVIDING A PURCHASE PRICE TO A POTENTIAL BUYER

• Set the Starting Point: By providing a purchase price, you establish a starting point for negotiations, which can help set expectations and guide the conversation.
• Control the Narrative: Sharing a purchase price allows you to shape the perception of the value you attribute to your business, potentially influencing the buyer's perception and their subsequent offer.
• Efficiency: Providing a purchase price upfront can save time by eliminating the need for prolonged back-and-forth negotiations and enabling both parties to quickly assess the feasibility of the deal.

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THE CONS OF PROVIDING A PURCHASE PRICE TO A POTENTIAL BUYER:

• Risk of Undervaluation: If you provide a purchase price that is too low, you may undervalue your business and potentially leave money on the table.
• Limited Leverage: Sharing a purchase price upfront can diminish your negotiating leverage, as the buyer may use that information to anchor their offer at a lower price.
• Missed Opportunities: By providing a purchase price, you may discourage potential buyers who could have been willing to offer a higher price than what you initially suggested.

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The Pros or cons of WAITING FOR THE BUYER TO MAKE THE FIRST OFFER

LET THEM GO FIRST - THE PROS OF WAITING FOR THE BUYER TO MAKE THE FIRST OFFER:

• Gather Market Insights: By waiting for the buyer's offer, you gain valuable insights into how they perceive the value of your business and the current market conditions.
• Maximize Potential Value: By allowing the buyer to make the first offer, you leave room for them to potentially offer a higher price than you would have initially set, increasing the chances of maximizing the value of your business.
• Negotiating Advantage: When the buyer makes the first offer, you have more leverage to negotiate and potentially secure more favorable terms and conditions.

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CONS OF WAITING FOR THE BUYER TO MAKE THE FIRST OFFER:

• Uncertainty: Waiting for the buyer's offer introduces an element of uncertainty, as you may not know their valuation expectations or whether they will make an offer at all.
• Time-Consuming: The process of waiting for the buyer's offer may prolong the negotiation period, potentially leading to delays and impacting your business's operations.
• Missed Expectations: If the buyer's offer falls significantly below your desired price, it may result in disappointment and wasted time if you ultimately choose not to proceed with the negotiation.

It is important to consider the specific dynamics of each negotiation and the unique characteristics of your business when deciding whether to provide a purchase price or wait for the buyer's offer. Assess your goals, market conditions, and seek expert advice to make an informed decision that aligns with your objectives.