Treat an unsolicited offer as a conversation starter, not as a valuation.
Treat an unsolicited offer as a conversation starter, not as a valuation. Before sending files, control information, ask how the buyer would pay, and separate the going-in multiple from cash, working capital, earnout, and exclusivity. Then get an independent sense of value and, if the approach is real, create a second option. A lone admirer is not a market.
What to know before using the headline number
- An unsolicited multiple is marketing copy until earnings definition, cash, debt, working capital, and contingent pay are on paper.
- Send no identifiable file until an NDA, a buyer identity, and a funding path exist.
- Exclusivity granted to the first caller is a free option on the owner's year unless it has milestones and a way to die.
- A lone admirer is not a market. A second option, even if it is simply keeping the company, is what makes walking away possible.
- The owner's first reply should collect structure, not volunteer a bottom number or a retirement story.
An unsolicited indication is marketing, not an appraisal
Buyers who reach out cold are doing a job. They are trying to start a process on their paper, their timing, and their definition of earnings. That can still be a good outcome for an owner who was already considering a sale. It is not a conclusion about what the business is worth. IRS valuation practice, including the closely held business factors associated with Revenue Ruling 59-60, looks at the company, the economy, earnings, and comparable evidence. A complimentary email that says 'we pay 5x' does none of that work.
Respond politely and slowly. Thank them. Do not correct their numbers with better numbers in the first reply. Do not volunteer that you are tired, retiring, or fighting with a partner. Curiosity is allowed. Neediness is expensive. SBA acquisition guidance is written from the buyer's side of the table for a reason: they are supposed to investigate. The seller's job at this stage is to decide whether an investigation should happen at all, and on whose process.
Information hygiene comes before any file
The first request will be for 'a little background': tax returns, customer lists, payroll, the pipeline. That is not a little background. It is the company. Send nothing identifiable until there is an NDA, a description of the buyer, and a funding path. A competitor in a friendly tone is still a competitor. An aggregator collecting books in a region is still collecting books. Code the customers. Redact employee data. Keep the first package at the level of a teaser plus summary financials.
Create a log. Date of approach, who they said they were, what they asked for, what was sent, and who on the owner's side knows. If the conversation dies, revoke access. If it continues, the log becomes the start of a diligence index. Owners who forward the last three years of returns from a phone in a parking lot are not being efficient. They are opening a process they cannot reconstruct.
Compare the going-in multiple with the terms that actually pay
Unsolicited buyers often lead with a multiple because multiples travel well in conversation. Terms travel poorly, which is why they arrive later. Ask what earnings definition they used, which year, whether owner compensation is in or out, whether the number is enterprise value or equity value, and how working capital, debt, earnout, and seller notes would work. A '5x' of seller's discretionary earnings that is 60 percent cash, 40 percent earnout, and a working-capital target far above the company's normal level is not 5x. It is a small cash check plus a hope.
Write a proceeds sketch even if the numbers are still rough. Cash at close, minus debt, minus a sample working-capital true-up, minus fees, plus the probability-weighted earnout, plus the credit quality of any seller note. IBBA transaction vocabulary helps keep the sketch from mixing SDE and EBITDA, or mixing enterprise and equity. If the buyer will not put enough of that on paper to sketch, there is not yet an offer. There is a compliment.
Exclusivity can be the most expensive paragraph in the letter
The unsolicited buyer will often ask to 'take the company off the market' while they look. If the company was never on the market, that request is a request to freeze the owner while the buyer does homework. Exclusivity has a price: duration, milestones, financing commitment, and what happens if they retrade. A 120-day exclusive with no deposit of seriousness, no lender engagement, and a broad diligence out is a free option on the seller's life. Granting it because the first person who called seemed nice is how owners lose a year.
SBA lending procedures also remind sellers that a buyer's financing is not automatic. Change-of-ownership underwriting can fail. If exclusivity is granted at all, pair it with dates: NDA already signed, indication in writing, lender introduction by a named week, letter of intent with a working-capital definition, and a right to terminate if milestones slip. An unsolicited process should not be less disciplined than a marketed one. It should be more disciplined, because there is no competing bidder to keep anyone honest.
Build a second option before you answer in detail
A single unsolicited party is not a sale process. It is a conversation. Before sending the deep file or granting exclusivity, the owner should know what else could exist: another competitor, a manager buyout, a later marketed process, or simply continuing to operate. That does not require a public listing. It requires a valuation range, a document file, and a decision about whether to invite one more party under NDA. The second option is what makes walking away possible.
If the owner was not planning to sell, it is legitimate to say so and to slow the clock. Unexpected money can still be good money, but only after the company is measured. Get the books in order, understand concentration and owner dependence, and then reply with a process: staged information, written indication, advisers copied, no exclusivity until terms are specific. Buyers who disappear when asked to be specific have given a complete answer.
How to respond without pretending you are already in a deal
A practical first reply has four parts: acknowledgment, NDA, a short teaser or questionnaire the other way (who is the buyer, how would they fund, have they closed similar deals), and a statement that any indication should include cash, debt treatment, working capital, deferred consideration, and timing. It should not include a counter-multiple invented in irritation. It should not include the owner's bottom number. Those figures, once spoken, become the ceiling.
Then run the company's own review. What is maintainable earnings. What would a buyer have to replace. What would a lender ask. What would a leak cost. The unsolicited approach is useful because it forces those questions on a date the owner did not choose. It is dangerous because it invites the owner to answer them with the buyer's pencil. Use your own.
How to read an unsolicited approach before it becomes the process
The first caller wants to set vocabulary. The owner should translate that vocabulary into cash, risk, and optionality before sending the deep file.
| Issue | What the owner should assemble | What a buyer is likely to test | Why it changes the decision |
|---|---|---|---|
| Identity and intent | Legal name, operating footprint, other deals in process, and whether they are a competitor, aggregator, or searcher. | Would this party benefit from the information even if they never close? | Competitor-buyers get a tighter NDA and a thinner first package. |
| Earnings definition behind the multiple | Which year, SDE versus EBITDA, owner-pay treatment, and one-time items the buyer already assumed. | Does '5x' use the same earnings the owner would defend in a valuation file? | A high multiple on an inflated base is not a high price. |
| Cash versus contingent pay | Cash at close, seller note terms, earnout metric, and who controls the books after closing. | What does the owner receive if the earnout misses and the note is subordinated? | Headline value and household cash can diverge by hundreds of thousands of dollars. |
| Working-capital grab | Proposed target versus the company's own monthly normal, including seasonal peaks. | Is the peg a delivery of ordinary operations or a second price cut? | An inflated target can erase a large share of the advertised multiple. |
| Exclusivity and financing outs | Duration, milestones, lender status, and termination rights. | Does the buyer have a free look while the owner is frozen? | Unscoped exclusivity is often more expensive than a slightly lower cash offer with competition. |
Worked example: a roofing company offered '5x' with a working-capital grab and a 40 percent earnout
These figures are hypothetical and are not a roofing multiple. Assume a residential roofing company with trailing seller's discretionary earnings of $388,000. An aggregator emails that they 'pay 5x,' implying $1,940,000. The written indication is $980,000 cash at close, a $184,000 subordinated seller note, and a $776,000 earnout (40 percent of the headline) over three years on EBITDA the buyer would control. Equipment loans of $127,000 would be paid off. The proposed working-capital target is $312,000 against a documented monthly normal near $148,000. The buyer wants 120 days of exclusivity before spending on diligence.
| Term as advertised | What the paper actually did | Hypothetical dollars | Owner-risk reading |
|---|---|---|---|
| '5x' of SDE | Used $388,000 without a shared add-back policy | $1,940,000 headline | Marketing multiple, not a valuation |
| Cash at close | Only the wired portion after debt | $980,000 minus $127,000 debt = $853,000 before fees | The only relatively certain check |
| Seller note | Subordinated, thin default rights | $184,000 face | Credit investment in the buyer's stack |
| Earnout 40 percent | EBITDA after buyer allocations, no owner control | $776,000 if fully earned | Option, not price |
| Working-capital target | $312,000 peg versus ~$148,000 normal | About $164,000 extra capital left in the company | Silent price cut |
| 120-day exclusivity | No lender file, no reverse-break, broad diligence out | Four months frozen | Free option on the owner's peak season |
If the earnout misses and the working-capital peg holds, the owner has not sold a $1,940,000 company. They have sold an $853,000 cash-after-debt check, plus a $184,000 credit, minus fees, minus a $164,000 true-up, plus a hope. That is a different economic event from 'someone offered 5x.' Revenue Ruling 59-60 style analysis would have asked about earnings quality, customer concentration, and owner dependence before any multiple was applied. The email skipped that work on purpose.
The 120-day exclusive was the process trap. Roofing has a weather window. Freezing the owner through that window without a lender engagement or a reverse-break fee meant the buyer could look, reprice, and leave after storm season. Building a second option (another operator under NDA, or a decision to keep the company through one more peak) is what would have made a 'no' possible.
A disciplined reply would have been: NDA, teaser, request for cash-debt-working-capital-earnout on one page, and no exclusivity until those lines were specific. It would not have been a counter-multiple of 5.5x invented in irritation. Once the owner argues in multiples, the buyer owns the vocabulary.
A six-step response before any deep file leaves the building
Move only as far as the buyer's paper has earned. Each step should produce a document, not a longer email thread.
- 01
Log the approach
Record who reached out, what they claimed, what they asked for, and who inside the company knows.
Deliverable: Approach log
- 02
Send NDA, not financials
Fit the NDA to a competitor or aggregator. Refuse identifiable lists and employee data until it is signed.
Deliverable: Executed NDA
- 03
Swap teasers
Provide a blind summary and require the buyer's identity, funding path, and relevant close history in return.
Deliverable: Two-way teaser exchange
- 04
Demand a structured indication
Cash, debt treatment, working-capital definition with a sample number, earnout mechanics, seller note, timing, and exclusivity ask.
Deliverable: One-page term sketch
- 05
Run your own value file
Normalize earnings, note owner dependence and concentration, and sketch proceeds under the buyer's terms versus a keep-operate case.
Deliverable: Independent range and proceeds sketch
- 06
Create a second option before exclusivity
That option can be another confidential party, a later marketed process, or a written decision to wait. Do not freeze the company for a free look.
Deliverable: Exclusivity conditions or a written refusal
Where otherwise credible analyses break down
Forwarding tax returns from a phone because the buyer 'just needs a peek'
Why it matters: The process then exists on the buyer's terms with no NDA, no log, and no way to revoke the file.
Better approach: NDA and a redacted summary first, always.
Arguing about the multiple instead of the cash bridge
Why it matters: The buyer keeps the vocabulary, and a 5x with a 40 percent earnout still sounds like a compliment.
Better approach: Translate every indication into cash, contingent pay, working capital, and exclusivity.
Granting 120 days of exclusivity to the first caller
Why it matters: The owner loses the weather window, the right to test another party, and leverage against a later retrade.
Better approach: Milestones, short initial periods, and no freeze until structure is specific.
Telling the buyer you are tired, divorcing, or done
Why it matters: Need is priced. Unsolicited buyers listen for it.
Better approach: Stay polite, stay slow, and let advisers speak to process.
What a defensible owner decision looks like
I treat an unsolicited offer as a useful interruption, not as an answer. Someone knocking on a roofing company's door with a 5x story has done marketing. They have not appraised the company, and they have not promised cash. My first job is to keep the owner from sending the whole file in a grateful mood.
If the terms survive a proceeds sketch, we can talk. If the sketch shows a small check, a working-capital grab, a large earnout, and a long exclusive, I would rather the owner keep operating through one more season than freeze the company for a free look. Walking away is a response. It is often the adult one.
Bring the email, do not answer it from the truck, and we will separate compliment from consideration. That is how you respond without accidentally starting a sale on someone else's paper.
Questions owners ask
Should I ignore unsolicited buyers?
Not automatically. Some are real. Screen them, control information, and compare terms with an independent view of value. Ignoring every approach is a policy. Sending the whole file to the first email is also a policy, and a worse one.
Is a verbal 5x offer something I can rely on?
No. Until earnings definition, cash, debt, working capital, contingent pay, and exclusivity are written, a multiple is advertising copy. Even a written 5x can deliver much less cash.
Do I have to tell them I am not for sale?
You can. You can also say you would listen to a specific written indication after an NDA. Either is better than a long, unguarded explanation of why you might consider selling.
What if they say the offer expires this week?
Artificial urgency is common in unsolicited outreach. A real buyer can live with an NDA, a staged package, and a few days of adviser review. A process that cannot survive a week of hygiene is not a process you want.
Should I tell them I already know what the business is worth?
You can say you have an independent view and will compare any written indication to it. Do not volunteer the number. Let their paper go first.
Can an unsolicited buyer still be the right buyer?
Yes. Some close well. The screening, the cash bridge, and the second option are how you find that out without giving away timing, information, or exclusivity in the first conversation.
Sources and review date
Last reviewed: September 3, 2026. Sources are linked for context; a national benchmark is not a substitute for local comparable sales or a purpose-specific appraisal.
- U.S. Small Business Administration: Merge and acquire businesses — Owner-oriented guidance on valuation, agreements, due diligence, and professional support in an acquisition.
- SBA SOP 50 10 lender and development company loan programs — Current SBA lending procedures; financing rules can affect valuation scope, equity injection, seller debt, and change-of-ownership underwriting.
- IRS valuation job aid and Revenue Ruling 59-60 — Appendix A reproduces Revenue Ruling 59-60 and its closely held business valuation factors; the job aid itself states that it is not legal authority.
- International Business Brokers Association glossary — Professional definitions for SDE, transaction terms, and Main Street business brokerage concepts.
- U.S. Small Business Administration: Close or sell your business — Current owner guidance on sale planning, valuation approaches, sale agreements, transfer choices, professional advice, and maintaining required records.
- IRS Publication 537: Installment Sales — Explains installment-sale treatment, contingent payments, unstated interest, debt assumptions, and the separate treatment of assets sold as part of a business.
- U.S. Small Business Administration: 7(a) loans — Current 7(a) loan-program overview, including change-of-ownership financing that can affect equity injection, seller notes, and underwriting.
- IRS Instructions for Form 8594 — Explains purchase-price allocation for qualifying asset acquisitions, including inventory, equipment, identifiable intangibles, and goodwill.