Selling Your Business? How to Negotiate a Purchase Offer

Step 3. Respond to the buyer's proposal.

Based on input and advice from your sale advisors, you'll either sign to accept the buyer's offer or you'll propose a counter offer.

As you respond to the buyer's letter of intent, remember this isn't the time to negotiate fine points. Your objective is gain agreement on the major elements of the buyer's proposal, including price, payment structure, exclusions or additions to the sale, timeframe, and your after-sale involvement.

Determining sale details will happen during the negotiation of final terms prior to drawing up the final purchase agreement and before the formal closing of the deal.

At this point, however, if your primary sale requirements differ greatly from the buyer's purchase intentions, you'll want to propose a counter offer, just as you'd do when accepting a purchase offer on your home. Involve your broker or your accountant or attorney to provide input, to share objective criteria, to serve as sounding boards and safety valves, and to help you avoid unnecessary disputes as you undertake the first of your buyer-seller negotiations.

Step 4. Accept the buyer's offer.

To accept the buyer's offer, you and the buyer will sign either the initial letter of intent or a version that reflects mutually agreed upon changes. Either way, once your signatures are on the line the letter signifies agreement to a purchase offer. Here's what typically happens next:

• Your broker, if you're using one, will collect a deposit of, usually, 10 percent of the proposed purchase price, to be held in an escrow account.
• If you're not using a broker, you and your sale advisors will decide whether to require a deposit from the buyer. If so, the deposit is called earnest money. If earnest money is involved, once it's collected it's held in a third-party escrow account until any conditions stipulated in the letter of intent are adequately addressed and the sale closes.

From this point, your sale moves into the due diligence stage. More work lies ahead, but for the moment, take a deep breath and realize you've successfully attracted an offer from a qualified buyer. Congratulations!

In next week’s installment of "Selling Your Small Business" we’ll go over how to conduct due diligence during the sales process.

Editor’s Note: This article is the eighteenth piece in a series taken from BizBuySell.com’s Guide to Selling Your Small Business. The guide is a comprehensive manual to help small business owners maximize their success when the day to sell arrives. Each Wednesday, Inc.com will publish a new section of the guide outlining BizBuySell.com’s best practices, from the initial planning stages of a sale all the way through negotiations and post-sale transition.