A seller who fixates on purchase price is negotiating the wrong number. The number that matters — the one that hits your account, after everyone gets paid — is net proceeds. On Colorado deals in the $1M–$10M range, the gap between headline price and net proceeds is typically 25%–45%, and it's almost always larger than sellers plan for.
The full deduction stack at close
- Existing debt payoff. SBA loans, lines of credit, equipment financing, subordinated notes — all cleared at close from proceeds.
- Working capital true-up. Buyers require the business to be delivered with a target level of working capital. Fall short and it comes off your check.
- Escrow / holdback. Typically 10%–20% of purchase price held 12–24 months against indemnity claims. Not yours until it releases.
- Seller financing or earn-out. The portion paid over time, not at close. Real, but not in your account on day one.
- Transaction costs. Advisor/broker fee, transaction attorney, CPA quality-of-earnings support, closing fees. 4%–10% of purchase price for owner-operated deals.
- Federal and state taxes. The single largest deduction. Depends heavily on entity structure, allocation, and holding period.
A realistic example
A Colorado services business sells for a headline $4.0M.
- Cash at close (80% of price): $3.2M
- Seller note (20% at 6% over 5 years): $800K, deferred
- SBA payoff and equipment debt: $400K
- Working capital true-up: $60K
- Escrow holdback (10%): $400K, released over 18 months
- Transaction fees (7%): $280K
- Federal + Colorado state tax on gain (~25% blended): ~$580K
Cash to seller at close: ~$1.48M. Additional $800K comes over 5 years (with interest) and $400K over 18 months assuming no indemnity claims.
Where sellers most often lose money in the stack
Two places, consistently: (1) the working-capital peg is negotiated at LOI without modeling — and turns into a five- or six-figure surprise at close, and (2) tax structure is treated as a post-close problem instead of a pre-LOI decision. An asset sale vs. stock sale allocation, C-corp vs. S-corp treatment, and installment vs. lump-sum recognition can each shift the tax bill by six figures.
What to do before you agree to any price
Model your net proceeds — not just your headline — at three realistic price points, with realistic deal structures. If your broker or attorney can't produce that on request, you don't yet have the information you need to accept an offer. The net proceeds calculator gives you a starting model in five minutes.
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