Letter of Intent (LOI) Template & Guide for Small Business Acquisitions

A well-crafted LOI can save you months of negotiation and thousands in legal fees. Here's how to get it right.

If you're serious about buying a business, you need to master the Letter of Intent (LOI). This critical document sets the foundation for your entire acquisition and can determine whether your deal succeeds or stalls.

We've analyzed hundreds of successful acquisitions and created the LOI Breakdown Mini-Guide – a comprehensive toolkit that helps you draft Letters of Intent that protect your interests and move deals forward efficiently.

A Letter of Intent serves as your roadmap for the acquisition process. While mostly non-binding, it establishes the key terms of your deal and demonstrates serious buyer intent. Think of it as the bridge between initial interest and your final purchase agreement.

Your LOI accomplishes four essential objectives: it signals legitimate buying interest, outlines the deal structure, secures exclusivity during due diligence, and identifies critical contingencies that must be satisfied before closing.

Many buyers confuse an Indication of Interest (IOI) with a Letter of Intent. An IOI is preliminary – a brief expression of potential interest. An LOI represents commitment, complete with specific terms, valuation methods, and structured contingencies.

Understanding this distinction helps you engage sellers at the right time with the right document.

Your LOI needs specificity. Beyond stating the purchase price, you must detail your complete payment structure and valuation methodology. This includes:

Working capital adjustments often become the most contested aspect of negotiations. Setting clear targets upfront prevents costly disputes at closing.

Clarity prevents conflict. Your LOI must explicitly state what you're buying and what you're excluding. List included assets (inventory, equipment, customer lists, intellectual property) and excluded items (personal property, certain liabilities).

More importantly, specify which liabilities you'll assume. Most buyers only accept explicitly listed obligations like lease transfers or specific vendor contracts, excluding any undisclosed debts or pending litigation.

The exclusivity provision might be your most valuable protection. It prevents the seller from negotiating with other buyers while you invest time and resources in due diligence.

Standard exclusivity periods run 30-60 days – sufficient for thorough investigation while maintaining deal momentum. Your due diligence scope should cover financial records, legal compliance, key contracts, and employee agreements.

Through our community's collective experience, we've identified four mistakes that consistently derail acquisitions:

1. Vague Terms: Ambiguity creates misunderstandings. Be specific about prices, dates, and conditions.

2. Weak Valuation Justification: Support your offer with clear reasoning. This strengthens your position during negotiations.

3. Ignoring Seller Priorities: Price isn't everything. Understand what matters to the seller – employee retention, legacy preservation, or transition timeline.

4. Overlooking Transition Needs: Define post-sale training periods and customer introductions. Smooth transitions protect your investment.

Sellers often push back on key LOI provisions. Here's how successful buyers respond:

When sellers question exclusivity, explain that it ensures focused negotiations and protects both parties' time investment.

If they resist seller financing, highlight the tax advantages and steady income stream it provides, plus how it demonstrates your confidence in the business.

For working capital concerns, emphasize that proper targets ensure the business can operate smoothly post-sale, benefiting everyone involved.

Review your preparation checklist:

Follow up within 48 hours to confirm receipt and schedule discussion. Prepare for counteroffers – sellers typically negotiate at least one aspect of the initial proposal.

Once signed, immediately begin due diligence. Line up your professional team: attorney, accountant, and lenders. Work toward a purchase agreement using the LOI as your framework.

Core Resources:

Advanced Tools:

Bonus Materials:

This comprehensive resource serves:

Whether you're pursuing a $100,000 local service business or a $10 million manufacturing company, these principles and templates scale to fit your needs.

The difference between successful acquirers and those who struggle often comes down to preparation and process. Our LOI Breakdown Mini-Guide provides both – giving you the framework and tools to approach any acquisition with confidence.

When you download the guide, you're also joining a community of entrepreneurs who've successfully navigated the acquisition process. Connect with peers, get feedback on your deals, and learn from others' experiences.

Every successful acquisition starts with a well-structured Letter of Intent. Our guide distills years of collective experience into actionable templates and strategies you can implement immediately.

Join thousands of entrepreneurs who've used our framework to structure successful deals and build lasting business value.

The LOI Breakdown Mini-Guide is provided by EBIT Community, where entrepreneurs connect to buy, operate, and scale small businesses. Visit ebitcommunity.com for additional resources and to join our growing community of business acquirers.

Disclaimer: Educational content only - not investment advice. Listings from third-party sources, accuracy not guaranteed. Do your own due diligence. Consult professionals before making decisions.