Be a Winning Seller: Good Negotiation is the Key
You’ve made the big decision to put your business on the market. Your reasons for selling are valid, carefully-considered, and “good” – the kind that won’t make a prospective buyer shy away. Now, you may tell yourself, comes the fun part. You’ll come up with a price – maybe a little high, but why not? – and let gut instinct (an attribute common to successful business owners) lead the way.
Wait just a minute. Or maybe a quarter of an hour; however long it takes you to bone up on your negotiation skills with the following steps as a guide. Being a smart negotiator is tantamount to effecting the successful sale of your business.
Gather Your Forces
The first step is to engage the help of a business broker professional. He or she understands the sales negotiation process as well as tactics for marketing the business. Before sitting down with your business broker, however, you should gather the following information: profit and loss statements (for three years), current federal income tax returns, a list of fixtures and equipment, copies of equipment leases (if any), the lease and any lease-related documents, a copy of your franchise agreement (if applicable), lists of loans (if applicable), with amounts and payment schedule, an approximate tally of inventory on hand, and the names of any outside advisors (attorney, accountant, etc.) you plan to consult.
Be Market-Smart
It’s vital to have a clear and realistic notion about the value of your business. Pricing your business intelligently is as important as impressive financial records. Your business broker will apply industry-tested valuation methods, including ratios based on the sales of similar businesses, as well as the historical data that most closely matches your type of business. He or she will also incorporate intangibles to insure that the business will not be underpriced. At the same time, your broker will make sure you understand how the price is dictated by the marketplace and that realistic pricing is an absolute must. Most buyers won’t wait for an outsized price to drop – they will just go somewhere else.
Know Your Buyer
Finding the right buyer may be more important than getting that extra-high asking price. Your business broker will determine the right buyer for the right business, focusing on those prospects who are financially qualified and are genuinely interested in your type of business. It’s important also to know something about the bargaining power of the buyer and to discover early on how he or she plans to finance the purchase of your business. Your business broker will do that and more: he or she will anticipate the buyer’s concerns and counsel you about being up-front about any problems that might make a buyer suspicious and therefore unnecessarily adversarial during the negotiation process. Steeped in knowledge about negotiating price, terms and other vital aspects of the sale, the broker will guide you each step of the way. During the early stages, while the buyer is still considering making an offer, the broker is the ideal person to follow up and keep the deal running smoothly. Working alone, you could lose bargaining effectiveness by doing the follow-up yourself. And, in general, having someone else negotiate on your behalf is the smartest way to go. The “middle man” can get your thoughts across, keeping you at a distance from the words themselves.
Be Flexible
In negotiating the sale of your business, you need to keep the ball rolling once an offer has been presented. Study it closely, and don’t automatically despair. Just because you didn’t get your asking price doesn’t mean that the offer has nothing to commend it. It may have other points to offset what you feel is a low figure, such as – if the deal is to be seller-financed – higher payments or interest, a consulting agreement, more cash than you anticipated, or the promise of a buyer relationship that will make life easier. In evaluating an offer, take the long view and look for the ways in which the offer just might accomplish your objectives. Above all, don’t think in terms of “punishing” the buyer because of a low offer. This is the worst reason for rejecting an offer – and certainly a self-defeating one for you.
Beef Up Bargaining Power
The best negotiating weapon is to have options available. For the seller, the mightiest one is lack of desperation. With any luck, you have not waited too long to sell and your business is sound. Carry this a step further: be sure, in preparing to sell, that you don’t let the business slip. It’s important that prospective buyers see your business at its best – bustling, and showing no signs of neglect. You should, for example, keep normal operating hours, repair signage and other first-impression areas of the business, repair or remove non-operating equipment, remove items not included in the sale, maintain inventory at constant levels. Make it obvious that you have not been forced to sell, and that – if necessary – you could refuse all offers and carry on the operation of your business. This may be the last thing you want to do, having made the hard decision to sell, but the buyer won’t know that.
Master the Art of Good Timing
Timing is crucial to the successful sale of a business. Any deal has a shelf-life, and it will go stale if it sits around too long. On the other hand, sometimes ideas need extra time to jell – and people sometimes need a little time-and-space to be more objective about their own positions. Your business broker will keep the process moving at the proper pace. He or she will also provide or offer advice about the specialized contracts and forms necessary for the completion of the sale.
In negotiating the sale process, you will benefit many times over from the guidance of a business broker professional. The business broker represents you, the seller, and works toward completing the transaction in a reasonable amount of time and at a price and terms acceptable to you. The broker will also present and assess offers and, at the appropriate juncture, he or she can help in structuring the sale and negotiating its successful close – helping to create a win-win situation for everyone involved.
Points to Ponder for Sellers
Who best understands my business?
When interviewing intermediaries to represent the sale of your firm, it is important that you discuss your decision process for selecting one. Without this discussion, an intermediary can’t respond to a prospective seller’s concerns.
Are there any potential buyers?
When dealing with intermediaries, it always helps to reveal any possible buyer, an individual or a company, that has shown an interest in the business for sale. Regardless of how far in the past the interest was expressed, all possible buyers should be contacted now that your company is available for acquisition. People who have inquired about your company are certainly top prospects.
Lack of communication?
It is critical that communication between the seller, or his or her designee, and the intermediary involved in the sale, be handled promptly. Calls should be taken by both sides. If either side is busy or out of the office, the call should be returned as quickly as possible.
Does the offering memorandum have cooperation from both sides?
This document must be as complete as possible, and some of the important sections require careful input from the seller. For example: an analysis of the competition; the company’s competitive advantages – and shortcomings; how the company can be grown and such issues as pending lawsuits and environmental, if any.
Where are the financials?
It may be easy for a seller to provide last year’s financials, but that’s just a beginning. Five years, plus current interim statements and at least one year’s projections are necessary. In addition, the current statement should be audited; although this usually presents a problem for smaller firms — better to do it now than later.
Are the attorneys deal-makers?
In most cases, transaction attorneys from reputable firms do an excellent job. However, occasionally, an attorney for one side or the other becomes a deal-breaker instead of a deal-maker. A sign of this is when an attorney attempts to take over the transaction at an early stage. Sellers, and buyers, have to take note of this and inform their attorney that they want the deal to work – or change to a counsel who is a “team player.”
Intermediaries are responsible for handling what is usually the biggest asset the owner has – and they are proud of what they do. Intermediaries realize that the sale of a business can create the financial security so important to a business owner. Even when a company is in trouble, the intermediary is committed to selling it, since by doing so, jobs will be saved – and the business salvaged.
Sell Your Business and Start Your Retirement
When the day comes to sell your business, it is important that prospective buyers understand why you have made this decision. Having a valid reason why it is time for you to sell can make your business more attractive to prospective buyers. After all, it is only natural that you will have to retire at some point even if the business is thriving. In fact, it is safe to state that buying a successful business from an owner that is retiring is just the kind of the situation that most buyers like
Owning a business and retirement, of course, is far different than retiring from a job. You likely have many friends ranging from vendors and employees to customers, clients and other business owners. It is vital that your departure does not disrupt the operation of your business and that prospective buyers understand that you have taken steps to ensure a smooth transition. In short, you want to create a situation in which everyone is happy once you have sold your business.
Helping to ensure a smooth transition has many parts. One of those parts is finding a buyer who will treat your people well. Another key aspect of a smooth transition is to automate as much of your work as possible before you leave. No one knows your business as well as you do, which means that you are the best source to automate and simplify the processes of your business. Outlining what steps you’ve taken to automate and simplify your business will help make it more attractive to buyers.
A key aspect of streamlining, simplifying and organizing your business is to pick out, well in advance, your second in command. Once you have decided on which person would be the best candidate, it is important that you begin grooming that person so they can take over day-to-day operations once you leave. Having a capable person who is committed to staying is a very attractive commodity for prospective buyers. A capable second in command can prove invaluable not just during the transition period but also for the long term operation of the business.
Finally, you should have set up a retirement account on which you can draw upon. Statistics indicate that roughly 50% of business owners do not have a retirement account set up in advance. If you don’t have an account set up, don’t panic, instead set one up as soon as possible.
Working with a business broker is one of the single best ways to handle the process of selling your business and getting ready for retirement.
A business broker can help you with everything from finding qualified prospective buyers to establishing the value of your business. The sooner you begin working with a business broker, the easier your transition will be.
Copyright: Business Brokerage Press, Inc.
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Legal Mistakes That Can Kill a Business Sale in Indiana
By Troy Frank, Owner — Indiana Equity Brokers
Estimated read time: 8 min
The short answer: The most costly legal mistakes sellers make when selling a business in Indiana fall into five categories: choosing the wrong sale structure (asset vs. stock), signing a poorly written letter of intent, agreeing to an overly broad non-compete, making representations they can’t support in due diligence, and hiring a general attorney instead of one with M&A transaction experience. Any one of these can blow up a deal after months of work or expose the seller to liability years after closing.
This article is educational and does not constitute legal advice. Consult a qualified transaction attorney for guidance specific to your situation
Most sellers spend years building a business and a few months selling it. The legal side of that sale gets compressed into a period when everyone is already exhausted and eager to get to the finish line. That’s exactly when mistakes happen.
I’ve watched deals collapse in due diligence, fall apart at the closing table, and even close successfully but leave sellers exposed to post-closing liability they didn’t see coming. Almost every time, the root cause was a legal issue that could have been caught earlier.
This article covers the legal mistakes that actually matter when selling a business in Indiana. Not the obvious stuff, but the things that blindside even experienced sellers.
Mistake #1: Not Understanding Asset Sale vs. Stock Sale
This is the most consequential legal decision in the entire transaction, and most sellers don’t know it exists until a buyer’s attorney brings it up.
Here’s the difference:
In an asset sale, the buyer purchases specific assets of the business (equipment, inventory, customer lists, goodwill, the name) without taking on the legal entity itself. The seller’s LLC or corporation remains intact; the buyer creates a new entity to hold what they acquired. The buyer gets liability protection from the seller’s past. The seller usually pays higher taxes because most asset gains are taxed as ordinary income.
In a stock sale, the buyer purchases the owner’s shares or membership interests. They step into the existing entity, including its history, contracts, and liabilities. Sellers generally prefer this structure because capital gains tax rates apply, which are significantly lower than ordinary income rates.
The tension: buyers almost always want an asset sale. Sellers almost always prefer a stock sale. The deal structure that results and the tax treatment that follows can swing the seller’s net proceeds by hundreds of thousands of dollars on a mid-sized transaction.
Most Main Street transactions in Indiana close as asset sales. That’s not necessarily bad for sellers, but you need to understand what you’re agreeing to and ensure the purchase price accounts for the tax differential. A seller who doesn’t understand this distinction signs an asset sale agreement thinking it’s a wash and discovers later they kept far less than expected.
Your transaction attorney and your CPA need to work this out together before you sign anything. Not after.
Mistake #2: A Letter of Intent That’s Too Loose or Too Tight
The Letter of Intent (LOI) is the document that follows an accepted offer. It outlines the key deal terms (price, structure, exclusivity period, timeline) and sets the framework for everything that comes after.
Sellers often treat the LOI as a handshake document. It’s not. While LOIs are typically non-binding on the final transaction, certain provisions within them are binding immediately: exclusivity clauses, confidentiality obligations, and sometimes breakup fees.
Where sellers get burned:
A vague LOI leaves too much room for renegotiation during due diligence. Buyers who discover any ambiguity in the original terms — and they will look — use it to reopen price discussions or change deal structure mid-stream. By that point, you’ve been off the market for 60–90 days and your leverage has evaporated.
An overly aggressive LOI, particularly one with a high termination fee, can scare off legitimate buyers or create legal complications if the seller later needs to walk away.
The right LOI is specific about what’s included and excluded from the sale, clear on the exclusivity period (typically 60–90 days), and structured so it protects the seller’s position without torpedoing the deal.
We cover the specific ways deals fall apart after both sides sign the LOI in our post on why business sales collapse after an agreement is reached. The LOI issues described there are exactly what a well-drafted letter of intent prevents.
Mistake #3: Signing a Non-Compete That’s Too Broad
Almost every business sale includes a non-compete agreement. The buyer is paying for goodwill: your relationships, your reputation, your customer base. They need assurance you won’t take that goodwill across the street and rebuild the same business.
That’s fair. The problem is scope.
Sellers sometimes agree to non-competes that are far more restrictive than the deal requires. Common overreaches:
Geography too wide. A non-compete for a local plumbing company in Indianapolis shouldn’t cover the entire state of Indiana, let alone the Midwest. Courts in Indiana will sometimes enforce geographic restrictions that are “reasonable,” but an overly broad agreement creates unnecessary constraints on what you can do next.
Duration too long. Two to five years is standard for most Main Street transactions. Longer than that (especially combined with a wide geography) starts to look punitive and can be challenged.
Industry definition too vague. If the non-compete says you can’t work in “any business similar to the one sold,” that language can be read to prevent you from doing nearly anything in your industry. Get specific: what exactly are you agreeing not to do, and for how long?
Sellers in a hurry to close often wave through non-compete terms without reviewing them carefully. Review them carefully. Once you sign, you’re bound by what the document says, not what you thought it meant.
Mistake #4: Making Representations You Can’t Support
The purchase agreement you sign at closing contains representations and warranties — statements you are making to the buyer about the business. Things like: the financial statements are accurate, there is no pending litigation, all taxes have been paid, all material contracts are in good standing.
If any of those representations turn out to be false, the buyer can come back after closing and sue for damages. In many deals, a portion of the purchase price is held in escrow specifically to cover post-closing claims against the seller’s representations.
The mistakes sellers make here:
Signing representations about things they haven’t verified. Sellers assume their accountant handled the taxes, assume the old lease is assignable, assume there’s no pending litigation. Those assumptions become legal statements when you sign the agreement.
Agreeing to a broad indemnification clause that gives the buyer an easy path to recoup money post-closing. Indemnification caps and survival periods — how long after closing the buyer can bring claims — need to be negotiated, not accepted as boilerplate.
The fix is simple in concept and requires discipline in practice: know what you’re signing before you sign it. That means reviewing every representation in the purchase agreement line by line with your attorney, confirming each one is accurate, and pushing back on any that aren’t.
Mistake #5: Hiring the Wrong Attorney
This is where sellers save $5,000 and lose $50,000.
Business sale transactions are not routine legal work. The attorney who handled your LLC formation, your real estate closing, or your last employee dispute may be excellent at what they do. That doesn’t make them qualified to represent you in an M&A transaction.
Transaction attorneys who regularly work on business sales know the market standards for indemnification caps, non-compete scope, escrow terms, and rep and warranty insurance. A general attorney reviewing their first purchase agreement doesn’t know what’s customary and what’s aggressive — which means they either accept everything or fight everything, and neither outcome serves you.
Ask your attorney specifically: how many business sales have you represented sellers on in the last two years? What’s the typical deal size? Do you work with business brokers regularly?
Indiana has a solid network of transaction attorneys. Indiana Equity Brokers can point you toward attorneys who work at the Main Street to lower-middle-market level — which means they’re priced appropriately and experienced with the types of deals our sellers close.
Confidentiality is also a legal issue that deserves professional attention. Every buyer who receives information about your business should sign a proper NDA before seeing anything meaningful. If you want to understand how seriously we take confidentiality throughout the sale process, our confidentiality approach page walks through it.
Frequently Asked Questions
What legal documents are needed to sell a business in Indiana? The core legal documents in a business sale are the Non-Disclosure Agreement (NDA), the Letter of Intent (LOI), the Purchase Agreement (which defines what’s being sold, the price, and the terms), a Bill of Sale for transferred assets, and any assignment agreements for leases, contracts, or intellectual property. For asset sales, you’ll also need transfer documents for each major asset category. Your transaction attorney will draft or review all of these.
What is the difference between an asset sale and a stock sale? In an asset sale, the buyer purchases specific assets of the business — equipment, customer lists, goodwill, inventory — and the existing legal entity stays with the seller. In a stock sale, the buyer purchases the owner’s shares and takes over the entire legal entity, including its history and liabilities. Buyers generally prefer asset sales for liability protection. Sellers generally prefer stock sales for more favorable capital gains tax treatment. Most small business sales are structured as asset sales.
How long should a non-compete agreement last when selling a business? A non-compete of 2 to 5 years is standard for most small business sales. The scope — what industry, what geography — should match the actual business being sold. An overly broad non-compete can restrict your career options unnecessarily, and Indiana courts may decline to enforce provisions that go beyond what’s reasonable to protect the buyer’s legitimate interests. Always negotiate non-compete terms before signing.
What are representations and warranties in a business sale? Representations and warranties are statements in the purchase agreement that the seller certifies as true — things like the accuracy of financial statements, the absence of undisclosed litigation, and the proper payment of taxes. If a representation turns out to be false, the buyer can pursue a post-closing claim against the seller. Sellers should verify every representation before signing and negotiate caps on indemnification exposure and limits on how long the buyer has to bring claims.
Do I need a special attorney to sell my business, or can I use my regular lawyer? You need an attorney with specific M&A transaction experience. General business attorneys — even excellent ones — often lack familiarity with market-standard terms for purchase agreement provisions, indemnification structures, and rep and warranty negotiations. The cost of hiring a transaction-experienced attorney is far less than the cost of signing a poorly structured purchase agreement.
Get the Legal Side Right Before You Go to Market
Legal issues in a business sale rarely surprise you at the start of the process. They surface during due diligence, during purchase agreement negotiations, and sometimes years after closing when a post-closing claim lands on your doorstep.
The best time to address them is before you list. That means understanding your sale structure options, having the right team in place, and going into negotiations knowing what you’ll and won’t agree to.
Indiana Equity Brokers has closed more than 884 transactions in Indiana. We coordinate with transaction attorneys and CPAs throughout the process and can help you identify issues before they become deal-killers. If you’re thinking about selling and want to understand what the process actually looks like — legally and otherwise — start with a confidential conversation about your situation.
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5 Things to Consider When Transferring Your Business to Family Members
Letting go of a business isn’t a process that one should jump into lightly, and that fact holds true even when it comes to your loved ones. Let’s take a look at five of the most important factors to consider when selling or transferring a business to a family member.
#1 The All-Important Buy-Sell Agreement
One of the single most valuable tools available when it comes to selling your business is a buy-sell agreement. Simply stated, this essential document puts everything in writing. In situations such as a family owned business, people may be tempted to skip a contract, but that doesn’t mean they should.
When transferring your business, you should have an expert created document in place that outlines the following:
- The business valuation
- Who is to be kept on the payroll and the amount he or she will receive
- The amount being paid
- What level of involvement you will have in the business once the transfer has taken place
#2 The Benefits of Gifting
Consider the option of gifting. Gifting can actually work to reduce your taxes on real estate, while at the same time it can allow you to maintain some level of control over the business.
#3 Seller Financing and Transferring the Family Business
Selling your business to a family member is, of course, another option. On occasion, sellers will consider a private annuity, which allows for payments to be spread out for a considerable time period, such as to the end of your life.
#4 The Self-Canceling Installment Note
Another option is to use an installment sale. If you are a selling parent and you happen to pass away before the payments have all been made for the sale, then the remaining debt may be attached to your will. This arrangement can keep your other children from paying excess income tax on your estate.
#5 Keep the IRS Happy
The fact of the matter is that the IRS does, in fact, look more closely into sales where the business is being sold to a family member. This reason alone is a good enough reason to professionally establish a real and accurate valuation of your business.
A business broker can help you work out the particulars as to how best to proceed when navigating the process of selling or transferring your business to a relative. With the right planning and preparation, selling or transferring your business to a relative doesn’t have to be an overly difficult or cumbersome process. Work with a business broker and you’ll find that the process can be smoother than you may have expected.
Copyright: Business Brokerage Press, Inc.
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