Why the First Offer Is Rarely the Best Offer

I have watched owners sell for 30%, 40%, even 50% less than they could have gotten. Not because the buyer was clever. Because the seller did not run a process.

They got one offer. It was reasonable. They took it.

That is not selling a business. That is accepting the first number someone put on the table.

What a process actually is

A sale process is a structured, competitive approach to finding a buyer. Instead of responding to the first inbound inquiry or listing the business and waiting, you identify a targeted buyer list, run a coordinated outreach, manage timing so multiple buyers are at the table simultaneously, and use the resulting competition to drive price and terms.

When buyers know there are other buyers, they behave differently. They move faster. They come in stronger on price. They are less aggressive on reps and warranties. They are less likely to retrade in diligence. Competition does that.

When there is no competition, the buyer knows it. And the buyer’s behavior reflects that knowledge.

The exclusivity trap

The single most common mistake I see sellers make is granting exclusivity too early.

A buyer will push for exclusivity from the moment they submit an LOI. They want to lock you up while they do diligence, so no other buyer can come in and outbid them during the process. That is rational for the buyer. It is almost always bad for the seller.

The moment you sign exclusivity, your leverage disappears. The buyer is no longer competing. They are diligencing. And diligence has a way of finding problems that become price reduction conversations. When you have no other buyer at the table, those conversations go one way.

Exclusivity is inevitable in most deals. The question is when and how long. Sixty days is very different from ninety. Ninety is very different from a hundred and twenty. And the period should not start until the buyer has done enough preliminary work to justify locking you up.

What real competition looks like

When I coach clients through a sale process, the goal is to have multiple parties at the same stage of interest at the same time. That requires orchestrating outreach, managing communication timing, and being deliberate about when you share information and with whom.

It also requires being willing to say no to a good offer because you believe a better one is coming. That takes nerve. Most owners have been working toward this moment for years, and when someone puts a real number on the table, the temptation to take it is enormous.

The discipline is in knowing whether the first number reflects market value or just the first buyer’s willingness to pay. Those are not the same thing.

The structure matters as much as the price

Most owners fixate on the headline number. Sophisticated sellers look at the full structure: how much is cash at close, how much is in a seller note, what are the earnout terms, what do the reps and warranties look like, what is the indemnification exposure.

A $10M offer with $7M at close, a $2M seller note, and a $1M earnout is a very different deal than $10M all cash. The headline is the same. The risk is not.

Competition does not just drive the headline number up. It drives the structure toward the seller. When a buyer is competing, they are less likely to load the deal with contingencies, earnouts, and seller notes. They want to win, and they know a cleaner structure is part of what winning looks like.

The lesson

The first offer is almost never the best offer. Sometimes it is close. Sometimes it is not even in the right neighborhood. You will never know unless you run a process that gives you something to compare it to.

Get multiple parties to the table. Manage timing deliberately. Understand the full structure before you compare offers. And be very careful about when you grant exclusivity and for how long.

The difference between a good sale and a great one is usually not the business. It is the process.

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If you didn’t know, now you know.

* Every deal I look at is under NDA. The stories I discuss are real. Some identifying details — company name, specific geography, exact numbers — may have been changed to protect the seller. The lessons haven’t.