1. Do not reply yet
An offer arrived. Maybe a letter, maybe a number over coffee, maybe a buyer who keeps calling. Your instinct is to answer, to be gracious, to not seem difficult. Hold that instinct for one day.
Here is the reason, and it is mechanical, not emotional. Your leverage in a sale peaks the day before you sign anything and drops the moment you do. A warm “sure, have a look at the numbers” becomes exclusivity. A casual “that sounds about right” becomes the anchor every later conversation is measured against. You do not need to be cold. You need to be unhurried, because unhurried is the one posture a buyer cannot argue with, and it is the posture of an owner who already knows their number.
This guide gets you through the first week in order: what to say, what not to sign, how to read what is actually on the table, how to decide whether you want the sale at all, and how to set the floor you will not cross. It is built from the same material as the book and the Endgame Playbook, compressed to the week you are in.
If you are not selling: keep reading anyway. The skill of reading an offer is the same skill that tells you what a bank’s term sheet, a partner’s buyout, or a key employee’s equity ask really costs you. You can borrow the buyer’s hard eyes without ever taking the call.
2. The first 72 hours
Three days. Here is the whole list.
Say little, and say it warmly. “Thank you. I take this seriously, and I am going to give it the attention it deserves. Give me a few days.” That is a complete answer. It signals a prepared seller, which is the single most expensive thing a buyer can run into.
Sign nothing binding. Not a letter of intent, not an exclusivity or no-shop clause, not a one-sided confidentiality agreement. In a typical letter of intent the economics are non-binding, subject to diligence and financing, but the confidentiality and exclusivity provisions usually do bind, and the no-shop they impose, commonly 45 to 90 days and lengthening in recent years, removes your alternatives during exactly the window in which price is most exposed to revision. Which provisions bind, and on whom, is a question for your deal attorney, not something to take from a book. If you sign one thing this week, let it be a plain mutual confidentiality agreement your attorney has read.
Make three calls. Your deal attorney, to put them on notice and ask for an hour this week. Your CPA, for an estimate of what you would actually keep after tax under your current setup, which you will need in Section 6. And one person who has sold a business before, not for advice on your deal, but to borrow their calm.
Start your floor. Before you study the offer, spend fifteen minutes on a rough version of your number (Section 6). A year of personal spending, including the costs the company carries today, divided by a safe withdrawal rate, plus what you would clear at close after debts and one-time costs. In pencil. Refine it with your financial advisor before you rely on it. The number you would refuse, roughed out now while your head is clear, is worth more than any tactic you will learn later.
3. Read the offer the way the buyer does: three prices, two clocks
Owners read an offer top to bottom and stop at the headline. The headline is the least informative number on the page. A letter of intent is an opening position with a clock attached, and it is better read as three prices, two clocks, and three ways the money moves.
The three prices. The headline (the number everyone repeats). The working-capital peg (a normal level of working capital the buyer expects to come with the business, trued up after close). And the earnout (a slice paid later, only if targets are hit).
The two clocks. Exclusivity (the no-shop window, during which you have no alternative) and escrow (a holdback released over time after close).
The three money shapes. Pay less (adjustments and retrades), pay later (note and escrow), and pay if (earnout).
The tool that holds this together is the Five-Line Translation. For any number anyone has said to you, fill in: headline, cash at close, working-capital peg, earnout, escrow. Until you have those five lines, you do not have an offer, you have a headline.
A worked example (Gene, a composite drawn from several real deals)
Gene’s letter read fourteen million dollars. Here is what the five lines did to it.
| Line | Amount | Held or lost |
|---|---|---|
| Headline | $14,000,000 | |
| Earnout ($2.5M face, revenue growth, three years, no covenants) | paid $0 so far | at risk; about $525,000 at the base rate |
| Cash at close before adjustments | $11,500,000 | |
| Working-capital peg (left “to be agreed within 30 days”) | $600,000 | owed back at true-up |
| Week-nine retrade | $500,000 | lost |
| Escrow (18 months, no insurance) | $600,000 | held, not lost |
| Wire | $9,800,000 | 11.5 minus 0.6, 0.5, and 0.6 |
Nothing “went wrong” in Gene’s deal. No one lied. The pages simply did what they said, and the pages were written by the buyer. The headline was a bet; the wire was the fact.
Two reading rules fall out of Gene’s file. Escrow is held, not lost: price it at the amount at risk times the chance of a claim, not as a loss. The peg is where quiet money moves: a peg left “to be agreed” after signing is a peg the buyer will set. Working-capital adjustments appear in more than ninety percent of private-target deals (SRS Acquiom, as cited in Buyer-Ready, chapter 4), so this line is not an edge case, it is the norm.
Your size (composites, drawn from several real deals)
The five lines work at any size; what changes is who writes the letter and what structure they load it with.
Frank (about one million of seller’s discretionary earnings, residential plumbing and drain service). Frank’s letter may be two pages, from a broker. His buyer is usually an individual financed through SBA lending, the process is broker-run, and an asset sale is the usual default. An illustrative three million dollar headline with a five hundred thousand dollar seller note is two and a half million at close, before fees and the asset-sale tax questions (arithmetic). The note’s terms are set by lender rules, which is a question for his attorney, not a figure in this guide. What the buyer checks in Frank’s file: the net after the note, fees, and tax; whether Frank knows their floor; whether he will carry the note; and how long he will stay.
Linda (about six million of EBITDA, commercial HVAC, plumbing, and electrical, three branches). Linda’s letter is longer and adds rollover (keeping a stake in the combined company) and insurance on the reps. An illustrative forty-eight million dollar headline with a third rolled (sixteen million) leaves thirty-two million of cash before escrow and taxes (arithmetic); if she keeps seventy cents of that and thirty goes to tax and holdback, that is about $22.4 million now. What the rolled stake is actually worth to her depends on its class and terms, which is a question for her attorney and financial advisor. More bidders, more structure, more pages, and a sell-side quality-of-earnings review is standard at her size.
Same five lines, every time. The headline is a bet; the wire is the fact. The only thing that changes with size is how many pages the buyer uses to move the two apart.
4. Structure decoded, and where the risk hides
Each structure line is a lever the buyer uses to move risk from themselves onto you. None are villainous; they are how deals at this size get financed. Each deserves one plain question, and every tax and legal question below belongs to your advisors, not to this page.
Seller note. Money the buyer owes you over time, usually subordinated to their bank. It is you lending part of your own price back. Ask your attorney: what rate and term, and what happens to my note if the business struggles under new ownership, and how far am I subordinated?
Escrow or holdback. A slice parked against problems found after close; present in about 88 percent of recent deals (SRS Acquiom, per chapter 4). Ask: how much, how long, what triggers a claim, and is my exposure capped?
Reps and warranties. What you personally stand behind after close, and for how long. This is where a clean data room pays you back: everything you documented in advance is something you are not exposed on later. Insurance on the reps is common at larger sizes; whether it fits yours is an attorney question.
Transition. Are you expected to stay, for how long, in what role, paid how? A transition tail can be fine or a trap. Know which before you agree.
The earnout, read by its four levers
The earnout is the part of the price you might never see. Across deals like these, earnouts pay about twenty-one cents for every dollar promised, and about four in ten pay nothing at all (SRS Acquiom, M&A Earnout and Milestone Trends, 2026). Two earnouts can carry the same face value and be worth completely different things. The difference is four levers:
- What it is measured on. Revenue growth, gross profit, or EBITDA of a business you no longer run, versus one clean thing you spent years making solid (a named customer kept, a specific revenue line, a unit count).
- How long it runs. Two years or more, versus about a year tied to the specific risk.
- Your protections: what must the buyer promise to do? Nothing written, versus run it like before, keep the spend, keep your customers where they are, keep books that measure it.
- Acceleration. Nothing happens if they resell, fire you, or shut your division, versus it pays in full.
The buyer usually drafts the first version of each. The seller can draft the second. The drafting is free, and it happens before you sign.
A worked example (illustrative arithmetic, not a valuation). A twelve million dollar offer, with three million of it in an earnout. Cash at close, nine million. Earnout promised, three million. Earnout at the average payout of twenty-one cents on the dollar, about $630,000. What the offer is likely worth the day you sign: about $9.6 million, not twelve.
The pattern to notice: aggressiveness and certainty pull apart. The offer written to win your attention, highest headline, most structure, is frequently the one most likely to fail or re-trade. A plainer, mostly-cash offer at a lower headline can be worth more in the only currency that counts, which is money that actually reaches you.
5. Hold or sell? The question under the question
Before you negotiate the offer, decide whether you want the sale at all. Owners skip this, because an offer feels like a decision already made. It is not.
Here is the framework, from our research on how these deals actually resolve (WP-003, The Deal Certainty Discount). A headline offer is a forecast, not a price. What you will realize is the headline times the probability it actually closes, times one minus the compression that happens after signing. The gap between the headline and that realized number is the Deal Certainty Discount, and it is almost always invisible to the owner staring at the headline.
Three facts set its size, and all three are in the deal literature. About one in three signed sell-side processes end with no deal at all (Pepperdine Private Capital Markets Report, as cited in chapter 4). Purchase-price adjustments appear in the large majority of private-target deals, revising the number down after the handshake. And earnouts realize roughly a fifth of their face. So an offer is worth its headline only if it is all cash, certain to close, and free of adjustment, which almost none are.
Now put that against the other side of the ledger: what the business is worth to you if you simply keep running it. The cash it puts in your pocket each year, the direction it is heading, and whether your net worth is dangerously concentrated in this one asset. Your financial advisor can help you set a hold hurdle: the return you would need from reinvested, after-tax proceeds to beat what the business already pays you. If the expected realized value of the sale, after the certainty discount and after tax, does not clearly beat the value of holding, the honest answer may be to hold, or to hold out for a better, more certain offer.
Run your specific situation through the free Hold or Sell tool. It takes the offer you entered, estimates its expected realized value and its Deal Certainty Discount, and tells you which way your own numbers lean. It weighs the decision; it does not value your business and it is not advice.
And if the answer is “I am not selling this one”? That is a complete and common answer. You lose nothing by having gotten this far, because everything you just did, the floor, the clean read, the walk-away number, is preparation you keep. “Not for sale” should never mean “not prepared.”
6. The Walk-Away Page
One page, filled in before emotion gets a vote. It is the most valuable thing in this guide, and it is a family number, not just a business one.
- My core. A year of personal spending, including the costs the company carries today, divided by a safe withdrawal rate (three or four percent). This is what the business has to replace. (Refine with your financial advisor before you rely on it.)
- My floor, after tax. The cash-at-close figure, after your CPA’s estimate of what you keep, below which I walk, no matter how good the headline looks. Dated, with the CPA review date noted. Not my hope, my floor.
- My terms. The structure I will not accept past a point: maximum earnout I will treat as real, maximum seller note, the reps I will not personally carry, the transition I will and will not do.
- My walk-away sentence, written in advance so I can say it calmly: “I appreciate the offer. It is not one I can take on these terms. If that changes, I am here.”
- Who this touches. Your spouse or partner signs too, or you write down who else the number touches, so it is not relitigated under pressure at ten at night.
A floor you set while calm is a wall. A floor you improvise while flattered is a suggestion. (Walt, a composite: his first letter read nineteen million, and the cash at close was about nine million pretax against a twelve million after-tax floor he had not yet written. The letter looked like a win. His floor, once written with his CPA, said otherwise.)
7. More than one offer: rank by what it pays, not what it says
If you are fortunate enough to have more than one offer, do not line them up by headline. Line them up by expected realized value, using the Offer Comparison sheet (in the Offer Arrived Kit).
For each offer, fill the same rows: headline, cash at close, note, earnout, escrow, peg, reps, your role after, how many real bidders are behind it, and how far along it is. Then estimate, for each, the probability it closes and the compression after signing, and compute the expected realized value and the Deal Certainty Discount.
Two things fall out almost every time. The ranking changes: the highest headline is frequently not the highest realized value once you discount the earnout and the close risk. And competition is worth more than any single term: a credible second bidder raises both your price and the chance that any one deal closes, because a buyer who knows you have an alternative behaves differently. Even quietly keeping a second conversation alive is worth real money.
8. When to bring in people you pay
There is a point where doing it alone costs more than help would. It is usually the point where a buyer with a full-time deal team sits across from an owner doing this for the first time.
An advisor earns their fee three ways: they run a process so you are not negotiating against yourself, they create or keep competitive tension, and they keep you from the unforced errors that come from being emotionally in the deal. What they cannot do is want it more than you, or know your floor better than you, which is why Sections 5 and 6 are yours to do first.
If you are at that point, with a real offer and real stakes, there is a direct way to work the last mile with people who have done it many times: the Cordis MRI. It is an invitation, not a funnel. If it fits your situation you will be invited to apply. If not, everything in this guide still gets you further than most owners ever get alone.
9. Your next step
If an offer is in front of you, the Offer Arrived Kit is built for exactly this week: the first-week plan, the Walk-Away Page, the Five-Line Translation, and the Offer Comparison, ready to fill. It is included in Defend Your Number, alongside Deal Math and everything that lets you walk in already knowing your number.
Start with the free Hold or Sell tool to see where your offer really stands. Then, if you are moving forward, move forward prepared. The owner who reads the five lines, knows their floor, and has a credible alternative is the calmest person in the room, and the calmest person in the room keeps the most of the headline.
10. Disclaimer
Educational estimates only. Not an appraisal, valuation opinion, or tax, legal or investment advice. This guide is general information, not advice on your specific transaction. Composites are drawn from several real deals; names and details are changed and no one is a real, identifiable owner. Figures and ranges are illustrative, or are sourced statistics, or are arithmetic shown on the page, and will differ from any real offer or outcome. Nothing here is an offer to buy or sell a business or a security, and nothing here creates an advisory relationship. Before you sign or decide anything, have your own attorney, CPA, and financial advisor review your specific situation.