Don't Accept, or Reject, on Reflex
Sellers shouldn't accept the first LOI automatically, but they also shouldn't reject or aggressively counter it just because it's first, the right move is to evaluate it carefully on all its terms, not just price. A first LOI can be excellent or weak; what matters is the whole package and the buyer behind it. Reflexively holding out for something better can cost you a strong deal, while accepting a flawed one out of eagerness can lead to trouble.
Whether you're buying or selling, get a broker's guidance on structuring an LOI that leads to a closed deal.
Evaluate the Whole Offer
Judge an LOI on more than the headline number: the deal structure, payment terms, contingencies, seller financing, transition, and timeline. A slightly lower price with clean terms and a strong buyer can be worth more than a higher price loaded with conditions, a big earnout, or a shaky buyer. See how to negotiate the sale.
Assess the Buyer
A critical, often-overlooked factor: who is the buyer, and can they close? A qualified, financing-ready buyer offering a fair price is more valuable than a higher offer from someone who may not be able to complete the deal. Evaluate the buyer's financial capacity, financing readiness, and seriousness, an LOI is only as good as the buyer's ability to follow through.
Usually, Negotiate
In most cases, the right response to a first LOI is to negotiate, not reject, not blindly accept, but engage to improve the terms where reasonable. There's often room to strengthen price, structure, or conditions. A skilled negotiation (ideally through your broker) can enhance a good first offer into a great one, or reveal that it's already strong.
But Don't Overplay It
A caution: a strong first offer can be your best offer, and playing hardball or holding out for more can backfire, driving away a good buyer or souring the relationship you'll need during transition. Especially in a market with limited buyers, a fair, clean, financeable first LOI from a serious buyer deserves serious consideration. The goal is the best achievable deal, not squeezing every dollar. See negotiating your sale.
Get Guidance
Deciding whether to accept, counter, or reject a first LOI is exactly where a broker's experience pays off, they can assess whether the offer is strong for your business and market, and negotiate on your behalf. An objective advisor helps you avoid both reflexes: undervaluing a good offer or overvaluing a weak one. See what an LOI is.
Frequently Asked Questions
Should I accept the first LOI on my business?
Not automatically, but don't reject it on reflex either. Evaluate it carefully on all its terms, structure, payment, contingencies, seller financing, transition, and timeline, and on the buyer's ability to close, not just the price. In most cases the right response is to negotiate to improve the terms, while recognizing that a strong first offer can be your best.
Is the first offer on a business usually the best?
It can be. A fair, clean, financeable first LOI from a serious buyer deserves real consideration, and holding out for more can backfire by driving away a good buyer. But first offers vary widely in quality, so each should be evaluated on its full terms and the buyer's ability to close rather than assumed to be either the best or the worst.
How do I evaluate an LOI as a seller?
Look beyond the headline price at the deal structure, payment terms, contingencies, any seller financing or earnout, transition, and timeline, and critically assess the buyer's financial capacity and financing readiness. A slightly lower price with clean terms and a strong buyer can be worth more than a higher, condition-laden offer from a shaky one.
Should I negotiate the first LOI?
Usually yes. The right response to most first LOIs is to negotiate, engaging to improve price, structure, or conditions where reasonable, rather than blindly accepting or rejecting. A skilled negotiation, ideally through your broker, can turn a good first offer into a great one or confirm that it's already strong. Just avoid overplaying a fair offer from a serious buyer.
Got Your First Offer?
Martin Navarro helps sellers evaluate offers objectively and negotiate the best achievable deal. Let's talk, confidentially and with no obligation.
Request a Confidential Consultation Call or text: 818-633-3254 · 365navarro.martin@gmail.com