Insights

What you actually keep: net proceeds when you sell your business

Most owners fixate on one number when they think about selling: the price. It is the figure in the headline, the one a buyer says out loud, the one you repeat to your spouse. But the price is not the check you cash. The number that matters is what lands in your account after everyone else takes their cut, and that number is almost always smaller than the one that made you smile in the first meeting.

Understanding your net proceeds before you go to market is not pessimism. It is how you avoid signing a deal that looks great on paper and disappoints at the wire. Here is what stands between the headline price and the money you keep.

The headline price is not the check you cash

The first gap is the difference between enterprise value and equity value. When a buyer offers a number, they are usually valuing the business itself, the operation, free of debt and free of excess cash. That is enterprise value. Your check is equity value, which is what is left after the debt that rides on the business gets settled.

So if a buyer values your company at five million and you carry a million in bank loans, equipment financing, and other interest-bearing debt, you are not starting from five. You are starting from four, before anything else comes out. Owners who skip this step anchor to the wrong number and feel cheated later, when nothing was actually taken from them. The price was real. It just was not theirs to keep in full.

What comes out before you see a dollar

After debt, several more line items sit between the price and your proceeds. None of them are surprises if you plan for them, and all of them are surprises if you do not.

• Transaction fees. Your advisor, attorney, and accountant all get paid out of the deal. A sell-side success fee plus legal and quality-of-earnings costs are real money, and they come off the top.
• The working capital true-up. Most deals require you to leave a normal level of working capital in the business. If you collected receivables hard and stretched payables right before closing, the post-closing true-up claws that back. It is not a penalty. It is the deal working as written.
• Escrow and holdbacks. A slice of the price, often ten to fifteen percent, sits in escrow for a year or more to back your reps and warranties. You may get all of it. You do not get it at closing.
• Seller financing. If part of the deal is a seller note or an earnout, that money is promised, not paid. It arrives over time, if the conditions hold.

Add these up and it is common for the cash that hits your account at closing to be meaningfully less than the headline price, with the rest arriving later or not at all. That is normal. The mistake is not knowing it in advance.

Then the tax bite

Whatever is left is not all yours either, because the IRS is a silent party to every sale. How much you owe depends heavily on structure. In an asset sale, the price gets allocated across different categories of assets, and each category is taxed differently. Some of it is favorable long-term capital gain. Some of it, like depreciation recapture on equipment you have already written off, is taxed at higher ordinary rates. A stock sale is usually cleaner for the seller but is not always on the table.

Higher earners also face the net investment income tax on top of the capital gains rate. The point is not the exact percentage, which depends on your situation. The point is that two deals at the identical price can leave very different amounts in your pocket depending on how the deal is structured and how the price is allocated. This is why the structure of an offer can matter as much as its size, and why a slightly lower headline number is sometimes the better deal after tax.

This is general information, not tax advice. Your CPA and attorney should model your specific situation before you agree to anything.

Why structure can beat a bigger headline

Once you see the full stack, you start comparing offers the way an experienced advisor does: not by the biggest number, but by cash at closing, by how much is at risk in escrow or an earnout, and by the after-tax result. A six million dollar offer that is half earnout and heavy on ordinary-income allocation can easily net less than a five and a half million dollar offer that is mostly cash at close in a favorable structure.

A real sell-side process exists partly to win on exactly these terms. Competition between buyers does not just lift the price. It lets you push for more cash at closing, a smaller holdback, and a cleaner structure, all of which flow straight to your net proceeds.

Know your real number before you go to market

The owners who are happiest at the closing table are the ones who modeled their net proceeds long before they had an offer. That model starts with a defensible valuation, subtracts debt, estimates fees and the working capital requirement, accounts for escrow and any seller financing, and runs the likely tax outcome past a CPA. The result is a realistic range of what you would actually keep.

Building that number early does two things. It tells you whether a sale even gets you where you want to be, and it shows you exactly which levers to pull in the next year or two to improve the outcome. Paying down debt, cleaning up the financials so the tax position is clear, and reducing the things that force money into escrow all move the net number, but only if you start before you list. This is where the right accounting and advisory partner earns its place well ahead of the deal, by getting your numbers and your structure sale-ready while there is still time to change them.

The Texas advantage

If you run your business in Dallas, Fort Worth, or anywhere across DFW, geography works in your favor on the part that matters most. Texas has no state income tax, so on the same sale, a Texas owner keeps more of the after-tax proceeds than an owner selling an identical business in a high-tax state. The federal bill is the same. The state bill is not.

That does not change the fees, the debt, or the working capital math, but it does mean the reward for running a clean process and a smart structure is larger here. If you want a grounded read on what businesses like yours are selling for in this market, that is a conversation worth having with a broker who works the Dallas and North Texas market before you set expectations.

The bottom line

The price is the start of the conversation, not the end of it. Your net proceeds are what is left after debt, fees, the working capital true-up, escrow, seller financing, and taxes, and that is the only number that actually changes your life. Owners who understand the full stack negotiate better, compare offers honestly, and are never blindsided at the wire.

If you are thinking about selling in the next one to five years, the smartest first move is not to list. It is to find out what you would really walk away with, so you can plan around the real number instead of the headline. A proper sell-side process starts with that honest read. Browse the Insights library for the rest of the picture, or book a confidential call and we will walk through your numbers together.

This article is general information, not legal, tax, or financial advice. Valuations, deal terms, and tax treatment vary by situation and change over time. Involve your CPA and attorney before making decisions about a sale.

Frequently asked questions

How much do you actually keep when you sell a business?

Less than the headline price. Your net proceeds are what is left after the debt on the business is paid off, transaction fees (advisor, attorney, accountant) come out, the working capital true-up settles, money is set aside in escrow, any seller note or earnout is paid over time, and taxes are paid. The cash that hits your account at closing is often meaningfully below the price you were quoted, with the rest arriving later or sitting at risk.

Do you pay taxes when you sell a business in Texas?

You pay federal tax, but not state income tax. Texas has no state income tax, so on the same sale a Texas owner keeps more of the after-tax proceeds than an owner selling an identical business in a high-tax state. At the federal level you still owe capital gains tax, possibly the net investment income tax, and ordinary-rate tax on items like depreciation recapture, depending on how the deal is structured and the price is allocated. Have your CPA model your specific situation before you agree to terms.

What gets deducted from the sale price of a business?

In rough order: interest-bearing debt the business carries (the gap between enterprise value and equity value), transaction fees, the working capital true-up if you left the business short of a normal level, an escrow or holdback to back your reps and warranties, any portion paid as a seller note or earnout over time, and finally taxes on what remains. Modeling all of this before going to market is how owners avoid surprises at the closing table.