Take a breath before you respond. An offer is a meaningful step, but the headline price alone does not tell you what you will receive, how likely the buyer is to close, or what commitments you may be making along the way.
Your next move is to get the proposal in writing, test its certainty, and compare the full terms. That way, you can protect your options and make a confident decision about how to sell a business on terms that fit your goals.
GET THE WHOLE OFFER IN WRITING
A serious offer should explain more than a purchase price. Ask the buyer to outline:
- Price and payment: Total price, cash due at closing, and any seller note or other deferred payment.
- Financing: Whether the offer depends on a lender’s approval, and the buyer’s expected financing milestones.
- Working capital and inventory: What is included, what is excluded, and how any adjustments or inventory count will be handled.
- Transition and employees: How long you are expected to assist after closing, whether that work is paid, and what the buyer proposes regarding the team.
- Earn-out terms: Any payment tied to future performance, including the measurement period, calculation, and payout schedule.
- Exclusivity and timing: How long the buyer expects you to pause discussions with others, and the target dates for diligence, signing, and closing.
If key terms are missing, don’t fill in the blanks for the buyer. Ask for a clearer proposal. The more specific the written terms are, the easier it is to evaluate the offer and identify unanswered questions before you commit.
COMPARE CERTAINTY, NOT JUST PRICE
Imagine one buyer offers $1 million, with a substantial amount due only if the company reaches future targets. Another offers less but has credible funds, a clear financing plan, and a straightforward path to closing. The first offer may look stronger at a glance. It may not be the better outcome for you.
Compare what you are likely to receive, when you will receive it, and what conditions could change it. Consider the cash at closing separately from a seller note or earn-out. A seller note is a promise of future payment, not cash in hand; understand its repayment schedule, interest, security, and any guarantees. An earn-out depends on future performance and terms that should be reviewed carefully.
Look closely at financing contingencies, too. What must the buyer accomplish to obtain financing? By when? What happens if the lender declines? A vague financing clause or open-ended timeline can leave you waiting while the buyer decides whether to proceed.
Then review working capital and inventory. “Normal working capital included” may sound clear but can mean different things to different parties. Ask what accounts are included, how the target will be set, and how the closing adjustment will be calculated. Clarify whether inventory is part of the price or paid for separately, how it will be counted, and how outdated or unsellable items will be treated.
Finally, consider the transition period and employee language. How much of your time does the buyer expect? Are you being asked to guarantee that employees stay? Get the details in writing, and have your legal and tax advisers review proposed obligations. A business valuation California owners receive can provide a useful starting point for assessing price, but the best offer depends on the full package, not one number.
CHECK THE BUYER BEFORE YOU GO EXCLUSIVE
Exclusivity can take your business off the market while one buyer investigates. Before agreeing, check whether that buyer is prepared and able to move forward.
Ask for reasonable evidence of available funds for the buyer’s proposed cash contribution. A buyer may provide a recent bank or investment letter or a redacted statement that shows the account holder, date, and sufficient liquidity. If financing is involved, ask for a lender letter and permission to confirm the financing status with the lender. A letter of interest is not the same as a loan commitment, so clarify what still needs approval.
You can also ask who has final decision-making authority, what diligence the buyer plans to conduct, and whether the buyer has completed similar transactions. If appropriate, request references from past sellers or transaction professionals. Look for clear answers, a realistic timetable, and prompt follow-through.
Before granting exclusivity, agree on a defined period and specific milestones. For example, you might expect the buyer to provide proof of funds, submit a diligence plan, and meet agreed document deadlines. Ask your attorney to review how exclusivity begins, what it requires, and how it ends if the buyer stops making progress. A California letter of intent guide offers further context, but your own transaction documents should be reviewed by your lawyer.
KNOW WHICH DOCUMENT YOU ARE RESPONDING TO
A verbal offer is an initial conversation. It helps you understand the buyer’s interest, but it is not a good reason to stop considering other options. Whether a particular exchange creates legal obligations depends on the facts and wording, so don’t rely on assumptions.
A letter of intent (LOI) usually summarizes proposed business terms and the expected next steps. It may be mostly nonbinding, but some provisions (such as confidentiality, access, expenses, or exclusivity) may be binding if written that way. Read every section and ask your attorney to explain what you are agreeing to before you sign.
A purchase agreement is the detailed contract for the transaction. It addresses the parties’ legal obligations, conditions to closing, assets or ownership being transferred, payment, representations, and other important terms. It should be reviewed by your legal and tax advisers. An LOI is not a substitute for that final agreement.
RESPOND PROFESSIONALLY, AND KEEP YOUR OPTIONS CLEAR
If the offer is far below what you believe your business is worth, you do not need to take it personally or respond in anger. Keep the conversation open while asking for a more serious proposal.
Polite response to a low offer:
“Thank you for putting forward an offer. I’m open to continuing the conversation, but the current price and terms are not a fit. If you can improve the cash at closing and clarify the financing, working capital, and timeline, please send a revised proposal for review.”
If you need more information before evaluating the price:
“I appreciate your interest. Before I can assess the proposal, please provide your proposed payment structure, financing status, evidence of available funds, and assumptions regarding inventory and working capital. I’ll review the complete offer and respond once I understand the terms.”
If the buyer asks for exclusivity before establishing credibility:
“I’m willing to consider a short exclusivity period after we have reviewed your funding evidence, diligence plan, and proposed milestones. Until we agree in writing, I will continue evaluating my options.”
These responses are direct without closing the door. They also put the next step where it belongs: with the buyer, who can improve the terms or supply the information you need.
KEEP A SECOND BUYER WARM, HONESTLY
If another qualified buyer is interested, you can keep the conversation moving without suggesting that either buyer has a deal. Be clear about the status and honor any binding confidentiality or exclusivity commitments you have signed. Don’t share another buyer’s confidential offer details unless you are authorized to do so.
You might say:
“Thank you for your continued interest. I’m reviewing a proposal, but no transaction has been finalized. If you remain interested, please let me know your financing status and timing so I can understand your position.”
That is straightforward and fair. It avoids promising a particular outcome or creating artificial pressure. Whether an interested buyer is based nearby or is evaluating opportunities from Charlotte, the same standard applies: communicate honestly, protect confidential information, and compare only the terms you are permitted to share.
GET A CLEAR READ BEFORE YOU DECIDE
An offer is a starting point for careful review, not a requirement to say yes or no on the spot. A business broker California owners trust can help organize proposals, screen buyer interest, and keep the process confidential. If you’ve been searching for business brokers near me, look for an advisor who can explain the terms clearly and respond to your questions.
At SD Business Advisors, our team has sold more than 850 businesses since 2007. I’ll help you assess the buyer, compare the terms, and understand what could affect your proceeds. Whether you need small business valuation services or support as you prepare business for sale, you deserve clear information and responsive guidance.
Explore our business sale services, read about how we approach a sale, or contact David. For a free, sale-focused valuation, share a few details about your business. You can also schedule a confidential conversation to discuss the offer before you decide.
ABOUT DAVID
David Mayfair is a Business Sales Advisor at SD Business Advisors. David Mayfair and his team have sold over 850 businesses since 2007. He learned about the industry when he became a business buyer in 2000. He offers a free, sale-focused valuation and a confidential, no-pressure process. Contact him at 650-304-1138.
