Lawpath Blog
Five Tips for Negotiating the Purchase of a Business

Five Tips for Negotiating the Purchase of a Business

Negotiating the purchase of a business can be challenging. Here are five tips to help you negotiate the purchase of a business like a pro.

17th June 2019

Negotiating the purchase of a business can be quite a challenging endeavour.  Closing a business sale is distinct from a regular negotiation, with possibly much more at stake. While you are seeking to purchase the company for a low price, a seller will be looking to get the maximum achievable return for their hard work. Unavoidably, given such contrasting goals, there can be tension involved. Despite having your fair share of practice in negotiation, you may still discover that you are unprepared for such an important and elaborate transaction. Here are five tips that you can utilise in best negotiating the purchase of a business and closing your next big deal.

Prepare Well Ahead of Time

To negotiate the purchase of a business successfully, you need to be well prepared right from the start. Below is a list of things you could do to ensure that you are prepared before entering into negotiation:

Do Your Research

Conducting research beforehand will help you understand the seller’s point of view. Prior to the negotiation, conduct investigation on matters relating to the seller’s assets and their associated value, due diligence items, relevant market activity, current sales climate in the industry and liabilities.

Anticipate the Seller’s Questions

Anticipating certain questions cropping up from the counter-party, will help you negotiate with transparency without giving up too much.

Establish Your Goals

Make sure you firmly establish your maximum limit on a range of things including the sale price, the deposit amount, the settlement period and the arrangements for existing staff.

Learn more about documents that require when you decide to negotiating the purchase of a business.

Listen Carefully and Learn

Negotiating the purchase of a business successfully will depend on the ongoing exchange of information. The key throughout the whole process of negotiation is to ask questions and, more importantly, listen carefully. Thus, by really listening, focus on identifying the seller’s business and personal goals. This will facilitate the creation of a courteous and constructive interaction that is a win-win for both parties.

Negotiate Confidently

When negotiating the purchase of a business, confidence is a great attribute that can help you achieve a win-win outcome.

In order to negotiate confidently, make eye contact as you converse. This will help you establish a level of trust, respect and dignity that is required to negotiate successfully.

Also, if you have done your due diligence, you would be aware of any existing problems. Acknowledge the issue and confidently ask for explanations. However, do maintain a positive approach towards the current operation of the business and avoid antagonising the seller with what they may see as criticism.

Lastly, negotiating confidently also requires you to be ready to walk away. Firstly, establish your maximum limits. Then, make it clear to the seller that you’re always willing to walk away from the negotiation without buying.

Don’t Be Afraid To Seek Concessions

Make sure that when you give something of value, you receive something of value in return.

Don’t offer up everything immediately. While negotiation involves give and take, you don’t want to give up too much before the other side has a chance to respond. You’ll have nothing left to negotiate with later on.

Moreover, you could even ask the seller if they are willing to promote the handover strategies or after sale training. You could utilise these to make sure that the business runs successfully even after the sale. Furthermore, a business sale lawyer could also help you draft a restraint of sale covenant to avoid any competition from the seller after the purchase of the business.

Get Professional Assistance

If you can afford to, consider getting a professional advice before purchasing a business. An accountant can help you estimate a business’ worth. Moreover, a lawyer, could help you set the terms for negotiation and also assist you with drafting important documents such as a business sale agreement. At Lawpath, we can help you find a business sale lawyer that best suits your needs.

Don’t know where to start? Contact us on 1800 529 728 to learn more about customising legal documents and obtaining a fixed-fee quote from Australia’s largest legal marketplace.

Author
Anupa Dhital

Anupa is a Legal Intern at Lawpath, and is currently in her final year of studying Bachelor of Laws at Macquarie University.