Should you offer the asking price in your letter of intent?

When is the asking price the right offer?

Asking prices are set by sellers and brokers. Some are close to what the business will sell for. Some are hopes. Before your LOI, run three checks.

1. Market multiple. Divide the price by the stated SDE. Compare it with the BizBuySell averages above and with your industry. Car washes averaged 4.99x and restaurants 2.15x, so an all-sector average is only a starting point.
2. Documentable earnings. Look at how much of the SDE is add-backs. The more add-backs, the more likely the documented number comes in lower.
3. Financing. Run the lender's math: cash flow after a salary for you, divided by the annual loan payment, must be at least 1.25x. Total debt is capped at the independent valuation, so a price well above market will need more of your cash.

If all three pass and other buyers are interested, offering the asking price can be the right call. Winning exclusivity on a good business is worth more than saving a few percent on price.

What is retrading, and why does it backfire?

Retrading is offering a high price to win the deal, then cutting it after diligence. Some buyers do it on purpose. Sellers and brokers know the pattern.

It backfires in three ways. The seller loses trust and becomes harder to work with during the transition you depend on. The seller may walk away after weeks of exclusivity, and you lose your diligence costs. In local markets, brokers remember buyers who retrade.

Price changes after diligence are not always retrades. If the documents show lower earnings than the seller represented, adjusting the price is fair. The difference is whether you set it up honestly in the LOI.

How do you offer the asking price without trapping yourself?

State the basis for the price, so any adjustment is arithmetic instead of an argument.

• Earnings basis."The purchase price is based on SDE of $350,000 for fiscal 2025, as represented by the seller." Add that the price adjusts at the same multiple if verified SDE differs.
• What is included. Say whether inventory, receivables and working capital are in the price. See what the asking price includes.
• Financing contingency. SBA loan approval on stated terms, and an independent valuation at or above the price.
• Diligence condition. Satisfactory review of tax returns, bank statements, the lease and key contracts.
• Structure. How much is cash at closing, how much is a seller note, and on what terms.

When should you offer below asking?

• The multiple is well above market for the industry with no clear reason.
• The documented earnings are lower than the listing's.
• The lender's coverage test fails at the asking price.
• The business has been listed for a long time, which often means others reached the same conclusion.

Offer below asking with the arithmetic attached. A seller can argue with an opinion. It is harder to argue with the lender's math.

Worked example: price versus terms

A business asks $1 million on SDE of $350,000, or 2.86x. You assume a $120,000 salary for yourself, leaving $230,000 for debt, and $60,000 of fees and working capital. Seller-note terms use the medians for listings that offer seller financing: 30% of price, 7% interest, 3 years.

1. Offer A: $1 million, with a $300,000 seller note. Project costs: $1.06 million. Injection at 10%: $106,000. SBA loan: $654,000, about $103,700 a year at 10% over 10 years. The seller note on a 3-year term costs about $111,200 a year. A note that is not on full standby counts in coverage. Total: about $214,900. Coverage: 1.07x. This fails.
2. Offer B: $920,000, all paid at closing. Project costs: $980,000. SBA loan: $882,000, about $139,900 a year. Coverage: 1.64x. This passes.
3. The seller's view. Offer A gives $700,000 at closing. Offer B gives $920,000. The IBBA reports that sellers received 83% to 92% of deal value in cash at close.

Offer B is lower but may win, because it is more cash now and more likely to close. If the seller insists on $1 million, a 10-year note instead of 3 years cuts its payment to about $41,800 a year and makes Offer A financeable.

Where these numbers come from: Multiples from Beancount's guide to BizBuySell data. Seller-note terms from Big Ideas DB on seller financing. Cash at close from the IBBA Market Pulse Q2 2026. SBA coverage, valuation and seller-note rules from this guide to SBA SOP 50 10 8.1. Rate cap from NerdWallet; check current prime. SOP 50 10 8.1 applies to loans numbered on or after October 1, 2026; lender practice under it is still settling and these are secondary summaries, so confirm current terms with your SBA lender.

Related questions

Should my first offer leave room to negotiate up?

Leave room on terms rather than price. Sellers usually care about cash at closing, timing and transition as much as headline price.

Will a broker present an offer below asking?

Brokers generally present offers to the seller. An offer with the arithmetic and a lender's pre-qualification is more likely to get a counteroffer than a bare low number.

Is it a retrade if the QoE comes in low?

Not if your LOI stated the earnings basis and the adjustment formula. It becomes a retrade when you invent new reasons to cut that were not about the documents.

What comes next

Whatever price you offer, you need to know what you are committing to when you sign. The next question is whether a letter of intent is binding. The buyers who end up with the most valuable companies decide what the business goes into before they buy it, and that tells you how much a given business is worth paying for.

Related articles

• What should a letter of intent to buy a business include?
• How do you compete when other buyers want the same business?
• How much should I pay for a business?
• What are typical seller note terms?
• When should you renegotiate and when should you walk away?

Meraki Dealmakers is a service of Meraki Partners, LLC, an advisory firm. It is not a broker-dealer, investment adviser, business broker, law firm or accounting firm. This article is general information, not legal, tax or investment advice.