Creative Strategies for Closing the Price Gap in Business Transactions

By Michael D. Rubin, CEO & Founder · Updated September 2026 · 722 words

When buyer and seller disagree on price, the gap can often be closed by changing how and when the price is paid rather than by one side simply giving in. Seller notes, earnouts, keeping the real estate, staged buyouts, royalties and carving out assets each move value or risk between the two sides.

Owners who insist on all cash at closing sometimes end up with a lower price than a more flexible structure would have produced. Even buyers who could pay cash often prefer to defer part of the price, because it protects them if the business does not perform as presented.

Why the gap appears

Sellers price on the company's best years and its potential; buyers price on proven earnings and the risk of owning it without you. Neither is wrong. The gap is usually about risk: who carries it if results fall after closing.

Sellers often feel they have carried the risk for years and want to be done with it. Buyers argue that if the business is as described, deferred payments cost the seller nothing. A good structure accepts both views and divides the risk in a way each side can live with. Naming the specific risk each side worries about is often the first step toward a structure that works.

Deferred payments: seller notes and earnouts

A seller note is a loan from you to the buyer for part of the price, repaid with interest over several years. It is common in lower middle market deals and often helps a buyer secure bank financing. An earnout ties part of the price to results after closing, such as revenue or gross profit.

Earnouts work best where both sides agree the future is uncertain for a specific reason. Suppose you have just launched a new service line that has cost real money but has not yet produced revenue. The buyer will not pay for it now; you will not give it away. An earnout tied to that line's revenue pays you if it succeeds and costs the buyer nothing if it does not. Our article on whether to accept an earnout covers the protections you need.

Other ways to bridge the gap

• Keep the real estate. If the price included property, you can keep it and lease it to the buyer at market rent. The purchase price falls by the property's value, and you receive rental income for years.
• Sell in stages. The buyer acquires a majority now and has the right, or the obligation, to buy the rest later at a price set by an agreed formula. You share in growth you believe is coming.
• Royalties. Instead of an earnout, the buyer pays a share of revenue, gross margin or EBITDA (earnings before interest, taxes, depreciation and amortization) for a set period. Royalties on revenue are often simpler to measure and harder to dispute than earnouts.
• Carve out assets. Non-core items, such as a vacation property, vehicles used personally or unrelated investments, can be removed from the deal, lowering the price to what the operating business supports.
• Rollover equity. You keep a minority stake alongside the buyer and share in the proceeds of a future sale.

Choosing the right tool

Each structure trades certainty for price. Before accepting one, ask how secure the deferred money is, who controls the results it depends on, what happens if the buyer sells the company or defaults, and how each payment is taxed. Your transaction attorney and CPA should answer the last two, and the answers can change which structure is best.

Compare offers on what you are likely to receive, when, and with what risk. Our article on comparing an all-cash offer with a higher seller-financed one walks through the arithmetic. Understanding the financing options buyers use also shows which structures their lenders will accept. None of these tools solves every price gap, but together they close more of them than most owners expect.

How MDR & Associates structures deals

Because we negotiate multiple letters of intent at the same time, the gap is often narrowed by competition before creative structure is needed. When it is not, we arrange SBA, conventional and seller-financed structures and work alongside your attorney and CPA to protect any money paid after closing. To talk through an offer or a gap you are facing now, contact us.

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Questions owners ask next

How do I protect a seller note?

Ask for security, such as a lien on business assets, a personal guarantee from the buyer where appropriate, and default terms that let you act quickly. Know in advance whether the buyer's bank will require your payments to pause if its own loan falls behind. Your transaction attorney drafts these protections.

Are royalty payments better than an earnout?

Sometimes. A royalty based on revenue is simple to measure and less exposed to how the buyer manages costs, while an earnout based on profit can be reduced by the buyer's own spending decisions. The right choice depends on what drives value in your company and how much control you keep.