Someone wants to buy your business. Maybe it is a competitor, a private equity firm, an individual buyer, or someone who reached out unexpectedly.
Then comes the number. It sounds big. Is it good? Maybe.
According to Value Builder’s Q2 2026 Exit Readiness Index, 21% of business owners surveyed had received a written offer in the prior year, yet only 1% were considered ready to sell.
That matters because you cannot judge an offer from the purchase price alone. You need to understand what your business is reasonably worth, how much cash you will actually receive, what portion of the deal is deferred or contingent, the tax and working-capital implications, the buyer’s ability to close, and what will be expected of you afterward.
Your goals matter, too. An owner who wants to retire quickly may evaluate the same offer very differently from one who is willing to stay involved or retain equity. And if the offer is unsolicited, remember: you are still looking at one offer from one buyer. That does not make it a bad offer, but it does mean you need enough context to know whether it is a good one.
A good offer is one that reasonably reflects your business’s market value while providing an acceptable combination of cash at closing, deal certainty, risk, tax consequences, post-closing obligations, and alignment with your personal goals.
There are legitimate reasons a buyer may approach you directly. A competitor may know your reputation. A private equity-backed company may want to expand into Nashville or Middle Tennessee. A strategic buyer may see particular value in your customers, employees, geography, licenses, capabilities, or market position.
But the buyer has an incentive, too. They want to buy the business on terms that work for them. If they can negotiate with you exclusively before other qualified buyers hear about the opportunity, they may also remove one of the seller’s strongest sources of leverage: competition.
That is why I get cautious when a buyer says some version of:
“You don’t need to take the business to market. Let’s just work this out between us.”
Maybe you do not need a full market process. But you should understand what you may be giving up before deciding that. Competition can affect more than price. Different buyers may offer more cash at closing, require less seller financing, expect a shorter transition, or simply have a higher probability of closing.
Before deciding whether an offer is good, you need some basis for comparison. Good compared with what?
Before analyzing an offer, establish a reasonable value range for the business.
Ideally, that means using an appropriate valuation process, such as a professional business valuation or Broker Opinion of Value, depending on your circumstances. Legacy ETA’s Business Valuation Services can help you establish a market-informed benchmark before deciding how the buyer’s offer compares.
At minimum, you should understand the earnings a buyer is likely to evaluate and how those earnings are normalized. For many owner-operated businesses, buyers focus on Seller’s Discretionary Earnings (SDE). Larger businesses with an established management structure are more commonly evaluated using EBITDA.
Read More: EBITDA Explained: What Small Business Owners Need to Know
The key word is legitimate. Not every expense can simply be added back, and the buyer, lender, CPA, and seller may not agree on every adjustment.
Normalized earnings usually provide a more useful starting point than revenue alone.
A company with $4 million in revenue and $250,000 in normalized SDE is very different from one producing $1 million in normalized earnings. Revenue, years invested in the business, and the amount you hope to retire with may matter personally, but they do not establish market value on their own.
The same caution applies to the buyer’s number. If someone proposes a purchase price before understanding your financials, customers, management team, assets, liabilities, and operations, treat it as preliminary.
A number is not a valuation just because someone put a dollar sign in front of it.
It may be an opening offer, a starting point for negotiation, or a number the buyer expects to revisit during due diligence.
Read Next: Business Valuation Multiples Tennessee Owners Should Understand
Price matters, but so does what you want the transaction to accomplish. An owner who is ready to retire may prioritize certainty of closing, strong cash proceeds, limited post-closing obligations, employee continuity, and a short transition.
An owner who still enjoys running the company may be willing to stay involved, retain rollover equity, or reject an otherwise reasonable offer because there is no immediate need to sell. Neither approach is wrong. The objectives are simply different.
Personal circumstances can change the analysis, too.
Burnout, a family issue, a partnership dispute, or another urgent situation may make speed and certainty more valuable than maximizing every possible dollar. That does not mean accepting a bad deal. But if the alternative is spending another two years running a business you no longer want, a marginal price increase may matter less than a clean, dependable exit.
Your reason for exiting belongs in the offer analysis.
Read Next: Exit Planning for Tennessee Business Owners
Purchase price matters, but the number at the top of a Letter of Intent is not necessarily the number that ultimately ends up in your bank account.
Two offers with similar headline prices can produce very different outcomes depending on how much is paid at closing, how much is deferred or contingent, what adjustments apply, whether the buyer can actually close, and what you are expected to do after the sale. Here are the major terms I would evaluate:
Start with the headline number and compare it with a reasonable market valuation.
A $2 million offer for a business reasonably worth $1.8 million to $2.2 million is very different from the same offer on a business worth closer to $4 million. But do not stop there. A $3 million offer can be economically worse than a $2.7 million offer depending on how the rest of the deal is structured.
How much money are you actually receiving when the transaction closes? Consider these two offers:
Offer B has the larger headline number, but that does not automatically make it the stronger offer. Cash at closing is immediate. Deferred consideration introduces time, conditions, and risk. Understand the difference before comparing two offers by purchase price alone.
A buyer may ask you to finance part of the acquisition through a seller note. That can be reasonable, but it also means you are becoming one of the buyer’s lenders. Review the principal amount, interest rate, payment schedule, term, collateral, subordination to other lenders, guarantees, default provisions, and your remedies if payments stop.
A $500,000 seller note is not the same as $500,000 in cash at closing.
An earnout makes part of the purchase price dependent on what happens after closing. Payment may depend on revenue, EBITDA, customer retention, or another performance target.
Earnouts can help bridge a valuation gap, but they also create risk, particularly when the buyer controls the business after closing. If your payout depends on EBITDA while the buyer controls staffing, pricing, spending, accounting policies, and operations, the calculation needs to be clearly defined.
A theoretical $4 million offer with $1 million dependent on future performance should not be evaluated the same way as $3.2 million paid at closing.
Private equity and strategic buyers may ask you to retain, or “roll,” part of your proceeds into equity in the new company.
That can create future upside, but it also means part of your consideration remains invested rather than becoming cash. Understand what you will own, your rights as a minority investor, possible dilution, distributions, governance, and what must happen before that equity becomes liquid.
Do not treat $1 million of rollover equity as if $1 million were wired to you at closing. It is a different asset with a different risk profile.
Price matters less if the buyer cannot successfully take over the company.
This is especially important in businesses that depend on industry experience, licenses, bonding, insurance, technical expertise, or key employee relationships. Ask what the buyer has operated before and who will run the business after closing. If the answer is still you, understand exactly how long that arrangement is expected to last.
Two deals with the same purchase price can produce different after-tax proceeds. Asset sales and stock sales can have different tax consequences, and seller financing or installment payments may affect the timing and treatment of income.
This is where your CPA should be involved. Compare offers based on what you reasonably expect to keep, not just the gross purchase price.
An aggressive Letter of Intent is not the same as a completed transaction. Buyers can retrade price during due diligence, lose financing, fail to satisfy a lender, change their investment thesis, or simply fail to close.
Before granting exclusivity, understand the buyer’s financial capacity, financing plan, experience, and authority to complete the transaction. An offer that has an 80-page deck behind it is still not money.
Some businesses cannot simply be transferred to whoever signs the purchase agreement. Contractor licenses, professional licenses, permits, franchise approvals, insurance, bonding, government contracts, and other requirements may affect whether the buyer can legally and practically operate the business.
Identify those issues early. The time to discover that a buyer cannot secure an essential license is not three days before closing.
Working capital is one of the areas that can materially change what a seller actually receives.
A buyer may agree to a $4 million purchase price while also requiring a specified amount of normalized working capital to remain in the business at closing. That raises questions about accounts receivable, accounts payable, inventory, accrued payroll, customer deposits, and the working-capital target or “peg.”
If the buyer requires you to leave $500,000 of additional value in the company that you expected to keep, that needs to be understood before comparing the offer with another one.
The treatment of accounts receivable and accounts payable is closely tied to working capital. In some transactions, the seller keeps receivables and remains responsible for payables. In others, they transfer with the business.
The agreement should also address collections after closing, bad debt, customer credits, warranty obligations, prepaid expenses, and deposits.
“We’ll figure that out later” is not a deal term.
Expenses that span the closing date may need to be divided between buyer and seller. Common examples include rent, insurance, property taxes, utilities, employee expenses, subscriptions, prepaid contracts, and deposits.
Each item may be small relative to the purchase price, but together they can still affect the final closing economics.
Do not focus so heavily on price that you overlook how long the buyer expects you to remain involved.
There is a meaningful difference between two weeks of introductions, a 90-day transition, one year as a paid employee, three years under an employment agreement, or remaining responsible for an earnout target.
Ask what you are expected to do after closing, for how long, and how you will be compensated for that work. Do not quietly include several years of your life in the purchase price calculation.
Understand what money is deposited, when it becomes nonrefundable, and whether part of your proceeds will remain in escrow after closing.
If an escrow is required, review how much will be held back, for how long, and what claims can be made against it. A $4 million purchase price with $600,000 held in escrow is not the same as $4 million wired to your account.
The legal structure of the transaction affects taxes, liabilities, contracts, employees, permits, and what is actually being transferred.
In an asset sale, the buyer generally purchases specified assets and assumes specified liabilities. In a stock sale, the buyer purchases ownership of the entity itself. Neither structure is automatically better. Your attorney and CPA should evaluate the implications based on your business and circumstances.
Read More: Asset Sale vs. Stock Sale: Why Deal Structure Matters
If the acquisition depends on SBA-backed financing or another lender, the lender becomes another party whose requirements can affect the transaction.
Current SBA and lender requirements may influence seller notes, working capital, buyer equity, documentation, guarantees, closing conditions, and other terms. Do not assume that a structure negotiated between you and the buyer will automatically satisfy the lender’s requirements. If financing is involved, confirm the proposed structure before treating the economics as final.
Read Next: Seller Financing, SBA Loans & Small Business Purchase in TN
Different sellers have different priorities. The purpose of this table is not to rank deal terms, but to help you understand what each one affects and why it may matter based on your goals.
The goal is to decide which of these factors matter most to your outcome before negotiations become complicated. An attractive purchase price can lose much of its appeal once you understand the risk, timing, obligations, and actual proceeds behind it.
Not every buyer approaches a transaction the same way. An individual buyer, a private equity-backed buyer, a direct competitor, and a strategic buyer may all value different parts of the same business and structure their offers differently as a result.
These are general tendencies, not rules, but understanding the buyer type can help explain why two buyers may arrive at very different conclusions about value.
This is why knowing the buyer universe matters. One buyer may value your cash flow. Another may care more about your customer base, geography, management team, licenses, or strategic position. A buyer that can integrate your company into an existing operation may also see value that a first-time individual buyer does not.
That does not mean one buyer type is automatically better than another. It means that the offer should be evaluated in the context of who is making it, what they value, and what they expect from you after closing.
A private negotiation with one buyer can still produce a good outcome, but it does not show you how other qualified buyers might value the same business.
Read More: How to Sell Your Business to Private Equity the Smart Way
Consider a hypothetical company with normalized earnings that support a valuation of roughly $3 million. The seller receives three offers, each with a different mix of purchase price, cash at closing, risk, and post-sale involvement.
Headline Price: $3.6 million
This offer includes $2.3 million in cash at closing, a $500,000 seller note, a $500,000 earnout, and $300,000 in rollover equity. You would also be expected to remain involved for two years, with a working-capital adjustment at closing and 10% of the cash consideration held in escrow.
Offer A has the highest headline price, but a meaningful portion of the value is deferred, contingent, or still invested.
Headline Price: $3.15 million
This offer provides $3 million in cash at closing with $150,000 held in escrow. There is no earnout or seller financing; the transition period is 90 days, the buyer has committed financing, and the working-capital terms are defined in the LOI.
The headline price is lower, but most of the consideration is received at closing with relatively few ongoing obligations.
Headline Price: $3.35 million
This offer includes $3.1 million in cash at closing and $250,000 held in escrow, with no earnout or seller financing. The seller agrees to a six-month paid transition. The buyer already operates similar businesses, can maintain the required licenses, and intends to retain employees subject to normal operating decisions.
Offer C combines significant cash at closing with a buyer that appears capable of taking over the business.
So, which one is better? There is not enough information to answer that for every seller. That is the point.
Offer A has the highest theoretical value, but some of that value depends on future payments and continued ownership. You also have a two-year commitment after closing. Whether that additional upside is worthwhile depends on how comfortable you are with the added risk and involvement.
Offer B may be more attractive despite having the lowest headline price. Most of the consideration is paid at closing; there is no seller note or earnout, financing is committed, and the transition period is relatively short.
Offer C may deserve additional consideration because the buyer already operates similar businesses and appears positioned to maintain the licenses and operating continuity the company requires.
It also provides substantial cash at closing without making a meaningful portion of the purchase price dependent on future performance.
The point is not that one of these offers is automatically better than the others.
Price alone cannot tell you which offer is better. The right offer depends on the economics, the risk, your post-closing obligations, and what you ultimately want from the sale.
Suppose your valuation work indicates a reasonable market range of $2.4 million to $2.8 million. You are 70, financially prepared to retire, and no longer enjoy running the company.
A qualified buyer offers $2.65 million with strong cash at closing, financing in place, reasonable working-capital terms, and a short transition. Then negotiations stall because you want another $100,000.
Can you ask for it? Of course. But before letting the difference jeopardize an otherwise workable deal, step back and consider what you are trying to accomplish.
If receiving $2.75 million is necessary to meet your financial goals, that matters. If the additional $100,000 is primarily about not wanting to leave money on the table, consider what you may be risking to get it. There will almost always be another dollar to negotiate. The goal is not to “win” every provision in the purchase agreement. It is to reach an acceptable outcome that accomplishes what you needed the transaction to accomplish.
Do not automatically reject an unsolicited offer, but do not automatically accept it either.
Before making a decision, get your financials organized, calculate normalized SDE or EBITDA, establish a reasonable value range, and understand exactly what the buyer is offering beyond the headline price. You should also evaluate the buyer’s ability to finance, operate, and close the transaction, understand the tax and legal structure, and be clear about why you are considering an exit in the first place.
One of the biggest decisions is whether negotiating exclusively with a single buyer is worth giving up broader market exposure. A buyer may argue that going to market will create unnecessary complexity, take longer, cost more, or increase confidentiality risk. Those are legitimate considerations. A competitive process has trade-offs, but so does selling directly to the first buyer who approaches you.
If broader market exposure makes sense, Legacy ETA’s Business Exit Services can help coordinate valuation, confidential buyer outreach, buyer qualification, and negotiations while keeping the process focused on your objectives.
The goal is to understand both before committing to one path.
Absolutely.
Sometimes the first buyer is the right buyer. The offer may be strong, the seller may value speed and simplicity, or a strategic buyer may see enough value in the business to make a broader process unnecessary. Personal circumstances can matter, too. For some owners, certainty and a clean exit may be more important than testing every possible alternative.
But that conclusion should come after you understand what your business is worth, what the offer actually includes, and what you may be giving up by negotiating exclusively. An unsolicited offer should be the beginning of the analysis, not the end of it.
The short answer is to compare the offer with a reasonable valuation of your business, then evaluate the entire deal rather than focusing only on purchase price. That means considering cash at closing, seller financing, earnouts, rollover equity, taxes, working capital, A/R and A/P, escrow, deal structure, buyer financing, closing certainty, licensing, and your required post-closing role.
Then ask one more question:
What reasonable alternatives do I have?
If you have not established the value of the business or considered what other qualified buyers might offer, it can be difficult to know whether the deal in front of you is truly fair.
A Letter of Intent may look preliminary, but economically, it can be one of the most important documents in the transaction. Once you grant a buyer exclusivity, your leverage can change. The buyer may have weeks or months to complete due diligence and secure financing while you are restricted from speaking with alternative buyers.
That does not mean you should refuse exclusivity. Buyers reasonably need time and access to complete diligence and financing. But it does mean the important economics should be as clear as possible before you remove other buyers from the equation.
At a minimum, make sure the LOI addresses the purchase price, cash at closing, seller financing, earnouts, rollover equity, working capital, A/R and A/P, transition expectations, transaction structure, escrow, financing, and major contingencies.
The goal is not to resolve every legal detail in the LOI. It is to make sure the economic deal is clear enough that you understand what you are agreeing to before moving forward.
Read Next: How Long Does It Take to Sell a Business in TN? Valuation, Preparation, and Other Considerations
If someone has approached you about buying your business, you do not necessarily need to launch a full sale process right away. But before you accept, reject, or negotiate the offer, you should understand what your business is worth and what the deal actually means for you.
At Legacy ETA, we work with business owners throughout Nashville and Middle Tennessee on business valuations, Broker Opinions of Value, exit preparation, and full sell-side representation. Sometimes the right move is to negotiate with the buyer already at the table. Sometimes it is to create a competitive process. And sometimes the best decision is to keep the business.
The first step is understanding the value, the terms, and what you want the transaction to accomplish. If you want a second opinion before accepting, rejecting, or granting exclusivity, you can talk through your business exit with Legacy ETA and determine which next step makes the most sense for your situation.
The highest offer is not always the best offer, and the first offer is not automatically a bad one. You just need enough information to know the difference.
Yes. A business valuation or Broker Opinion of Value can give you a reasonable benchmark for evaluating whether the offer reflects the current value of your company. Without that context, it is difficult to know whether the buyer’s number is strong, weak, or simply an opening position.
Start by understanding what the firm is actually proposing and why your business fits its acquisition strategy. Private equity offers may include cash at closing, rollover equity, earnouts, employment arrangements, or other terms that affect the real value of the deal. The headline price should be evaluated alongside those conditions and your own exit goals.
Yes. An unsolicited offer is generally a starting point for discussion, not something you must immediately accept or reject. You can negotiate price, cash at closing, seller financing, earnouts, transition requirements, working capital, escrow, and other terms before deciding whether the transaction makes sense.
Exclusivity generally means you agree not to pursue or negotiate with other potential buyers for a specified period while the buyer completes due diligence, financing, and other closing steps. Because that can reduce your negotiating leverage, the major economic terms should be reasonably clear before you agree to exclusivity.
Not necessarily, but having a buyer does not eliminate the need to evaluate the offer, deal structure, and alternatives. A business broker or M&A advisor may help establish value, assess the buyer and terms, negotiate the transaction, or determine whether broader market exposure could produce a better fit for your objectives.