When there's no broker, the terms come straight to you. Most small-business offers are more than a headline price: part may be paid later through seller financing, part may depend on future results through an earn-out, and part may be held back after closing. Knowing what each term means, and what to ask, is your job now.
If you've decided to sell without a broker, you've probably already done the arithmetic on the commission you won't pay. What's less obvious is the part of the broker's job that lands on your desk instead: reading an offer and understanding what it actually says.
This post explains the terms you are most likely to be asked about, in plain language. It won't tell you what to accept. That depends on your business, your buyer and your own situation, and it's a conversation for your attorney and accountant. What it will do is make sure no term in a letter of intent is a surprise.
Why the headline price is only part of an offer
Two offers with the same number on top can be worth very different amounts to you.
One buyer pays the full price in cash at closing. Another pays most of it at closing, a slice over the next few years through a note, and another slice only if the business performs. Both are "the same price." Only one of them puts the whole amount in your account on day one.
So when an offer arrives, read it as a set of questions. How much do I receive at closing? How much later, and on what schedule? How much depends on things I won't control? And what could reduce the amount after the fact?
The terms below are the usual answers.
Seller financing: you become the lender
Seller financing, sometimes called a seller note or owner financing, means you let the buyer pay part of the price over time. The buyer signs a promissory note to you. You receive payments, usually with interest, on a schedule you agree.
It's common in small-business sales for a practical reason: many buyers can't or don't want to fund the whole price from savings and a bank loan. A seller note fills the gap. Some buyers also see it as a signal. If you're willing to be paid over time out of the business's own earnings, you must believe those earnings are real.
What it means for you: you are now a lender to the person running your former business. If they run it well, you get paid. If they don't, you may not, and your security may be a business in worse shape than the one you sold.
Questions to ask about any seller note:
- How much of the price is deferred, and over what period? The larger the share and the longer the term, the more of your price depends on the buyer.
- What's the interest rate, and when do payments start? Some notes begin paying right away; others start after a delay.
- What secures the note? Common options include a lien on business assets or a pledge of the shares. Ask what you could actually recover if payments stop.
- Will the buyer sign personally? A note backed only by the business is weaker than one the buyer is personally liable for.
- Is a bank lending too? If a lender is financing the rest of the purchase, it may require your note to rank behind its loan, and may restrict when you can be paid. Ask to see those terms early, not at closing.
- What happens on default? What counts as a missed payment, how long the buyer has to fix it, and what rights you have then.
- Who is the buyer? A note is only as good as the person paying it. Their experience, finances and plan for the business matter more here than anywhere else in the deal.
Tax treatment of payments received over time can differ from a lump sum. Ask your accountant before you agree to a structure, not after.
Earn-outs: part of the price depends on the future
An earn-out makes part of the price contingent on how the business performs after the sale. For example, an additional payment if revenue or profit reaches an agreed level in the year or two after closing.
Earn-outs usually appear when you and the buyer disagree about the future. You believe the growth is coming; the buyer wants to see it first. The earn-out lets both of you be right, but it moves some of your price from certain to uncertain.
The difficulty is that after closing, the buyer runs the business. Decisions about pricing, staffing, spending and even which costs sit in which accounts are theirs. Those decisions can move the numbers your payment depends on.
Questions to ask about any earn-out:
- What exactly is measured? Revenue is simpler to verify than profit. Profit depends on which costs get charged against it.
- How is it calculated, and by whom? The definition should be written out precisely in the agreement, not left to "standard accounting."
- Over what period, and is it all or nothing? A payment that scales with results is different from one that disappears if a target is missed narrowly.
- What can the buyer change? Ask whether there are limits on decisions that would reduce the measured result during the earn-out period.
- Can you see the numbers? You'll want the right to review the figures the payment is based on.
- What share of the total price is contingent? Many owners treat earn-out money as upside rather than as money they are counting on. Whether that suits you is your call.
Holdbacks and escrow: money set aside after closing
A holdback, often held by a neutral escrow agent, is part of the price kept back after closing to cover claims if something you told the buyer turns out to be inaccurate. If no claims are made during an agreed period, the money is released to you.
It connects to the representations and warranties in the purchase agreement: the statements you make about the business, such as that the financials are accurate and there are no undisclosed disputes. The holdback is how a buyer makes sure there's money available if one of those statements proves wrong.
Questions to ask: How much is held, for how long, who holds it, and what exactly allows the buyer to make a claim against it? Also ask whether there's a cap on what you could owe beyond the holdback.
The best protection is disclosure. A problem you tell a buyer about before signing is priced in. A problem they find after closing becomes a claim.
Working capital and inventory: the adjustments
Some offers include a target for working capital or inventory at closing, with the price adjusted up or down if the actual figure differs. In smaller sales, inventory is often counted just before closing and paid for separately at an agreed basis.
These adjustments can move the final amount meaningfully, so ask how they're defined, when the count happens, and who does it.
Your transition and the post-sale terms
Offers usually include terms about you after the sale:
- Transition or training period. How long you'll stay involved, how many hours, and whether you're paid for it.
- Consulting or employment agreement. If you'll work for the business after closing, on what terms.
- Non-compete and non-solicitation. How long, what geography, and what activities you'd be agreeing not to do.
These are negotiable like any other term. They also interact with the rest of the offer. A long transition makes more sense if part of your price is an earn-out you want to help achieve. A tight non-compete matters more if you plan to keep working in the industry.
Reading a letter of intent when you're on your own
A letter of intent, or LOI, is usually where these terms first appear together. Much of it is typically non-binding, but it sets the frame for the purchase agreement, and terms agreed in an LOI are hard to reopen later. A few habits help:
- Translate every offer into three numbers: cash at closing, deferred payments, and contingent payments. Compare offers on those, not on the headline.
- Ask for definitions, not labels. "Seller note on customary terms" isn't a term. Rate, period, security and default provisions are.
- Ask the buyer to explain their financing. Where the money at closing comes from tells you a lot about how firm the offer is.
- Don't agree to terms verbally before they're written down. Once you've said yes in a conversation, it's harder to push back on paper.
- Get the documents reviewed. The purchase agreement, the note and any security documents deserve an attorney who works on business sales, and your accountant should see the structure before you sign.
None of this requires a broker. Screening buyers, running first conversations and working through terms are things owners do themselves every day. Our guide to screening buyers and running first conversations covers the earlier stage.
Where SimpleExit fits
SimpleExit handles the part before the offers: professional marketing materials, a listing across the major business-for-sale platforms and buyer networks, NDAs collected before any detail is shared, and NDA-signed inquiries forwarded to you. It's a flat fee of $10,000, not a commission, so the terms you negotiate change what you receive and nothing else.
You run the conversations and you decide what to accept. SimpleExit doesn't negotiate on your behalf or represent you in the sale. If you'd like help reviewing a letter of intent or a purchase agreement, optional support is available separately, only if you ask for it. You can see each step on the how it works page.
If you're weighing a sale and want to talk through how it would run for your business, book a free consultation. There's no obligation afterwards.