What does an offer actually look like?

By the time I was seriously thinking about a sale, I'd educated myself some. I knew more than I had a year earlier. I still had a long list of questions nobody had answered.

Near the top of that list was one that sounds almost too basic to admit: what is an offer even going to look like?

Is it a number and a handshake? Is somebody going to wire me the whole thing and I hand over the keys? Or is it going to be one of these earnouts I'd heard about — always mentioned in a tone that suggested I should be worried about it?

I genuinely didn't know.

The number is not the deal

What I eventually figured out is that a purchase price is usually not one thing. It's several kinds of money, and they don't carry the same weight.

Some of it may be cash at closing — the part that's actually in your account when you walk out.

Some of it may be a seller note, where you're financing part of your own sale and the buyer pays you over time. You're now a lender to the company you used to own.

Some of it may sit in escrow or a holdback for a period after closing, available to the buyer if something they were promised turns out not to be true.

Some of it may be rollover equity, where you keep a slice of the business going forward and get paid again if the next sale goes well.

And some of it may be an earnout — money contingent on the business hitting agreed targets after you're gone, or after you're mostly gone.

Add all of that up and you get a headline number. But two offers with the identical headline number can be wildly different deals, and the one with the bigger number on the front page isn't automatically the better one for you.

Why it mattered to understand this

Here's the part that surprised me. Learning the different structures wasn't mainly useful because I could go shop for a particular one — though you can push on structure, and it's worth knowing that you can.

It was useful because it managed my expectations.

Before I understood the menu, I had a number in my head and a vague picture of a wire transfer. That picture was not what the market was going to hand me. Knowing the actual range of what buyers commonly propose meant that when something landed in front of me, I wasn't reacting out of surprise or disappointment at a structure that was, in fact, ordinary.

There's a real difference between this offer is bad and this offer is unfamiliar to me. I couldn't tell those apart until I'd done the reading.

And the reading was not quick. Each of these structures has implications that aren't obvious from the description — how the risk shifts, what you're on the hook for, what has to keep being true for you to get paid. Working through even one of them properly took hours. Working through all of them took considerably more than that.

One Texas note

Texas doesn't have an individual income tax, and since 2019 the state constitution flatly prohibits the legislature from creating one. So the state-level bite that a seller in California or New York has to model simply isn't part of your math here.

That's a real advantage. It is not the same thing as your sale being tax-simple. How a deal is structured still drives federal treatment in ways that can move real money, and that conversation belongs with your CPA and your tax counsel, early — not after you've agreed to terms.

The part I wasn't prepared for

Everything above concerns what happens up to signing. There's another whole subject on the other side of it: what happens after the purchase agreements are signed and the money is deposited.

I'm going to write about that separately, because it deserves its own space. But I want to plant the flag here, because I can't emphasize it enough.

When the money hits your account, you pay your lawyers. You pay whoever else advised you. And then they're gone. That's not a criticism of them — it's the arrangement. The engagement was the deal, the deal is done.

Which leaves you alone with whatever comes next. And what comes next can be substantial: an earnout to be measured, a transition period to work through, obligations that run for years.

You could call your attorney back. But that means paying more, right at the moment you've finally stopped writing checks and are least inclined to write another one. So the temptation is to handle it yourself.

That is a mistake. More on it soon.