How do you negotiate the best deal?

How to buy a business

You’ve found the business of your dreams – so what’s next? Although you may feel as if you’re on the home straight, this is where your mettle is well and truly tested and it can be a fraught process for the uninitiated.

Make sure the business fits your budget

However wonderful an opportunity the prospective business is, it needs to fall within your budget. Your budget will depend on things you’ve already assessed (your cash position, your lender’s offer a contingency fund) as well as those issues specific to the business you want to buy – its profitability, risk factors and inventory, for instance.

While you certainly want to acquire a business with the potential to make a good return, if you overstretch yourself at the outset, you may not have the reserves to sustain the business long enough to reap the rewards of your investment further down the line. Look at it as pragmatically as you can, after all, unless you’re Donald Trump, there’s likely to be no shortage of businesses you can’t afford.

Negotiate the best price you can

A seller’s asking price is his or her opening gambit; unless the market is particularly fast-moving, you should always assume that an asking price is negotiable.

Do your research. Find out what other similar businesses have sold for and why the seller is marketing their business for sale, look closely at the business’s accounts and order book, and take professional advice before putting in an offer. Be prepared to support your offer with reasons why your figure might differ from the seller’s valuation.

Keep negotiations cordial

It’s best to stay as objective as you can throughout the process. If you really think the business is the one for you, you’ll need to be prepared to haggle over the price and terms of the agreements, but you should still aim to keep your relationship with the seller as cordial as you can.

This is especially important if you’re likely to be relying on them to maintain goodwill and provide a trouble-free transition. You may even want to tap into their expertise along the way, so stay professional and avoid being overly critical.

What’s included in the deal?

You need to understand exactly what the seller is offering. Buying a business can be as simple as acquiring the rights to a brand name or it can include stock, bricks and mortar, equipment, website and forward orders.

Everything impacts the purchase price and it may be possible to strip back the proposition to a more basic package – making an offer for the business without the property, for example. If you’re buying equipment, you’ll want to check its age and condition – there’s no point in acquiring an inventory that needs replacing.

Get comfortable!

Be prepared to enter a process of negotiation that may last several weeks, choose a solicitor with experience of business transfers and check every detail before you commit to a purchase.

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