Selling a Business: When the Price Is Just the Beginning

For many entrepreneurs, the price is the central question in a business sale. And understandably so—after decades of building something, the number attached to that legacy carries emotional and financial weight.

But in our experience, the purchase price alone rarely reflects the full complexity of a transaction.

Sellers often view contract negotiations as a technical formality—something the advisors will “handle.” In reality, this is where the deal gets its true shape: when and how the buyer pays, what’s held back, how the amount can change, and what each side commits to in return.

The sale agreement is like a coded balance sheet. If that balance is off, one side could take on disproportionate risk.

It Matters What the Buyer Is Actually Buying

Buyers aren’t always acquiring the whole company. In some cases, they’re only acquiring select assets. For example:

• In a restaurant deal, the buyer may take over operations, but not the property.
• In an engineering firm, they might acquire the projects and team—but not legacy liabilities or receivables.

In a share deal, the buyer takes on all past liabilities, contracts, and risks. In an asset deal, the seller typically retains those obligations. This choice has major legal, tax, and operational implications.

For example, if transferring customer contracts requires client approval, an asset deal can become complex. On the other hand, a share deal is often more straightforward—but carries more risk for the buyer, which they’ll typically address through warranties and indemnities.

What Happens After Closing—and Who Bears the Risk?

Many sellers feel that once the deal closes, their part is over. But it’s rarely that simple. In some deals, not all of the purchase price is paid upfront. Instead, payments may be staggered or tied to post-closing performance.

For example: In the sale of a B2B software firm Hintsoft Solutions has worked, 30% of the price was only paid if the company renewed contracts with three key clients within the first year post-sale. Since those clients were closely linked to the seller, both parties had a stake in a successful handover—and the seller stayed motivated to ensure continuity.

These “earn-out” structures only work when the seller remains involved during the transition. If not, they can introduce uncertainty—especially when performance criteria or valuation methods aren’t clearly defined.

The Price Is Just the Tip—Underneath Is a Formula

To many, the price seems like a round number: “X million dollars.” In reality, it’s a financial formula influenced by multiple variables:

• The company’s cash and debt at closing
• Net working capital (inventory, receivables, payables)
• Ongoing investments
• Deferred revenues and prepaid expenses

For example, target companies might delay payment of several large supplier invoices right before closing. This can inflate their cash position—giving the illusion of higher value. Without a working capital adjustment, the buyer would significantly overpay.

That’s why sellers and buyers should agree in advance on a “normal” working capital level—and adjust the final price accordingly. It’s not just fair—it prevents unnecessary friction at the table.

What If Something Goes Wrong After the Deal?

Even with due diligence, buyers can’t uncover everything—and post-closing surprises do happen.

This is where warranties and indemnities come in. Typically, parties agree on:

• A claims window (e.g. 18 months)
• A liability cap (e.g. up to 25% of the purchase price)
• Specific exclusions (e.g. unresolved tax or ownership disputes)

And, most importantly: How is the buyer protected if something does go wrong? Increasingly, deals include escrow accounts, where a portion of the price is held temporarily and only released after a clean post-closing period.

Preparing for Sale Starts Years Before Closing

A successful exit doesn’t begin at the negotiation table—it starts years earlier. A company with unclear ownership, sloppy bookkeeping, or uncollected debts may be a strong business, but buyers will see risk.

Strong preparation includes:

• Reviewing and updating contracts
• Analyzing working capital cycles
• Cleaning up ownership structures
• Building a transparent legal and financial framework

This behind-the-scenes prep can add millions to the final price—and ensures a smoother, faster sale process.

Final Thought: Think “Price Plus Terms”

Selling a business isn’t about “a number.” It’s about what’s behind that number—how and when it gets paid, under what conditions, and who takes on which risks.

The sellers who understand this from day one don’t just get a better price. They get better terms, clearer expectations—and the peace of mind that comes from handing over their life’s work on the right foundation.