Negotiating a Purchase Price

When you have found a gas station or convenience store that you would like to purchase, the next steps can be quite treacherous. The easy part is behind you – the real work begins!

Do your due diligence and research all the numbers; calculate an accurate value of the business at hand.

Once you have found what you believe to be an accurate valuation of the business and filed a letter of intent with the seller, arrange for a formal commercial appraisal to be conducted.

When you get the results of the appraisal, set a date to meet with the seller to discuss the sales price. Your goal as the buyer is to ask for a price that is below the asking price and also preferably below the appraisal price.

Here is some advice in regards to negotiating a price when purchasing a new gas station or convenience store:

1. Try to lower the asking price.
2. Know the official appraisal value.
3. Compare that appraisal to your valuation estimate and the asking price. This will help you gauge the threshold of what you feel the business is worth paying for.
4. Find 3-5 negative things about the business that will cut into your initial investment. For example, if the roof needs repair or the bathrooms need to be remodeled.
5. Deduct that amount of those initial repairs you will have to make from the appraised value if it is lower than the asking price. Be able to provide reasoning for the lower offer.
6. Be willing to provide a gesture of goodwill, such as coming up a little from your initial offer. Allow the seller to make some money, too. If you have a reputation of being the only one who makes money in a deal, then you won’t be entering into many deals!
7. Negotiate as if you don’t need this deal. Don’t be too eager to sign the dotted line!
8. Have an idea of what you’re willing to accept. Decide on a range of prices that you might be willing to adapt to. Know your budget and your limits. Remember, a bank will most likely only agree to finance up to about 80% of the appraisal value of the business.
9. Stay away from high-pressure tactics, ultimatums, and finite demands. It’s good to know your boundaries and to counter their arguments against your asking price; it’s also not good practice to create animosity.
10. Get the deal in writing. At the end of the negotiations, make sure you walk away with a signed purchase agreement that specifically states that the deal will be finalized only when the buyer receives amicable financing.

Once you get through this stage, it’s up to the bank to consider if you qualify for the financing you need to advance your dream of owning a gas station. If you have crossed your T’s and dotted your I’s, then I’m sure you will be on the road to success.