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negotiating terms to buy a business

Negotiating Terms to Buy a Business

Negotiating the terms of a business sale isn’t like a poker game where the winner takes all. Few deals get over the line without compromise or mutual trust.

Once you’ve decided on a business you want to buy and the seller has deemed you a credible buyer, it’s time to come to the table ready to negotiate terms.

There is an art to negotiating and getting it just right so that both parties leave happy with the result.

There are plenty of things to consider throughout the process.

Should I appoint a business broker?

Not every person appoints a business broker – an intermediary who can help you navigate every stage of the buying process – but it’s worth the outlay. They can help you prepare for, and conduct, negotiations.

The vendor is likely to have a professional adviser present too – possibly even conducting negotiations on their behalf.

Experienced and free of emotional attachment to the business or anxiety over making the biggest investment of their life, brokers can dampen down emotions and tension to keep negotiations amicable.

What does the seller want?

It is crucial to take a moment to step into the seller’s shoes and think about what their ideal outcome would be.

They may make this easy for you and be upfront early on about what they want. However, others may hold their cards closer to their chest.

Knowing what they want from the negotiation will help you meet them halfway and think, beforehand, of various ways to structure the deal that appeal to both parties.

Above all, the seller wants to be able to trust you. Show the seller that you are trustworthy and sincere in your interest in a business they have worked so hard to build.

Never make the seller feel like you are trying to cheat them out of a fair deal; be upfront and honest about what you want and the chances of them returning the favour will rise.

What do you want?

It is vital to decide on your ideal outcome at the outset and come to the negotiation table over-prepared to discuss every possible option.

Ultimately, you want to be happy with the end result, just like the seller. As you go into the negotiation process, therefore, be ready to compromise as well as being firm in getting at least some of what you want.

How should you act in a negotiation?

It can be difficult to know how to act throughout a negotiation; you don’t want to back down too easily, but neither should you appear stubbornly resistant to compromise.

Being aggressive is not recommended. A confrontational approach rarely helps to build trust and many sellers don’t want to surrender their business, to which they’ll probably retain an emotional attachment, to someone they dislike.

On the other hand, being passive will hand all power to the seller, leaving you wide open to being ripped off and ultimately unhappy with the final decision.

As with so many things, the best approach is to be assertive without being aggressive, friendly without being weak. Being assertive will make your position clear – and with both parties understanding each other’s goals, you can more quickly reach a compromise that is fair to both.

What if the seller is being unreasonable?

If you’re not prepared to walk away from the deal then the seller has all leverage. Give the seller the sense that you’re unwilling to back out and they’ll know that they hold all the cards too.

And if they know that they needn’t compromise to make the sale happen, they’ll be more likely to insist on terms that suit them more than they suit you.

So no matter how long and tortuous the negotiations, and however much you want the business, be prepared to walk away – and make sure the seller knows this.

Remember, there’s no need to rush things – you’re nearly there. What are a few more days or weeks of negotiations versus months of regret and a less healthy bank account if you hastily accept a poor deal?

A successful negotiation is all about going back and forth until both parties are happy.

Top negotiation tips in brief

  • Come prepared
  • Take time to walk in the seller’s shoes – find out what they want from the deal
  • Decide what you want from the deal – and be clear and upfront about your goals
  • Mutual trust is everything
  • Be assertive but not confrontational, friendly and flexible but not too accommodating
  • Be prepared to walk away if the seller won’t compromise


Faye Ferris

About the author

Faye Ferris is the APAC Sales & Marketing Director for BusinessesForSale.com, the world’s most popular website for buying and selling businesses attracting over 1.3 Million visitors each month. If you are interested contact faye@businessesforsale.com

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