The Comprehensive Guide to Making an Offer on a Business for Sale

How to Make an Offer on a Business for Sale: A Strategic Guide for Success

Buying an established business is one of the most direct routes to success, offering financial independence and the chance to build upon a proven legacy. However, the transition from "searching" to "offering" is where many aspiring entrepreneurs hesitate.

Making an offer is not just about picking a number; it is a layered process involving risk mitigation, financial analysis, and professional negotiation. At First Choice Business Brokers (FCBB), we believe that a well-crafted offer is the foundation of a successful acquisition. This guide will walk you through the essential steps to making an offer that gets accepted while protecting your long-term interests.

The Pre-Offer Phase: Analyzing the "True" Numbers

Before you submit an offer, you must move beyond surface-level marketing to understand the business's operational reality. An offer made without deep analysis is a recipe for a financial nightmare.

Recasting and SDE

The financial statements of privately owned businesses rarely show the actual cash flow available to a new owner because many owners run personal or non-recurring expenses through the company. FCBB brokers assist in "recasting" or "normalizing" these financials. This process adds back owner salaries, personal perks, and one-time costs to determine the Seller's Discretionary Earnings (SDE). Your offer should be based on this SDE figure rather than stated net profit.

Verifying the Asking Price

A seller’s asking price is often influenced by emotional "sweat equity" or personal retirement needs. At FCBB, we use data from thousands of successful transactions to estimate a Most Probable Selling Price (MPSP) using industry-specific multiples. This gives you a solid, defensible foundation for your offer.

Understanding Deal Structure: Price vs. Terms

In business acquisitions, the terms of the deal are often as important as the price. A higher price with favorable terms may be more beneficial than a lower "all-cash" offer that drains your working capital.

• Asset vs. Stock Sale: Most small business acquisitions are asset sales, where you purchase specific assets and leave unwanted liabilities with the seller. A stock sale involves buying the entire legal entity, meaning you inherit all past financial and legal obligations.
  
  
• Seller Financing: This occurs when the seller provides a loan for part of the purchase price. It not only reduces your initial cash requirement but also signals the seller's confidence in the business's future success.
  
  
• Earn-outs: These are additional payments contingent on the business meeting specific performance targets after you take over.

The Letter of Intent (LOI): Your Roadmap to Closing

Your offer will typically be presented as a Letter of Intent (LOI). This is a non-binding document (except for confidentiality and exclusivity clauses) that outlines the preliminary understanding between you and the seller.

Key Components of an FCBB-Guided LOI:

• Purchase Price and Structure: Clearly stating how and when the price will be paid.
• Earnest Money Deposit: A "good faith" deposit held in trust to prove your serious intent.
• Due Diligence Timeline: A specific window (usually 15–30 days) to verify every facet of the business.
• Contingencies: Clauses that allow you to withdraw if you cannot secure financing or if the lease cannot be transferred.
• Exclusivity: A period during which the seller cannot negotiate with other buyers.

Why Professional Negotiation Matters

Direct negotiations can be fraught with emotion. A simple misunderstanding can derail an excellent deal. An FCBB broker acts as a professional, objective intermediary who handles the tough conversations and keeps the discussion focused on facts.

By filtering out the emotion, your broker secures better terms and preserves a positive relationship with the seller, which is essential for the transition and training period after closing.

The Role of Due Diligence

Once your offer is accepted, you enter the "forensic investigation" phase. You must not accept profit and loss statements at face value; they must be verified against tax returns and bank statements.

Your Due Diligence Checklist Should Include:

• Financials: 3 to 5 years of tax returns and SDE calculations.
• Lease Review: Ensuring the landlord will approve you as a tenant and that the lease terms are stable.
• Operational Health: Assessing if the business is overly dependent on one key employee or a single supplier.
• Legal Standing: Checking for potential lawsuits, liens, or zoning issues.

Conclusion: Start Your Journey with Confidence

Making an offer is the first real step toward achieving your dream of business ownership. While the process is complex, you do not have to navigate it alone. Partnering with FCBB transforms a risky gamble into a strategic investment. We provide exclusive access, expert valuation, and a guided process to get you to the closing table safely.

Your future as a business owner starts here.

Disclaimer: This content is for informational purposes only and does not constitute legal, financial, or investment advice. Buyers should consult qualified professionals before making acquisition decisions.