Comparing Two Offers To Buy Your Business: Which One Is Best?
Two buyers want your company, and one is offering more money. But the highest offer isn't necessarily the best. Before you choose, compare cash at closing, performance-based payments, the buyer's ability to close, and your obligations after the sale. The terms can matter more than the headline number.
Two buyers want your business.
One offers $7.8 million.
The other offers $7.2 million.
That sounds like an easy decision, doesn't it?
Someone's willing to pay you $600,000 more for the company you've spent years building. Why would you take less? I'd certainly want to understand the difference.
But I'd also want to know what each buyer expects in return.
Is that higher price payable at closing? Does some of it depend on how the business performs after the sale? And how confident are we that either buyer can actually complete the transaction?
I've written before about the risks of selling a business without testing the market. Having multiple buyers at the table can create valuable competition and negotiating leverage.
But competition doesn't make the decision for you.
You've got two legitimate opportunities to sell, with potentially different financial outcomes and obligations. The biggest number isn't necessarily the best offer.
Two Offers, Two Very Different Paydays
Consider two hypothetical offers with realistic terms.
Offer A ($7.8 million): $4.9 million in cash at closing, a $1.4 million seller note payable over time, and a $1.5 million earnout that depends on the company meeting agreed performance targets after closing.
Offer B ($7.2 million): $6.7 million in cash at closing and a $500,000 seller note, with no earnout.
For this example, the $7.8 million and $7.2 million figures represent total stated consideration, not the risk-adjusted present value of future payments.
Offer A is $600,000 higher, but the payment terms change the picture.
Offer B would deliver $1.8 million more cash at closing. Offer A puts another $1.5 million behind a performance test and asks the seller to finance a substantially larger part of the purchase price.
Neither offer is automatically better. Offer A could yield more total proceeds if the buyer repays the note and the earnout targets are achieved. Offer B may be more attractive to someone who wants a cleaner exit with less of their financial future tied to the new owner.
Even those cash-at-closing figures aren't the seller's final take-home proceeds. Debt repayment, transaction expenses, taxes, working-capital adjustments, escrow, and other deal-specific items can change that calculation. For this comparison, assume both offers are priced on the same cash-free, debt-free basis with the same working-capital target. Actual closing proceeds still require a transaction-specific calculation, including any escrow or holdback and an after-tax estimate prepared with your tax advisor.
The point isn't that Offer B wins. It's that headline price and financial outcome aren't the same thing. I've discussed how to respond when an offer first arrives. With two buyers at the table, your next job is to decide which terms warrant negotiation before agreeing to exclusivity.
Start With the Outcome You Actually Want
Before comparing the offers, I want to know what matters most to the seller.
Some owners want as much cash as possible at closing because they have a specific retirement number in mind. Some are comfortable with a seller note if the buyer is well capitalized and the economics make sense. Others care deeply about who will lead the company, what happens to employees, or whether the business keeps its name.
And some sellers just want to be done. Not in three years. Not after meeting quarterly earnout targets. Done.
Those preferences help determine which offer is actually better.
If you plan to stay involved, an earnout with achievable targets and appropriate protections might appeal to you. If you're ready to leave the business after thirty years, the same arrangement could be a terrible fit.
In Sweat Equity Payday, I talk about knowing your number, creating leverage, and negotiating an exit on your terms. Alternatives create leverage only when you know what you're trying to protect.
So before ranking the offers, answer this: what are you unwilling to compromise on, and where do you have room to negotiate?
Otherwise, the buyers may end up defining success for you.
Compare What Is Promised, What Is Conditional, and What Can Change
Every serious proposal deserves to be broken into three categories.
Money expected at closing. How much cash is scheduled to be paid at closing, and what funding or conditions must be satisfied first? Is any amount placed into escrow or held back? Are there unresolved working-capital assumptions that could reduce the funds paid at closing?
Future payments and retained ownership. How much is in a seller note or earnout, and when might it be paid? Does the deal include rollover equity, which is ownership in the continuing business rather than cash due on a payment date? Consider its rights, potential dilution, and when it could become liquid.
Terms that can still change the economics. What is the buyer assuming about debt, cash, inventory, working capital, capital expenditures, closing adjustments, and your post-sale role?
Put those terms on a consistent basis. One buyer may expect a normal level of working capital at closing while another expects unusually high inventory and receivables. That difference can change what the seller actually receives.
An earnout can bridge disagreements about future performance, but it isn't cash in the bank. Understand what triggers payment, who controls the decisions affecting performance, which accounting rules apply, and how disputes will be handled.
If the buyer can change pricing, move costs between companies, reduce your sales budget, or replace management, will the earnout still measure what you thought you agreed to? That is a question for your transaction attorney and advisors, not something to discover after closing.
Seller financing has its own issues. A note may pay interest and create an attractive overall package, but it also makes you a lender to the person buying your business. Review repayment terms, priority relative to other debt, available security, guarantees if applicable, and what remedies actually exist if payment stops. A larger note isn't automatically bad; pretending it carries no risk is.
Put those terms side by side before choosing a buyer.
Which Buyer Can Actually Close?
Before getting caught up in the purchase price, I want to know two things: Does the buyer have the money, and what still needs to happen before they can close?
A buyer can be sincere, enthusiastic, and willing to pay the offered price but still be unable to close. One may be relying on a loan that hasn't been underwritten. Another may need investment committee approval. A strategic acquirer may have cash but still require board approval or lender consent.
I'd want to know who has authority to approve the deal, how much equity is committed, whether the lender has reviewed the business, and what could cause financing to change. I also want to know who's leading diligence and whether the closing timetable is realistic.
Enthusiasm isn't evidence of readiness. Has the buyer tested the earnings adjustments, considered key customers and contracts, and understood the working capital the company needs? A buyer who has done that work may be less likely to discover a fundamental problem later, though no buyer can guarantee a smooth closing.
That's also why I pay attention to the risk of a price retrade during diligence. Sometimes new information justifies changing terms. Other times, a buyer reopens previously disclosed matters. A clear record of what both sides knew gives you a basis to challenge any claims.
This scrutiny matters because selecting a buyer often means granting exclusivity. While you work toward closing with one party, the other may move on. I've covered what happens after you sign the letter of intent, including why you should negotiate exclusivity carefully.
I'd rather work with a buyer who explains the remaining conditions honestly than one who promises there are no obstacles. Before granting exclusivity, make sure you understand the path to closing.
Ask What the Buyer Will Expect From You After Closing
Think about what happens the day after closing.
One buyer may want you available for sixty days to introduce customers, transfer knowledge, and help the new management team settle in.
Another may expect you to remain as president for two years, meet growth targets, help win new accounts, and report to somebody who now owns the company you built.
Those are two very different commitments, even if the buyers are offering nearly the same price.
If an earnout is involved, will you control the decisions you're measured on? Will your work be compensated separately? What happens if you and the new owner disagree about strategy or staffing?
Transition assistance is also different from a real operating job. If the buyer wants you working full-time, discuss compensation and responsibilities accordingly; don't quietly treat them as part of the purchase price.
Restrictions and promises can survive closing: noncompetition or nonsolicitation provisions, consulting commitments, indemnification obligations, and other contractual terms. Their actual scope depends on the transaction and applicable law, so have counsel evaluate them.
You can negotiate a higher price and still end up with a worse life after the sale.
Don't Award the Deal Before You've Compared It Properly
Two credible buyers give you leverage. Use it intelligently.
You could tell Buyer B that Buyer A offered $600,000 more and demand a match. But you might get a proposal the buyer can't finance or will try to change later.
I'd rather negotiate toward the seller's priorities.
Maybe Buyer A can replace part of the earnout with cash at closing. Maybe Buyer B can improve its note or shorten the transition. The real disagreement may concern risk and responsibilities, not price.
In the book, I talk about the importance of never giving something away without considering what you receive in return. That principle works both ways here. If a seller accepts a larger earnout, a longer transition, or more seller financing, what is the buyer providing in exchange? And is that trade actually worth it?
You don't need to disclose one buyer's confidential proposal to the other to run a disciplined process. Have your advisor manage the conversations, observe confidentiality obligations, request clarification when needed, and document revised terms. Make sure buyers understand the process and deadlines without manufacturing competition or making promises you cannot keep.
Your company isn't a prize awarded for enthusiasm. The transaction still has to close.
Sometimes the Best Choice Is Neither Offer
Suppose Offer A has the higher price but leaves too much of your money exposed to future performance. Offer B pays more at closing but requires personal obligations you're not willing to accept. Maybe neither buyer can demonstrate a credible financing path.
You don't have to declare a winner. Negotiate further, revisit the market, or keep operating if the terms don't meet your goals.
The discipline is to make that decision before exclusivity turns a disappointing proposal into the only proposal left.
When I evaluate competing offers with a seller, I want the conversation to end with a clear answer to five questions:
Value: What are the realistic expected proceeds, and when might the seller receive them?
Risk: How much money remains contingent, deferred, or otherwise exposed after closing?
Execution: What evidence supports the buyer's ability to fund and complete the transaction?
Obligations: What must the seller do, guarantee, or give up after closing?
Fit: Which package best supports the seller's financial goals and next chapter?
There's no universal formula. An owner who values certainty may answer differently from one who's comfortable retaining some risk. That's why the decision must be made with the seller, not for them.
The strongest offer creates the best overall outcome on terms you can accept, with a buyer who can credibly close.
At HartmannRhodes, we help business owners prepare, market, evaluate offers, and negotiate the sale of their companies. If you're comparing proposals or trying to decide which terms deserve the most attention, schedule a confidential conversation before you commit to one buyer.
You only sell your business once. Make it count.
If you're comparing proposals or trying to decide which terms deserve the most attention, schedule a confidential conversation before you commit to one buyer.
Common Questions About Comparing Offers to Buy Your Business:1. Is the highest offer usually the best offer when selling a business? Not necessarily. A higher offer may include seller financing, an earnout, or obligations that extend well beyond closing. Compare how much cash you'll receive at closing, what payments remain uncertain, and what the buyer expects from you afterward. Also have your tax advisor evaluate the estimated after-tax proceeds. The best offer is the one that delivers the strongest overall outcome for your circumstances. 2. How should I compare offers with different seller notes, earnouts, or rollover equity? Start by separating cash at closing from money or ownership interests you'll receive or retain after the sale. A seller note depends on repayment, an earnout depends on agreed performance conditions, and rollover equity exposes you to the future value of the business. Each carries different risks. Have your M&A advisor, accountant, and transaction attorney review the terms before treating those amounts as equivalent. 3. What if the buyer offering more money has less certain financing? Ask where the money is coming from, what financing has been committed, and which approvals remain outstanding. A buyer may genuinely want your company but still be unable to complete the transaction. You may be able to negotiate stronger financing conditions or choose a buyer with a more credible path to closing. A higher offer means little if the deal never closes. 4. How important is the seller's transition period when comparing offers? Very important. Helping a buyer transition for sixty days is considerably different from agreeing to remain president for two years. Understand your responsibilities, compensation, decision-making authority, and any connection between your continued involvement and future payments. If you're selling to reclaim your time, an offer that keeps you tied to the company may be less attractive than its purchase price suggests. 5. Can I reject both offers and continue operating my business? Yes, subject to any contractual commitments you've already made. Receiving multiple offers doesn't obligate you to sell. You can negotiate further, continue operating, or reconsider the timing of your sale. Sometimes neither proposal meets your financial objectives or provides acceptable terms. Understanding your alternatives before granting exclusivity gives you greater control over the decision. |
Mark Hartmann is a former business owner turned M&A advisor—and the author of Sweat Equity Payday—who knows firsthand what it takes to build, grow, and sell a successful company. A three-time Inc. 5000 CEO honoree, he led his own eight-figure sale and now helps business owners sell companies worth $1M to $25M. Mark understands that selling a business is personal, not just financial. That’s why he works closely with owners to maximize value, protect their legacy, and transition on their terms.
He holds an MBA from Eastern University and a master's degree in organizational change management from St. Elizabeth University, as well as Certified M&A Professional (CM&AP), Certified Business Intermediary (CBI), Certified Exit Planning Advisor (CEPA), and Certified Value Builder (CVB) credentials.
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HartmannRhodes advises owners of companies typically valued between $1–$25 million. If you’d like a structured pre-sale valuation review and a readiness roadmap, we can walk you through the process and tailor it to your timeline and goals. Contact us today!
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