FOR SELLERS
How a Buyer Lowers the Price After the Offer
A signed offer or LOI hands the buyer leverage they did not have before. They mostly look in the same five places. Look there first.
The five places a buyer tests your price after the LOI, and how to find the weak spots before they do.
When a buyer lowers the price after the LOI, owners call it a retrade, and most are caught off guard. An offer or letter of intent (LOI) feels like the finish line. It is closer to a checkpoint. The buyer agreed to a number based on the information in front of them, and diligence is the process of checking that information against the real business.
Most of what changes the number is predictable. This article walks through where a price gets tested, what each test can cost on a business you would recognize, and how an owner can look at their own business the way a buyer’s accountant will, before signing.
I. Why a Buyer Lowers the Price After the LOI
An LOI is mostly non-binding on price. It usually also grants the buyer exclusivity, which means you stop talking to other buyers while they investigate. That is the moment your leverage is lowest and the buyer’s costs are highest.
Axial, a deal platform for the lower middle market, tracked 75 deals that fell apart after an LOI in 2025. It reported the cause of each failure:
- 25.3% broke on findings from diligence other than the earnings review, such as legal or compliance risks, customer concentration and contract issues.
- 21.3% broke because the buyer’s earnings review found less profit than the seller had presented.
- 14.7% broke over renegotiation of the price itself.
Add the first two and diligence findings account for 46.6% of the failures. One caution on what this shows. It measures why deals died, not how often prices get cut, and Axial does not state a deal-size band for its sample. Treat it as a map of where deals get tested, not a forecast for yours.
II. The Five Places a Price Gets Tested
1. Earnings the buyer will not count. Your price is a multiple of your earnings, so a dollar the buyer removes comes off the price several times over. Say a buyer pays four times earnings and rejects $100,000 of owner expenses you counted as add-backs, such as personal costs run through the business. That is a $400,000 lower price. This is the most expensive test because it multiplies.
2. The working capital target. Working capital is the cash tied up in receivables, inventory and bills. The buyer’s review sets the level they expect you to leave in the business. If it comes in higher than you assumed, the price drops dollar for dollar. Our article on the closing-day rule that adds or subtracts from your sale price explains how that number gets set.
3. Customers and contracts. A large customer with no agreement, a failed reference call, or revenue that looks one-time rather than repeating can change the buyer’s view of what they are buying. This often shows up as a change in structure, such as part of the price moving into an earnout, rather than a lower headline number.
4. The recent months. If sales or profit slip while the buyer is investigating, they have the most defensible reason to adjust the price they will ever have. Owners who cut back their hours during diligence make this one easy to trigger.
5. The lender or appraiser. When the buyer relies on a bank loan, including an SBA loan, the lender can order its own valuation of the business. If it comes in below the LOI price, the buyer has a new reason to revisit it.
| Where a buyer looks | What they are checking | What to check on your own business first |
|---|---|---|
| Earnings | Whether your profit holds up when someone else rebuilds it | Tie your earnings to your tax returns and flag every add-back a stranger would question |
| Working capital | How much cash, inventory and unpaid bills the business normally runs on | Work out your typical level over the last year or two and see if it is higher than you assumed |
| Customers | How much rides on a few accounts, and what is in writing | List your largest customers, their share of sales, and what each agreement says |
| Recent months | Whether the business is still performing as presented | Track sales and profit month by month against last year, so you can explain any dip first |
| The lender | What a bank thinks the business is worth, if the buyer is borrowing | Ask whether your numbers would support the price in front of a lender |
III. A Real Finding or a Squeeze
Not every request to lower the price is a bad-faith move. Some are the buyer finding something true. Two questions help you tell the difference.
- Is the support attached? A real finding comes with the schedule, the report or the document behind it.
- Did it arrive late and vague? A change that surfaces weeks into exclusivity, with a general explanation, is worth asking about.
If a finding is true, you negotiate around a real number. If it is not, your position depends on whether another buyer is still reachable. IBBA and M&A Source’s Q2 2026 survey of 255 advisors found 87% of deals over $5 million drew at least three offers, and 33% drew ten or more. That figure covers deals above $5 million. Below that, competition varies by business, so ask your advisor what yours looks like.
IV. Get Ahead of It Before You Sign
You cannot stop a buyer from looking, but you can look first. Every item above is something an owner can check on their own business, ideally with an outside accountant, before the LOI is signed. A weakness you find yourself is something you can fix, explain or price. The same weakness found by the buyer after you have signed is leverage for them at time when you fatigued with the process.
Once you know where you stand, your attorney can also help you build protection into the LOI. Two common ones are a short exclusivity period with deadlines the buyer must meet, and a clause that lets you end exclusivity if the buyer proposes a lower price. Neither is guaranteed, and both cost nothing to ask for. Consult with your attorney.
V. How to Look at Your Own Business
If a buyer lowers the price after the LOI, the best defense is not being surprised by the reason. A few steps do most of the work.
- Have an outside accountant rebuild your earnings from your tax returns and flag every add-back a stranger would question. Our article on the five signs a business is not ready to sell covers the most common gaps.
- Work out the level of cash, inventory and unpaid bills your business normally runs on.
- List your biggest customers, how much of your sales each one is, and what is in writing.
- Watch the monthly numbers, and keep running the business as though the sale will not happen.
- Before you sign, ask your advisor what happens if the deal falls apart, and whether any other interested buyers can be kept in touch once exclusivity ends. Competing interest is the best protection you have, and an LOI limits how you can use it.
The price in an offer is also only part of what you collect. See why two offers at the same price are not the same deal.
Conclusion: Prepare for the Test
A buyer who lowers the price after the LOI is not always acting in bad faith, and not every cut can be avoided. What decides your outcome is usually what you knew, and when you knew it. Axial’s 2025 dead deal report shows where letters of intent get tested. The rest is looking at your own business before they do.
This article is general information, not legal, tax or investment advice. Talk to your attorney and CPA about your own deal.
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