Making an offer on a business is not the same as making an offer on a house. There's no listing protocol. The first number you put out rarely ends the conversation. And a bad offer — either too low to be taken seriously or too high to protect your downside — can end a deal that should have closed. The goal is to enter the negotiation with a number you built, not one you reacted to, and to move from verbal agreement to LOI without losing momentum. Here's the sequence.
The Verbal Offer → LOI Sequence
Most business acquisitions follow this sequence: preliminary financial review → verbal offer → seller counter → term sheet or LOI heads → signed LOI → due diligence → definitive purchase agreement → close.
The verbal offer is not a formal commitment. It's a signal of serious interest at a specific price and structure. It tells the seller: "Here's where I am. If we're in the same universe, let's go to an LOI and stop shopping the deal."
The LOI (Letter of Intent) is the first binding — or semi-binding — document. It sets the price, structure, exclusivity period, and key terms. Once signed, the seller typically stops marketing the business and the buyer starts due diligence. The purchase agreement (the actual legal contract) is drafted during or after due diligence.
Why the verbal offer matters: If you go straight to an LOI without a verbal discussion, you risk spending legal fees on a document the seller won't sign. The verbal offer conversation is where you test whether you're in the same range on price and structure before anyone drafts anything.
What to include in the verbal offer: - Your proposed price (or range) - Proposed structure: all-cash, SBA financing, seller note, combination - Any major contingencies: financing, due diligence, lease assumption - Proposed timeline: exclusivity period, due diligence duration, target close
Note: the "how much to offer" question — what's the right price based on SDE and multiples — is a separate analysis from the process covered here. For the valuation math, see how much to offer for a business.
Anchoring Price With SDE and Multiples
The strongest position in a business acquisition negotiation is having a price you built from the numbers — not one you derived from the asking price.
Before you make a verbal offer, build your price from the bottom up:
Step 1: Verify SDE from tax returns (or request them to verify before making an offer). Don't anchor to the seller's stated SDE.
Step 2: Apply the industry multiple for this business type and size. Service businesses: 2–4x. Manufacturing/distribution: 3–5x. Recurring revenue: 4–7x. Adjust down for specific risk factors (owner-dependency, concentration, short lease).
Step 3: Run the DSCR check. At your proposed price with SBA financing, does the business cash flow at 1.25x DSCR? If not, your price is too high for financing — not just too high in principle.
Step 4: Build your offer number. This is typically the midpoint of your valuation range, with room to move up if the seller pushes back on specific risk factors you've priced in.
How to use the number in the conversation: "Based on our review of the financials, we see SDE at approximately $X and a multiple in the [range] range for this business type and risk profile. That brings us to a price of $Y. We're prepared to move to an LOI at that number."
That framing is different from "we think the asking price is a bit high." The former shows work. The latter invites the seller to defend the asking price without the buyer demonstrating any independent analysis.
For the full calculation, the Deal Analyzer runs SDE, multiple, DSCR, and offer range in one model.
Deal Analyzer
Input the SDE and deal structure to get an offer range, DSCR check, and multiple benchmark before you call the broker.
Get my offer range →Structuring Terms to Bridge a Price Gap
When the seller's price and your offer are far apart, the right move is often to change the structure rather than simply raising the number.
Terms that can bridge a gap while protecting buyer economics:
Seller note. Offering a seller note reduces the seller's immediate cash at close but gives them a higher total price over time. A buyer who offers $1.8M all-cash may also offer $2.1M with $300K in seller financing at 6% over five years. The seller nets more total dollars; the buyer manages cash outflow and gets a deal at a lower initial equity requirement.
Earn-out. If the gap exists because the seller believes in growth the trailing financials don't support, a performance-based earn-out can bridge it. Offer the base price the trailing earnings justify, plus an earn-out of $X if revenue or EBITDA hits a target over the next 12–24 months. The seller can claim a higher headline number; the buyer only pays it if the business delivers. See earn-out business acquisition for how to structure this correctly.
Closing date timing. A buyer who can close in 30 days is more valuable to a seller than one who needs 90 days. Offering a faster close — even at the same price — can move a negotiation that's stuck on dollars.
Working capital provision. Offering to leave more working capital in the business at close (accepting a lower NWC draw-down) can give the seller more confidence in the transition and is sometimes used as a gap-bridging tool. For the mechanics, see net working capital peg.
What not to do to bridge a gap: Don't raise your price without a documented reason. If you offered $1.8M based on verified SDE and a multiple, and the seller wants $2.3M, simply moving to $2.1M without a new analysis is conceding without receiving anything. If you move, know why — and what you're getting in return.
Handling the Counteroffer
A counteroffer means the seller is engaged. That's good. A seller who ignores your offer or simply says no without a counter is either not motivated or working multiple interested parties with a stronger offer. A counter means they want to do a deal — just at different terms.
The first counter: don't blink immediately. When the seller comes back at a higher price, resist the instinct to respond with an immediate concession. Instead, ask them to explain what drives their number. "Help me understand how you're getting to $2.3M — can you walk me through your SDE calculation and the multiple you're applying?" This does two things: it forces them to defend a number, and it tells you whether there's information in their analysis that you missed.
The split-the-difference trap. Sellers and brokers frequently try to split the difference — "you're at $1.8M, we're at $2.1M, let's do $1.95M." Splitting the difference feels fair but means you've moved more than they have. If your $1.8M is built on verified SDE and a defensible multiple, the midpoint of the negotiation should not be the midpoint of the gap — it should be a number you can still defend with math.
Counter with structure, not just price. Rather than responding with a higher price, counter with a different structure: "We'll go to $2.0M if the seller note is $250K at 6% over 5 years on standby." Now you're negotiating structure, not just bidding up. A seller motivated by total proceeds may take $2.0M with a note over $1.95M all-cash.
Know your walk-away before you start. Before you make a verbal offer, decide: what is the maximum price at which this deal makes sense for me? At what price does the DSCR fail? At what multiple am I paying a risk premium I'm not comfortable with? If the negotiation approaches that number, be willing to stop. The discipline to walk away from an overpriced deal is the single most valuable acquisition skill.
Turning an Accepted Offer Into an LOI
When you reach verbal agreement on price and structure, the next step is immediate: move to LOI before the deal cools.
How fast to move: Within 48 hours of verbal agreement, send an LOI for the seller's review. Delay creates doubt. Sellers who agreed to a deal on Monday and haven't seen paperwork by Thursday start re-evaluating. Brokers re-open conversations with backup offers.
What the LOI should lock in: - Purchase price (the agreed number, not a range) - Deal structure: asset vs. stock, SBA financing, seller note terms, any earn-out - Exclusivity period (30–60 days is standard; 90 days is aggressive and often resisted) - Due diligence period duration - Deposit (good faith deposit of $10,000–$25,000 is common; confirms buyer seriousness) - Key contingencies: financing, satisfactory due diligence, lease assignment - Transition agreement terms: seller availability, consulting period - Non-compete scope, duration, and geography
What not to spend energy fighting in the LOI: The LOI is a framework. Some legal terms are deferred to the purchase agreement — indemnification caps, rep and warranty scope, specific liability exclusions. Don't hold up the LOI for terms that belong in the purchase agreement. Get the LOI signed; refine the details in the definitive agreement.
For the LOI template and specific language for each key term, see letter of intent to buy a business. The LOI Generator can produce a complete draft LOI in minutes once you have the agreed terms.
LOI Generator
Generate a complete LOI in minutes with agreed price, structure, exclusivity terms, and contingencies — ready to send within 48 hours of verbal agreement.
Generate my LOI →Frequently Asked Questions
Should I offer below asking price for a business?
Only if your offer is supported by verified SDE and an appropriate industry multiple — not as a blanket strategy. A below-asking offer that's backed by the numbers ("based on a verified SDE of $X and a comparable multiple, the supportable price is $Y") is a credible opening. A below-asking offer with no rationale is just a lowball. Before making any offer, see how much to offer for a business for the full SDE-based calculation methodology.
Do I need an LOI or a purchase agreement first?
LOI first. The LOI establishes the agreed terms — price, structure, exclusivity, contingencies — and kicks off due diligence under exclusivity. The purchase agreement is the legally binding contract that follows due diligence, incorporating the deal terms from the LOI plus the detailed reps, warranties, and indemnification provisions that the LOI doesn't cover. Trying to draft a full purchase agreement before an LOI is agreed is backward — you'd be negotiating the details before the principals have agreed on the fundamentals.
How much earnest money is normal?
Good faith deposits for small business LOIs typically run $10,000–$25,000 for deals in the $1M–$3M range, and $25,000–$75,000 for deals in the $3M–$5M range. The deposit signals buyer seriousness and is typically applied to the purchase price at close. Deposits are usually refundable if the deal fails due to financing or due diligence contingencies, and non-refundable if the buyer walks for reasons outside the defined contingencies. Higher deposits are sometimes requested by sellers with multiple interested parties.
The offer process is a negotiation, not a transaction. Buyers who enter with a number they built from verified SDE and a defensible multiple negotiate from a position of strength. Buyers who anchor to the asking price or respond to every counter with an immediate concession negotiate from a position of reaction. Build your number first. Make a verbal offer that you can explain. Move to LOI within 48 hours of agreement. And know your walk-away number before you sit down — because discipline at the moment a deal exceeds your price is what separates buyers who build value from buyers who pay for the seller's optimism.
Get Your Offer Range Before You Call the Broker
Run the SDE, multiple, and DSCR analysis in the Deal Analyzer to arrive at a defensible offer number before you start the conversation.
Get my offer range →Acquisition Guide
Ready to buy a Business Coaching Practice business? See EBITDA multiples, deal structures, SBA eligibility, and active targets in our full buyer guide.
Business Coaching Practice Acquisition Guide