Insights

7 deal terms that matter more than price when selling a business

Deal terms when selling a business decide how much of the headline price you actually keep, and seven of them move more money than the number on the offer: cash at close, the working capital adjustment, escrow size and duration, the indemnity cap and survival period, the earnout definition, seller note protections, and what you are required to do after closing.

Owners negotiate the price hard and then sign the terms that give it back. It is not carelessness. The price is one number you can hold in your head, and the terms are forty pages of language that all sounds standard until it costs you something.

The seven below are ordered by the number of dollars each one can move away from the headline price, largest first. That ordering is deliberate: if you only have leverage to fight for two or three items, fight for the ones at the top of this list rather than the ones your buyer is most willing to argue about.

1. Cash at close, as a share of the headline price

Cash at close is the single largest swing in any offer, and it is the term most often buried in a summary page. Cash at close is the portion of the purchase price wired to you on the closing date, net of escrow, holdbacks, and any purchase price adjustment, and it is the only part of an offer that is not conditional on something happening after you hand over the keys.

Two offers with the same headline number can differ enormously here, because the rest of the consideration can sit in an earnout, a seller note, rollover equity, or a holdback, in any combination. The percentage that arrives at closing is set by the buyer type, their financing, and how much risk your financials leave on the table, so ask for it as a dollar figure rather than a percentage and ask what it is net of.

Takeaway: ask every buyer for one number, the dollars unconditionally wired to you on the closing date, and compare offers on that.

2. The working capital adjustment and how the peg gets set

The working capital adjustment can move six figures at closing on a mid-sized deal, and it is decided by a formula in the purchase agreement rather than by any general rule. A working capital peg is the target level of current assets minus current liabilities the business is expected to have at closing, with anything above the target paid to you and anything below it deducted from your proceeds.

What matters is how the peg is calculated, and that is entirely negotiable: which months go into the average, whether the average is trailing twelve months or a seasonal window, which accounts are included, how aged receivables are treated, and whether deferred revenue counts as a liability. A peg built from your strongest months is a peg you will fail. Ask which months are in the calculation, ask to see the schedule before the LOI is signed, and ask who prepares the closing statement and how long you have to object to it.

Takeaway: the working capital peg is set by a formula you can negotiate, so get the actual schedule in writing before exclusivity starts. The mechanics are in working capital peg when selling a business.

3. Escrow size, duration, and whether it is your only exposure

Escrow determines how much of your money sits in someone else's account after closing and for how long, and its size is negotiated rather than fixed. An escrow or holdback is a portion of the purchase price withheld at closing and held by a third party to cover claims the buyer may bring later, released to you on a schedule in the agreement.

Three variables matter and they are separable. Size is the dollars withheld. Duration is how long they sit there, which usually tracks the survival period for the seller's representations. The third variable is the one owners miss: whether the escrow is the exclusive remedy, meaning the buyer's claims are capped at the escrow amount, or whether it is merely the first place they look before coming after you personally. An exclusive-remedy escrow is worth agreeing to a larger number for.

Takeaway: negotiate exclusive remedy before you negotiate the escrow percentage, because the cap matters more than the amount. See escrow and holdbacks when selling a business.

4. The indemnity cap, the basket, and the survival period

The indemnity terms decide your maximum exposure after closing, and unlike the escrow they can reach beyond the money held back. Three numbers in the agreement define the shape of that exposure: the cap, which is the ceiling on what you can be required to pay; the basket or deductible, which is the threshold claims must exceed before the buyer can recover anything; and the survival period, which is how long after closing each category of representation stays live.

None of these has a standard answer, because they vary by deal size, industry, buyer type, and whether representation and warranty insurance is in the deal. If insurance is available, ask who pays the premium and whether the policy replaces your indemnity obligation or sits on top of it. Also check which representations are carved out of the cap entirely, because carve-outs are where a capped deal quietly becomes an uncapped one.

Takeaway: ask for the cap, the basket, the survival period, and the list of carve-outs as four separate answers, because a low cap with broad carve-outs is not a low cap. The underlying promises are covered in reps and warranties when selling a business.

5. The earnout definition: which metric, who controls it, how it is measured

An earnout is worth exactly what its definition allows you to collect, and the definition is written by whoever cares more. An earnout is a portion of the purchase price paid after closing only if the business hits agreed targets, measured over a defined period.

The metric is the first question. Revenue is easier to verify than EBITDA because it has fewer places to hide an adjustment. EBITDA can be reduced by decisions the buyer makes after closing, including allocated corporate overhead, new hires, and accounting policy changes, unless the agreement says otherwise. The second question is control: if you no longer run the business, you are being paid on results produced by someone else's decisions. The third is measurement: who prepares the calculation, on what accounting basis, what audit or inspection rights you have, and what happens if you disagree.

Takeaway: an earnout with a clear metric, stated accounting policies, and inspection rights is a real deal term. An earnout without them is a discount you agreed to. See earnout vs seller note vs rollover equity.

6. Seller note protections: subordination, standstill, security, and interest

If you carry a seller note, the protective terms decide whether you get repaid, and they matter more than the interest rate. A seller note is deferred purchase price the buyer pays you over time under a promissory note, which makes you a lender to the person who just bought your business.

Four terms determine your position. Subordination sets whether your note sits behind the buyer's bank debt, and in most bank-financed and SBA-financed deals it does. A standstill provision may prevent you from taking any collection action for a period even after a default, so ask how long that period runs. Security is whether the note is backed by collateral, a personal guarantee, or nothing at all. Interest and amortization decide your cash flow, including whether there is an interest-only period at the front. Ask what happens to your note if the buyer sells the business, and ask whether the note accelerates.

Takeaway: read your seller note as a lender would underwrite it, because that is the role you accepted. Details are in seller financing when selling a business.

7. What you are required to do after closing

Post-closing obligations are the term owners agree to fastest and regret longest, because they are priced in time rather than dollars. Three commitments usually travel together: a transition or employment period, a non-compete, and sometimes a consulting arrangement.

For the transition, the questions are length, whether it is full-time or part-time, whether you report to someone, and what happens if you want out early. For the non-compete, the questions are duration, the geographic scope, and how the restricted business is described, because a broad description can block your next venture in an industry you never intended to compete in. Texas enforces reasonable non-competes tied to the sale of a business, and reasonableness is judged on the specific terms, so this is a conversation for your own attorney rather than a rule of thumb. For consulting, ask whether the payments are guaranteed or contingent on you being asked to work.

Takeaway: negotiate the non-compete's description of the restricted business as carefully as its duration. See non-competes when selling a business.

The Certain-Dollars Test: the one calculation that ranks offers correctly

The Certain-Dollars Test is a single figure: the dollars wired to you at closing that are not held in escrow, not subject to a purchase price adjustment, and not contingent on anything happening after the closing date. Divide that by the headline price and you have the share of the offer that is actually certain. Everything else on the offer is a claim you may collect.

Here is the arithmetic, on two hypothetical offers with figures assumed purely for illustration.

• Offer A, headline $6,000,000. Assume the structure is $4,200,000 cash at close, a $900,000 earnout over two years, a $300,000 seller note, and a $600,000 escrow funded out of the cash at close and held eighteen months. Assume also that the closing statement shows the business $180,000 below its working capital peg, deducted at closing. Certain dollars: $4,200,000 minus $600,000 minus $180,000, or $3,420,000, which is 57 percent of the headline.
• Offer B, headline $5,500,000. Assume $4,950,000 cash at close, no earnout, no seller note, a $275,000 escrow, and a business that meets its peg. Certain dollars: $4,675,000, which is 85 percent of the headline.
• The reversal. Offer B is $500,000 lower on the headline and $1,255,000 higher in certain dollars, and the gap only widens if the earnout underperforms.

Stated as a rule: an offer that is 10 percent higher on the headline and 25 points lower on certain dollars is the worse offer. Those percentages are arithmetic on the assumptions above, not market figures. The point of the test is not the specific numbers. It is that the ranking of two offers frequently reverses once you run it, and most owners never run it. For the full comparison framework, see how to compare offers when selling a business.

Where these seven terms actually get decided

Most of these terms are set in the letter of intent, not in the purchase agreement, which is the opposite of what owners assume. By the time the definitive agreement is being drafted you are usually inside exclusivity, you have spent money on advisors, your team may know something is happening, and the other buyers have moved on. Leverage does not survive that.

The practical consequence is that the cash at close, the earnout metric, the escrow percentage, the working capital methodology, and the shape of your post-closing commitments belong in the LOI in writing, even when the buyer prefers to describe them as details for later. Details for later are details decided without you. Which document binds you to what is laid out in LOI vs purchase agreement.

How this plays out in Fort Worth and North Texas

Fort Worth owners in trades, manufacturing, and industrial services see a specific version of this problem, because a large share of the credible buyers for those businesses are private equity platforms and their add-on acquisitions. Those buyers are sophisticated, they are repeat acquirers, and they have negotiated these terms hundreds of times against sellers negotiating them once.

That asymmetry is not a reason to avoid those buyers. They are often the best buyers in the market and they close. It is a reason to have someone on your side of the table who has seen the same terms as many times as they have. That is the argument on our Fort Worth business broker page and, more broadly, on our Texas business broker page.

The bottom line

Price gets negotiated once and terms get negotiated by default. The seven terms above, in order, are cash at close, the working capital adjustment, escrow size and duration, the indemnity cap and survival period, the earnout definition, seller note protections, and your post-closing obligations. Run the Certain-Dollars Test on any offer before you respond to it, get the material terms into the LOI rather than leaving them for the definitive agreement, and treat every deferred dollar as a dollar you might not receive. An owner who negotiates the top three items on this list and concedes the headline price usually nets more than the owner who does the reverse.

If you have an offer in hand and want a straight read on the terms rather than the number, book a confidential call. More on structure and process is in the Insights library.

Last reviewed: September 2026. This is general information, not legal, tax, or accounting advice. All dollar figures and percentages above are illustrations built on assumptions stated in the sentences that carry them, not estimates of market terms. Deal terms vary by business, industry, buyer, and the documents you sign. Talk to your own CPA about the tax consequences of any structure and to your attorney about the agreement itself.