Editorial staff
A deal to buy a business might look straightforward at first, but the fine print in a contract can shift the entire outcome. Overlooking certain clauses could leave you with unexpected costs, restrictions, or obligations that last well beyond settlement. By understanding the key areas that often cause trouble, you can approach negotiations with a clearer head and stronger position.
Non-compete clauses that limit growth
Many business sale agreements include non-compete terms that restrict the seller from starting a similar business nearby. While these are intended to protect your investment, they can sometimes be too broad. If the clause covers an unrealistic geographic area or time frame, it could also block potential collaborations or acquisitions you might consider in the future. Always ensure the scope is reasonable and specific.
Lease terms that don’t match your plans
When a business operates from leased premises, you often inherit the lease. Problems arise when the lease has:
- Short remaining tenure without renewal options
- Rent increases scheduled sooner than expected
- Limitations on subleasing or altering the property
- Maintenance obligations that shift more responsibility onto you
Review every term carefully with the landlord and seek amendments before finalising the purchase.
Supplier agreements that restrict flexibility
Some contracts require you to maintain existing supplier relationships, sometimes at fixed prices or minimum order quantities. This can be a hidden cost if those suppliers aren’t competitive. To protect your flexibility:
- Request copies of all current supplier agreements before settlement.
- Identify any clauses that lock you into long-term commitments.
- Negotiate break clauses or review periods where possible.
Staff contracts and entitlements
When taking over an existing team, you also inherit their contracts, entitlements, and workplace obligations. This can include accrued leave balances, redundancy provisions, or bonus structures. Beyond the legal requirements, it is worth assessing whether the existing contracts suit your future operating model. Clear communication with staff and fair treatment during transition can prevent disputes later.
Payment structures that add risk
Not all business purchases are paid in full at settlement. Common alternatives include vendor finance, staged payments, or earn-outs based on future performance. While these can help manage cash flow, they also tie your success to assumptions about how the business will perform under your ownership. Make sure performance targets are realistic and that you have the data to verify past results.
Warranties and indemnities to protect you
A well-drafted contract should include warranties from the seller, such as confirming they have disclosed all liabilities, complied with relevant laws, and own all the assets being sold. Indemnities go further, providing a mechanism for you to recover costs if specific problems arise after settlement. These protections are particularly important if you are buying from an individual rather than a large company.
Why early legal review matters
Engaging a commercial lawyer at the negotiation stage, rather than just before signing, gives you more leverage to adjust terms. They can help spot clauses that could limit your ability to adapt the business, grow into new markets, or sell it later. Skipping this step can lead to costly surprises once you are already committed.
Using your findings in negotiations
Once you understand which clauses pose risks, you can:
- Request amendments to narrow their scope
- Negotiate a lower purchase price to offset potential costs
- Seek alternative arrangements, such as trial periods with key suppliers
- Propose additional warranties to safeguard against hidden issues
A clear, well-negotiated contract will give you greater confidence in your purchase and allow you to focus on running the business instead of managing disputes.
Buying a business is never just about the headline price. The contractual terms set the framework for your future operations, profitability, and flexibility. If you are looking at buying a business for sale in Perth, for example, take the time to examine each clause with care and question anything that feels too restrictive or uncertain. Many successful buyers will tell you that the most valuable wins happen during contract negotiations, long before the first day of trading.
A strong purchase agreement doesn’t just record the deal – it actively supports your plans for growth, protects your investment, and reduces the risk of costly disputes. By treating contract review as a critical stage of the buying process, you give yourself the best chance of a smooth transition and a profitable future.
A thorough approach now can save you from years of frustration later. When you know exactly what you are agreeing to, you can enter ownership with confidence, secure in the knowledge that your obligations and rights are clear. This clarity not only safeguards your investment but also supports long-term success.
Editorial staff
