The Short Answer:
After a buyer makes an offer on your business, the next steps typically include negotiation, signing a letter of intent (LOI), completing due diligence, arranging financing, and finalizing the purchase agreement. Once the buyer and seller satisfy the transaction requirements, the business sale can proceed to closing and transfer of ownership. However, accepting an offer does not guarantee that the transaction will close.
When a buyer expresses interest in purchasing your business, the first step is to evaluate more than the proposed purchase price.
A seller should consider the buyer's financing arrangements, contingencies, payment structure, and expectations for the transition period. Important considerations include:
Purchase Price: How does the offer compare with the asking price and the current valuation?
Payment Terms: Will the seller receive cash at closing, provide seller financing, or accept future payments?
Buyer Qualifications: Does the buyer have the financial capacity to purchase the business?
Contingencies: Is the transaction dependent on financing, due diligence, or other conditions?
Transition Requirements: Will the seller need to assist the new owner after closing?
An experienced business broker can help the seller evaluate these terms and negotiate an agreement that reflects their goals.
Read More: A Company Wants to Buy My Business. How Do I Know if the Offer Is Good?
Once the buyer and seller reach a preliminary agreement, the transaction generally moves through several stages.
The steps involved can vary depending on the business structure, buyer requirements, and whether the acquisition is financed.
A letter of intent (LOI) outlines the preliminary terms that the buyer and seller intend to use when negotiating the purchase.
A signed letter of intent may address the purchase price, transaction structure, due diligence period, financing conditions, and anticipated closing date.
Although the proposed acquisition is often non-binding at this stage, certain provisions, such as confidentiality or exclusivity, may be enforceable.
A seller should have a qualified business attorney review the LOI before signing.
The due diligence process allows a buyer to verify the information provided before committing to the acquisition. Depending on the business, a buyer may request:
Three years of tax returns and supporting financial records.
Profit and loss statements, balance sheets, and bank statements.
Customer contracts, supplier agreements, and lease documentation.
Employee information and operational records.
Equipment, inventory, intellectual property, and outstanding debt information.
A buyer may also evaluate cash flow, customer concentration, and the seller's involvement in daily operations. If the buyer discovers unexpected financial or operational risks, the parties may need to renegotiate certain terms.
Read Next: Due Diligence Checklist for Sellers: How to Prepare Your Business for Buyers
If the buyer is using acquisition financing, the lender will typically review the buyer's financial qualifications and the business's ability to support repayment.
This process may involve underwriting, reviewing financial statements, evaluating collateral, and obtaining an independent business valuation or appraisal when required.
A lender may also request additional documentation before approving the transaction. Financing requirements vary by lender and loan program, so the seller should avoid assuming that an initial financing discussion guarantees funding.
Not necessarily. Some business transactions include an earnest money deposit, while others do not.
When earnest money is required, the purchase agreement or another applicable agreement should specify the deposit amount, deadlines, conditions for release, and whether the funds are refundable. The deposit may be held in escrow by a neutral third party under agreed instructions.
The buyer and seller should also confirm who will administer closing funds and documents. A title company may be involved when real property is included, but not every business sale requires one.
Yes, depending on the signed agreements and circumstances. A buyer may withdraw because of financing difficulties, unexpected due diligence findings, or an unresolved contingency.
However, once a definitive purchase agreement is signed, the buyer's ability to terminate the transaction depends on the contract's terms and applicable law. A seller should carefully review termination provisions, earnest money requirements, and other remedies before entering a binding agreement.
On closing day, the parties complete the legal documents, satisfy outstanding closing conditions, and arrange payment according to the purchase agreement.
Depending on the transaction, closing may involve transferring ownership interests or assets, assigning contracts, resolving liens, and delivering access to business records and systems. The new owner takes possession or control according to the agreed closing terms.
If the seller has agreed to provide transition assistance, the parties then begin the documented handover process.