How to Negotiate When Buying a Business in Australia
Negotiating the purchase of a business in Australia isn't a single conversation — it starts the moment you make first contact with a seller and doesn't end until the settlement funds hit the vendor's account. Most buyers think negotiation is about arguing over the asking price. It isn't. The asking price is just where the conversation begins.
A well-run negotiation covers price, structure, what's included, warranties, transition support, and a dozen other terms that together determine whether you've bought a good business or an expensive problem. Get it right and you save money, reduce risk, and set yourself up for a clean handover. Get it wrong and you're arguing with a seller six months after settlement about a customer debt they swore didn't exist.
This guide covers how to actually negotiate a business purchase in Australia — from preparation through to what happens after the letter of intent is signed.
What most buyers get wrong
The most common mistake I see is buyers treating negotiation as adversarial from the start. They read a price, decide it's too high, and open with a lowball offer that immediately puts the seller offside. The seller gets defensive, the broker calls to say "we have other interested parties" (sometimes true, often not), and the buyer either caves or loses the deal.
The second mistake is negotiating price before doing proper due diligence. If you don't know what the business is worth and why, you're guessing. Guessing is expensive.
The third mistake — and this one costs people real money — is stopping the negotiation at heads of agreement and assuming the Sale and Purchase Agreement (SPA) is just paperwork. It isn't. The SPA is where the deal is actually defined, and every clause in it is negotiable.
Do your numbers before you sit down
Before you make any offer, you need three things: a realistic view of what the business is worth, an understanding of the seller's situation, and a clear sense of your own walk-away point.
The valuation work comes first. For most small Australian businesses, you're looking at EBITDA multiples — typically 2x to 4x for trades and services businesses, depending on size, recurring revenue, and how owner-dependent the thing is. Check the how-to-value guide if you want the full framework. What matters for negotiation is that you can justify your number — not just feel like the asking price is too high.
The seller's situation matters more than most buyers realise. A seller who's been trying to exit for two years and has a business that runs on their name and mobile number is in a very different position to someone with a profitable business, a manager in place, and three competing offers. Find out why they're selling, how long the business has been listed, and whether there's a timeline (retirement, health, divorce, partnership breakdown). A broker told me recently about a deal where the seller had already bought a house interstate — settlement was in eight weeks and the business hadn't sold. That's a very motivated vendor.
Set your walk-away number before you start. Not a range. A number. If the deal can't be done at or below that number in total consideration (price plus assumed liabilities plus your due diligence costs), you walk. Having that commitment in your head before emotions get involved makes it much easier to hold the line when the seller or broker is applying pressure.
Understand what the seller actually wants
Price is rarely the only thing a seller cares about. Often it's not even the main thing.
Sellers who've built a business over 15 or 20 years frequently care a lot about what happens to their staff and their customers after they leave. They want confidence the buyer can actually operate the business — not just that a cheque will clear. I've seen deals fall over because the seller met the buyer and decided they were the wrong kind of person (which is a polite way of saying they didn't like them).
Other sellers are purely transactional — they want the highest number, cleanest settlement, shortest transition period. Usually these are the ones who burned out two years ago and are just waiting to be done.
Understanding which type of seller you're dealing with shapes your whole approach. With the values-driven seller, demonstrating that you know the industry, respect the staff, and have a credible plan for the business does more work than shaving $20,000 off the price. With the transactional seller, bring a clean offer and don't waste their time.
What you can actually negotiate
Most buyers focus on price. Smart buyers negotiate the whole deal. Here's what's actually on the table.
The purchase price. Yes, obviously. But rather than making a round-number lowball offer, come in with a justified number. "Based on adjusted EBITDA of $X and a multiple appropriate for this type of business, I'm offering $Y" is a completely different conversation to "we think $400K is too high, how about $320K." One opens a discussion; the other starts a fight.
What's included in the sale. This is where a lot of buyers get surprised. Does the price include stock on hand? Plant and equipment? The vehicles? What about customer lists, intellectual property, the website, the phone number? Never assume — get a complete schedule of assets included in the price, and if something isn't included, negotiate it in or adjust the price accordingly.
Outstanding liabilities and debtors. Who gets the aged debtors? Who's responsible for creditor balances at settlement? These can swing the effective price by tens of thousands of dollars on a small deal. A business with $80,000 in debtors and $60,000 in creditors at settlement is a very different transaction depending on who keeps what.
Warranties and indemnities. The seller will typically warrant that the financial statements are accurate, that there are no undisclosed liabilities, and that the business can continue to operate as represented. You want these warranties to be specific and to have a reasonable claim period — at minimum 12 months post-settlement, ideally 24. The seller will want them narrow and short. Negotiate this in the SPA, not after.
The restraint of trade. You're paying for a customer base. If the seller can open a competing business next month, you haven't bought what you think you've bought. A restraint of trade clause — typically 2-3 years, within a defined geographic area — is standard in Australian business sales. Make sure it's in the SPA and that it covers the seller's related parties (spouse, family trusts).
The lease. If the business operates from leased premises, the landlord's consent to assignment is usually required, and the terms you inherit matter enormously. Check the remaining term, the options, the rent review mechanism, and whether there are any make-good obligations at expiry. A business with a 6-month lease and no option is worth considerably less than one with 5 years remaining.
Transition support. How long will the seller stay on after settlement to help you understand the business? Four weeks is typical; eight weeks is better. Get this in writing, define what "help" actually means (are they available full time? Part time? By phone?), and agree on what happens if they're not available. Some sellers resist a long handover — which is itself a red flag worth noting.
Vendor finance and earn-outs. If the seller is confident in the business's future performance, ask them to back it with a vendor finance arrangement or an earn-out agreement. Vendor finance means they lend you part of the purchase price; earn-outs mean part of the price is contingent on the business hitting targets post-settlement. Both structures can bridge valuation gaps — and both put the seller's money where their projections are.
Working with brokers
Most small business sales in Australia go through a broker, and the broker is paid by the seller. That doesn't mean they're your enemy — good brokers want deals to close because that's how they get paid — but it does mean their primary obligation is to the vendor.
Work with the broker, not against them. They know the seller's motivations, timeline, and red lines better than you do. Treat them as a source of information and use them to communicate offers in a structured way. Don't trash the business to the broker as a negotiating tactic — it gets back to the seller every time and it makes you look like someone who's trying to nick a business rather than buy one properly.
That said, don't rely on the broker for legal or financial advice. Get your own accountant and lawyer involved before you sign anything. This is covered in depth in Module 7 of the Playbook.
After the LOI: the SPA is also a negotiation
First-time buyers often think the hard work is done when the letter of intent is signed. It isn't (and if you haven't drafted one yet, grab the free Letter of Intent template to start).
The LOI establishes heads of agreement — price, structure, exclusivity period, conditions precedent. The SPA fills in everything else, and "everything else" includes exactly how warranties are worded, how long they last, what indemnity caps apply, and what happens in a dispute. These aren't administrative details. They determine what remedies you have if something goes wrong after settlement.
Sellers often push back on buyer-friendly SPA terms with some version of "that's not market standard." It's worth having your lawyer verify what's actually standard — because sellers and their solicitors sometimes define "market standard" as whatever they want.
When to walk away
The best negotiating position you can have is genuine willingness to walk away from a deal that doesn't work. Not as a tactic. As a real commitment.
If the seller won't move on price to something you can justify, if the warranties offered are too narrow to give you meaningful protection, if the due diligence has turned up issues that weren't disclosed and the seller won't adjust the price or terms — these are situations where walking away is the right call.
I've walked away from deals that looked good on paper because the seller's behaviour during negotiation told me something about how disputes would go once they had my money. The way someone negotiates is often a preview of the way they'll behave when things get difficult.
FAQ
What is the 70/30 rule in negotiation? The 70/30 rule means spending 70% of your time listening and 30% talking. In practice: ask the seller why they're selling, what they're worried about, what a good outcome looks like for them — and listen carefully. You'll learn more about how to structure your offer from five minutes of listening than from two hours of talking.
What is the 80/20 rule in business acquisition negotiations? In negotiation, the 80/20 rule refers to doing 80% of the work in preparation — knowing your valuation, understanding the seller's position, researching comparable deals — so the actual negotiation conversation can be relatively brief and focused.
How much is a business worth with $1 million in sales in Australia? Revenue alone doesn't determine a business's value — profit does. A business with $1 million in sales but $80,000 in net profit might be worth $200,000 to $280,000. The same revenue with $300,000 in profit could be worth $900,000 to $1.2 million, depending on how reliable those earnings are.
What are the key terms to negotiate beyond price? The most important terms beyond price are: what assets are included, how long the seller stays on for transition, the restrain of trade clause, warranty coverage and duration, how outstanding debtors and creditors are handled, and the lease terms if the business is premises-based.
What's next
Negotiation is one part of a broader process. Before you negotiate, you need a clear view of what you're buying — which means doing proper due diligence, understanding the financials, and knowing what the business is worth. After the negotiation, you need to get the deal documented correctly and set yourself up for a successful first 90 days.
If you're working through this for the first time, subscribe to The Leveraged Worker newsletter where I share deal analysis, mistakes, and the specific things I'm doing in the businesses I'm buying. No polish, no hype — just what's actually happening.
And if you're at the offer stage, Module 7 of the Playbook covers the full negotiation and closing process, including what to watch for in a Sale and Purchase Agreement and how to manage the settlement period.