How to Negotiate a Business Sale

Considerations to Discuss With Your Purchaser

Business people shaking hands in conference room
Photo: Martin Barraud / Getty Images

You have found the perfect buyer for your business. The buyer is willing, will take good care of your business, and has the cash or loan money to make the deal happen. Now it's time to negotiate terms. To help you sort out the general flow of the process, here are some possible questions that you and the buyer will need to deal with.

Key Takeaways

  • Business owners have some negotiating points to consider when they are selling their company.
  • Make sure you gather as much information you can on the buyer and consult with business advisors.
  • Make sure you have a good estimate for the different facets of the negotiation prices.
  • Consider other covenants, contingencies and transition items during the negotiations.

Begin by Gathering Information

The party with the most complete and accurate information has an advantage in a business negotiation.

You may think because you're the seller, that you have all the information about your business, but make sure you know everything that the buyer could bring up as an issue. For example, what liabilities and lawsuits could derail the deal?


Most business sales are complicated transactions, and they require the help of several advisors for both parties. Get a good CPA to look over the financials and the tax implications of the sale, and, most of all, you will need an experienced attorney to make sure the terms of the deal are what you want.

Don't Forget Negotiation Strategies

Selling a business is usually a once-in-a-lifetime event. Even if you think you are a shrewd negotiator, take some time to review negotiation strategies, like knowing your "bottom line" ahead of time and having an ideal sales price.

Negotiate Selling Price

This sounds like it should be a simple number to arrive at, but the selling price is the most difficult part of the negotiation. As you discuss the selling price with a potential buyer, keep in mind that the selling price may be separated into several sections.

The first is the price of business assets. What's the value of these assets? Is the value based on fair market value or an appraisal? Or are the assets of so little value that they are at liquidation (sell-off at a loss) value level? 

You'll need to know the purchase price for buildings and land owned by the business. The land and building should also be appraised, and comparable values.

The more outside valuation information you can get on the assets, the easier it is to make your case for the value of the business.

The "Basket" of Business Price

As you can see, the selling price is not just one number. It's a "basket" of different possibilities, depending on how the buyer and seller can come to terms. 

You'll also need to know the purchase shares of stock owned by the owner and other shareholders.

You need to account for compensation for a non-compete agreement. In many cases, the buyer will ask the seller for an agreement not to compete against the new business (see below). To be fair, the seller should be compensated for giving up potential income for a period of time.

But we're not done yet.

Decide on Contingencies

Contingencies are those conditions that must occur before the sale is complete. Contingencies might include:

  • Favorable review (a financial audit) of your business financial records
  • Receipt of escrow or earnest money deposit by the buyer
  • Qualification of the buyer by a lender
  • Acceptable transfer of building or office lease
  • Acceptable bank financing for the buyer

Consider Covenants and Promises

Covenants are promises made by the parties to each other. The seller may receive special compensation as part of the "basket" described above in return for one or more of these agreements:

  • A covenant not to compete with the new owner. not to set up shop near the new owner and steal current customers.
  • An agreement not to solicit employees or customers away from the current business.


These promises made during the sale of a business are sometimes called restrictive covenants.

In addition, the current owner may be required to make a "business as usual" promise, especially during the sales process. The current owner promises to keep running the business "as usual," not making any new or unusual agreements, taking on new products or services, maintaining the same business hours and inventory levels, and continuing to provide the same level of customer service.

Review Other Agreements and Promises

Warranties are promises made by the parties to each other. In a business sale, these warranties might include:

  • An audit of the financial records of the business that shows the records are true and complete
  • The inventory of goods and products is correct
  • The seller has full authority to sell assets and is not in default on any contracts
  • All leases are in good order, all taxes have been paid, all liabilities are current, and there are no liens against any assets that have not been disclosed.
  • All permits, licenses, and certifications are current and valid

Discuss Transition Issues

Other discussions between buyer and seller may include transition issues, such as:

  • In-progress inventory or customer work.
  • Dealing with 'hidden' liabilities that might show up after the sale has closed.
  • Contact with customers - how and when that will be handled, and by whom.
  • Current employees - will they stay or go?
  • Contracts with credit card vendors, other vendors, and how/when to notify these people.


Finally, take a look at these tips for avoiding the five biggest mistakes business sellers make.

Was this page helpful?
The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
  1. Cornell Legal Information Institute. "Covenant Not To Compete."

  2. Mintz. "Pre-Closing Covenants: Operating in the Ordinary Course of Business."

Related Articles