Walk away when a problem goes to the seller's honesty, makes the deal impossible to finance, or cannot be measured. Renegotiate when you can put a number on it, and match the tool to the problem: cut the price when verified earnings are lower than represented, change the terms (a seller note or longer transition) when a risk may or may not happen, and use a holdback when the risk is a specific liability such as a pending claim. As of October 2026, SBA rules prohibit earnouts and cap total debt, including seller notes, at the independent valuation, so on an SBA deal an earnings shortfall is almost always fixed with price, not terms.
Decide these rules before diligence starts. Buyers who have spent money and months on a deal find reasons to stay.
When the problem reduces earnings by a known amount. Typical cases: add-backs that do not hold up, a quality of earnings report below the seller's number, a cost the seller left out, or rent that will rise under a new lease.
The fair adjustment is the shortfall times the multiple in the LOI. If your LOI stated the earnings figure behind the price, the adjustment is arithmetic, not a retrade. Show the seller the documents and the calculation.
When the risk is real but uncertain: a large customer that may leave, an owner whose relationships may not transfer, a decline that may or may not stop. Price is the wrong tool, because you would be paying for a loss that may not happen, or not paying for one that does. Terms share the risk.
When the risk is a specific liability with a known maximum: a pending lawsuit, an open tax audit, a warranty claim, a working capital shortfall at closing. Part of the price sits in escrow for a set period. If the liability arises, it is paid from escrow. If not, the seller gets the money.
A holdback works better than an indemnity alone, because collecting from a seller after closing is slow and uncertain. On an SBA deal, ask your lender and lawyer how the holdback must be structured. It must not work like an earnout tied to future performance.
Your LOI offers $3.2 million, 4.0x the seller's EBITDA of $800,000 after a manager's salary. Because the price is over $3 million, the lender commissions a quality of earnings report. It finds $700,000. Assume the independent valuation follows the QoE at the same 4.0x. Fees and working capital add an assumed $120,000.
On an SBA deal, the valuation cap turns most earnings disputes into price disputes. Terms are for risks, not for shortfalls.
Where these numbers come from: SBA rules on valuation, seller notes, injection, transition and earnouts from this guide to SBA SOP 50 10 8.1, FunderIntel and Starfield & Smith. Earnout data from Livmo, citing SRS Acquiom. Rate cap from NerdWallet; check current prime. SOP 50 10 8.1 applies to loans that receive an SBA loan number on or after October 1, 2026 (SBA Information Notice 5000-880695).
It can. It is less likely to when the LOI stated the earnings basis for the price and you show documents. Sellers react worst to price cuts that look like tactics.
In writing, with the document that shows it, the dollar effect, and your proposed fix. Raise it as soon as you know. Saving problems for the end of exclusivity looks like a retrade even when it is not.
Yes. A seller can ask for more if the business performs better during diligence, or walk if your financing changes. The LOI's non-binding terms cut both ways.
Treat money already spent as gone. Decide on the deal as it now stands. A bad deal does not get better because you paid for the QoE.
Many renegotiations start with the first offer. The next question is whether you should offer the asking price in your letter of intent. The buyers who end up with the most valuable companies decide what the business goes into before they buy it, which makes walking away easier: one deal is not the whole plan.
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.
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Meraki Dealmakers is a service of Meraki Partners, LLC.
Meraki Partners, LLC is an advisory firm. It is not a broker-dealer, investment adviser, business broker, law firm or accounting firm, and does not solicit investors or receive compensation based on capital raised.
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