Valuation
A $5M Offer Isn’t Always Worth $5M: How Deal Structure Decides What You Keep
Why two offers with similar headline prices can leave you with very different amounts, and the questions to settle before you go to market.
By Michael D. Rubin, CEO & Founder · Updated September 2026 · 783 words
What you keep from a sale depends on how the price is paid, not just how big it is: cash at closing, a seller note, an earnout and retained equity each carry different risk and timing. A higher offer loaded with deferred payments can be worth less to you than a lower offer paid in cash, and sometimes it is worth more.
Owners tend to remember one number, the headline price. What they actually receive, after debt payoff, taxes, working capital adjustments and payments still due years later, is often a different number, and deal structure decides much of that difference. Settle these questions before marketing starts, not when two letters of intent are already on your desk.
Two offers, side by side
Here is a hypothetical. Both offers are for the same company; the figures are illustrations, not typical terms.
| Offer A | Offer B | |
|---|---|---|
| Headline price | $5.0 million | $4.5 million |
| Cash at closing | $3.5 million | $4.5 million |
| Seller note | $1.0 million, paid over five years | None |
| Earnout | $0.5 million if revenue targets are met | None |
| Financing | Buyer's bank loan plus your note | Buyer pre-approved for financing |
| Risk you keep after closing | The note and the earnout | Little beyond normal indemnities |
Reading the fine print of each
Offer A looks bigger, but nearly a third of it is not cash. The seller note (a loan from you to the buyer, repaid over time) makes you a lender to the business you just sold, usually ranking behind the buyer's bank. If the business struggles, the bank may require your payments to stop until its loan is current. The earnout (a payment that depends on the business hitting targets after closing) depends on results you no longer control. Ask, too, what happens to the note if the buyer later sells the company or refinances.
That does not make Offer A worse. Seller notes are frequently paid in full, and receiving part of the price over time can have tax advantages your CPA should assess. Some offers also include rollover equity, where you keep a minority stake in the company under its new owner. If that owner grows the business and sells it again, the stake can be worth more than the cash it replaced. Our article on how a private equity rollover works explains the mechanics.
Questions to answer before going to market
Our guide to comparing offers works through the after-tax arithmetic for each type of consideration.
- How much cash do you truly need at closing? Enough to retire debt, pay taxes and fund what comes next. That figure is your floor, and it tells you how much flexibility you can offer on the rest.
- Can the business carry the debt a buyer will need? Lenders take adjusted earnings, subtract a fair salary for whoever runs the business and the yearly loan payments the price implies. If little is left, the price will not be financed as asked, whatever a valuation says.
- Will you carry a note, and on what terms? The interest rate, the length, the collateral, and whether the buyer's lender can freeze your payments.
- Would you keep equity? Only if you trust the buyer's plan and can wait years for that money. If you want a clean break, say so early, because it shapes which buyers should be approached.
- What does each structure do to your taxes? Asset or stock sale, how the price is allocated and when payments arrive all matter. Your CPA and transaction attorney decide, ideally well before a sale.
Flexibility brings more buyers
Structure affects not only what you keep from one offer but how many offers you get. An all-cash, take-it-or-leave-it position limits you to buyers who can pay or borrow the full price. Openness to a reasonable seller note or a partial rollover lets more qualified buyers compete, and competition is what raises price. Owners who insist on rigid terms often end up with a single buyer able to meet them, and that buyer has little reason to pay more. Flexibility is a negotiating asset, not a concession. Decide in advance which terms you would accept and on what conditions, so you can respond quickly when a buyer proposes them. Understanding the financing options behind each offer helps you decide which terms to offer and which to refuse.
How MDR & Associates compares offers
We negotiate multiple letters of intent at the same time and present every offer to you in person, translating each into cash at closing, deferred amounts and the risk attached, alongside your attorney and CPA. You decide which to accept, reject or counter. If you already have an offer and want to know what it is really worth, talk to us.
Where this fitsBusiness valuation in Texas →
Questions owners ask next
Is an earnout or a seller note safer?
A seller note is usually more predictable, because the amount is fixed and payment does not depend on hitting targets, though payments can be paused if the buyer's bank requires it. An earnout depends on future results you no longer control. Security, clear definitions and short measurement periods reduce the risk in both.
Why would a buyer who has the cash still ask for a seller note?
A seller note keeps you invested in a smooth handover and gives the buyer recourse if the business was misrepresented. Lenders also like to see the seller share some risk. Agreeing to a modest, well-secured note can raise the price or widen the pool of buyers willing to compete.