Should I make a lowball first offer on a business?

The idea of starting low comes from the hope that there will be room to meet in the middle. With a business, the logic is weaker than it seems. The seller is not just a counterparty but the person who knows the customers, the suppliers and the quirks of the operation. How the first exchange goes can set the tone for everything that follows.

Why an unexplained low opening backfires

A number far from the asking price with no reasons attached can read as a lack of seriousness or respect. Some sellers simply stop replying. Others reply but trust you less, which makes later requests harder.

Justify the opening with your reasons

If your offer is below the asking price, say why, in writing, in terms the seller can check. Refer to what the records showed, what you assumed and what you would need to see to change your mind. A reasoned offer invites discussion and lets the seller correct a misunderstanding. An unreasoned one invites a rejection.

What a credible first offer includes

• A clear structure for how the price would be paid.
• The assets and obligations that would be included.
• The conditions that must be met, such as diligence and financing.
• A realistic timeline and your plan for the handover.

Where this fits in the process

The mechanics of a letter of intent are covered in making an offer on a business, and the number itself is something to settle with your accountant. This page only addresses how to open. Because an offer can be conditional, you can state a position while keeping room to adjust after you see more.