How to Negotiate the Purchase Price of a Business in NZ

How to Negotiate the Purchase Price of a Business in NZ

Buying a business is one of the most significant financial decisions you will ever make. Once you have found the right opportunity, the negotiation phase is where deals are won or lost — and where buyers can save tens of thousands of dollars or secure far better terms. Yet many first-time buyers in New Zealand approach this stage unprepared, either accepting the asking price without question or making unrealistic offers that kill the deal before it starts.

This guide walks you through a proven negotiation strategy for buying a business in New Zealand, so you can negotiate with confidence and reach an agreement that works for everyone.

Understand What Is Actually Being Negotiated

Price is only one element of a business sale negotiation. Equally important are:

Savvy buyers treat all of these as negotiable levers. Pushing solely on price can sour a deal; adjusting a combination of terms can create significant value without the seller feeling squeezed.

Build Your Position Through Due Diligence

Your negotiating strength is built on information. Before making any offer, complete thorough due diligence — review the financials, lease, supplier contracts, customer agreements, and day-to-day operations in detail. Look specifically for:

Every weakness you uncover is a legitimate, evidence-based reason to adjust the price or terms. Document your findings carefully. A good accountant and business advisor will pay for themselves many times over at this stage.

Understand How the Business Was Valued

To negotiate effectively, you need to understand how the seller — or their broker — arrived at the asking price. The most common valuation methods used for New Zealand SMEs are:

Earnings Multiple (SDE or EBITDA): The most widely used method for small-to-medium businesses. The seller's discretionary earnings are multiplied by an industry benchmark, typically between 2x and 4x for small NZ businesses. Higher multiples are justified by strong recurring revenue, long-established customer bases, or low owner dependency.

Asset-Based Valuation: Common for asset-heavy businesses such as manufacturing, transport, or plant hire. The value is based on the replacement cost or market value of the tangible assets.

Revenue Multiple: Sometimes applied to SaaS, subscription, or other recurring-revenue businesses where profitability is secondary to growth.

Comparable Sales: What have similar businesses in the same region and industry sold for recently? Business brokers often have access to transaction databases. Your own research using listed businesses can also provide directional benchmarks.

If the asking price is based on a 3x earnings multiple but comparable businesses in the sector typically sell for 2.5x, that is a data-backed reason to counter with a lower offer.

Making Your First Offer

In New Zealand, it is common and accepted practice to make an initial offer below the asking price — but not so far below that you offend the seller and close off negotiations. A typical starting point is 10–15% below asking, accompanied by a clear written justification referencing your due diligence findings.

For example: "Based on the revenue decline recorded in the 2024 financial year and the upcoming lease renewal in twelve months which introduces pricing uncertainty, we believe a purchase price of $X more accurately reflects the current risk profile of the business."

This approach is professional, specific, and difficult to simply dismiss. Avoid emotional language — never say "it is just not worth that much." Instead, use financial data and facts. Sellers respond to evidence, not to opinions.

Negotiate the Whole Deal, Not Just the Price

If a seller will not move on the headline price, there is still considerable room to negotiate value through other deal terms:

Vendor finance: Ask the seller to lend you a portion of the purchase price, repaid over time from business profits. This reduces your upfront capital requirement and aligns the seller's interest in a successful handover.

Longer training period: A seller who remains involved for three to six months rather than four weeks significantly reduces your transition risk — especially if you are new to the industry.

Reduced deposit or delayed settlement: Preserving your working capital in the early months can be as valuable as a lower price.

Earnout structure: Agree on a base price paid at settlement, with additional payments triggered if the business meets agreed revenue or profit targets in the 12–24 months following the sale. Earnouts bridge the gap when a seller genuinely believes the business is worth more than its current numbers show and a buyer needs proof before committing.

Always Use a Lawyer and Accountant

In New Zealand, every business sale is documented in a legally binding Sale and Purchase Agreement. You should never sign one without your own lawyer reviewing it first. Your lawyer will:

Your accountant should independently verify the financial statements and advise you on the tax implications of the deal — including how the purchase price is allocated between goodwill, equipment, stock, and other assets, which has significant implications for your future depreciation and tax deductions.

Keep the Relationship Front and Centre

Business negotiations in New Zealand tend to be direct, but they are also relationship-oriented. Sellers are frequently emotionally attached to businesses they have spent years building. Aggressive, disrespectful, or overly transactional tactics tend to backfire — sellers may simply disengage or favour a less aggressive buyer offering a similar price.

The goal is not to "win" the negotiation. The goal is to reach an agreement both parties consider fair. A seller who feels respected and well-treated is far more likely to support the transition enthusiastically, honour all commitments in the sale agreement, and recommend you to their long-standing customers and suppliers after handover.

Practical Tips for NZ Business Buyers

Negotiating a business purchase in New Zealand is a skill that improves with preparation, patience, and the right professional support. Do your homework, know your numbers, and approach every conversation with calm professionalism — you will be in the best possible position to secure a great deal on terms that set your new business up for long-term success.