My friend Ted Sarvata, a business consultant with Gazelles, Inc. shared an interesting article with me recently about the strategies used by savvy buyers to drive down the price on a business sale.

One tactic to watch for is an initial offer for way more money than the owner dreamed of, often based on a formula tied to company earnings, especially when it includes an exclusivity clause to prevent negotiations with other prospects. Most owners are delighted to get such a generous offer, and happily sign the exclusivity agreement. Then the fun begins.

Despite promises of a speedy sale, the due diligence phase drags on longer than expected. Meanwhile, the owner postpones key expenditures which will affect earnings and thus drag down the sale price. Then the buyer begins demanding “emergency” meetings, often at inconvenient times, disrupting the owner’s routine and increasing stress levels.

With the owner mentally checked out of the business and worn out from due diligence – and the business suffering from a cutback in critical expenditures to pump up earnings – the business unsurprisingly suffers a temporary slump. The buyer wants the company’s performance to suffer a little so they can use it to drive down the price. Beat up by the entire process, the owner will be more likely to give in to all kinds of last minute concessions affecting the final price of the business.

How do you avoid this unpleasant outcome? Start by enlisting a good business broker. If a serious prospect wants an exclusivity agreement, limit it to 30 days and require a big deposit that will be forfeited if the deal doesn’t close. And do your best to insulate yourself from the transaction. Have a trusted executive work with your broker as a go-between with the buyer, and push back against last-minute demands for meetings.