Buying a business | 3 min read

How to negotiate the best deal when buying a business

Last updated: December 20, 2019

Whether you’re comfortable with it or not, negotiating is part of buying a small business. The conversations can be tough, but understanding the fundamentals will make it that much easier to get the price you want.
Here are seven tips to negotiate your way to the best deal.

1. Knowledge is power

Before any kind of negotiation, you need know the business inside and out. Some sales will include stock, lease agreements, or employee contracts, while others may just be selling the business idea or intellectual property. Be clear on exactly what you’re purchasing and do as much research as you can before agreeing to anything. If you’re negotiating a price, make sure you understand the price out in the market, as well as what the seller wants to get out of the deal.

2. Location, location, location

Choosing the right place to negotiate is important. A great location removes the chance of a power imbalance and ensures everyone is as comfortable as possible. You might want to consider things like noise and other distractions, so loud or busy cafes probably aren’t ideal. Try to find some neutral ground where you can have an open discussion without risk of interference or disruption.

3. Body language

Understanding your body language can give you a great advantage during negotiations. By being open, honest and confident, you’re showing the seller that you’re not hiding anything. This can come down to things like punctuality, maintaining friendly eye contact, nodding your head, smiling and being self-aware of other facial expressions.

4. Aim high

Like poker, you don’t want to lay all your cards on the table too soon. Make sure your first offer isn’t your final one. This gives you more wiggle room to negotiate back to the outcome you want. You also don’t want to give something away without getting something in return, so try discussing pricing, delivery and other terms in a way that favours you. You don’t have to be cutthroat to walk away with a great deal.

5. Patience is a virtue

Negotiations are a process and may take some time. Rushing a sale probably won’t result in you getting the best offer, and neither will walking away from a deal prematurely. If things seem to be moving slowly, make sure you’re talking directly with the seller, rather than having solo conversations with their accountant or business broker. If the conversations are moving faster than you’d like, have a chat with the owner about slowing things down so you’re both comfortable.

6. Be confident and honest

Anything is possible, so don’t be afraid to ask for what you want. You may not know what the seller can provide, but the answer is always no if you don’t ask. However, the earlier you make additional requests, the better. You don’t want to throw in extra demands when nearing a final agreement. Also, keep in mind that you may need help from the current owner when you take over the business, so keep interactions respectful and civilised.

7. Know when to walk away and when to hold your ground

Be prepared for the fact that you may need to walk away from a deal if you are unable to come to a reasonable outcome. If you’ve done your research but you’re not sure if the seller is being honest with you, consider walking away. If you know the other party is bluffing, it might be time to hold tight. Every negotiation will be different, so keep your wits about you and make an informed decision based on what you know.

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At the end of the day, it’s important to remember that successful negotiations are based on compromise. Going into a conversation backed by extensive research, but with an open mind is going to help you get the best outcome.

Wondering what else you should consider when purchasing a business? Check out our ultimate guide on how to buy a business.