Receiving a Letter of Intent to Sell a Business: What It Usually Signals
Why a Letter of Intent Matters
Receiving a Letter of Intent (LOI) to sell a business is often viewed as a major milestone. In many cases, it signals that a potential buyer has moved beyond casual interest and is willing to outline proposed terms in writing.
From an informational standpoint, an LOI does not represent a completed transaction. Instead, it functions as a framework that guides further discussion, evaluation, and negotiation.
What a Letter of Intent Typically Includes
While formats vary, most LOIs share a common structure. These elements are intended to clarify intent, not to finalize every detail.
| Component | General Purpose |
|---|---|
| Proposed valuation | Establishes an initial price range or methodology |
| Deal structure | Outlines cash, equity, earn-outs, or deferred payments |
| Exclusivity period | Limits parallel negotiations for a defined time |
| Due diligence scope | Defines financial, legal, and operational review |
| Non-binding language | Clarifies that most terms are preliminary |
For background context on transaction structures and terminology, informational resources such as Investopedia provide widely referenced explanations.
How Founders Often Interpret an LOI
In public discussions, founders frequently describe an LOI as both validating and unsettling. Validation often comes from seeing years of work translated into a concrete number, while uncertainty stems from recognizing how much remains unresolved.
It is common to overestimate the certainty of an LOI. Many proposed deals change materially during due diligence, and some do not close at all.
What Usually Happens After an LOI
After signing an LOI, attention typically shifts to verification and negotiation rather than celebration. This phase can be time-consuming and mentally demanding.
- Detailed financial and legal due diligence
- Clarification of operational dependencies
- Renegotiation of terms based on findings
- Drafting of definitive agreements
Guidance from organizations such as the American Bar Association highlights that legal and advisory support is commonly involved at this stage.
Limits of Online Anecdotes and Personal Accounts
Personal experiences shared online reflect individual situations and cannot reliably predict outcomes for other businesses, industries, or market conditions.
Many narratives focus on valuation outcomes, but omit context such as timing, leverage, or prior negotiations. As a result, these accounts are best read as situational observations rather than templates.
Any individual experience should be understood as non-generalizable and shaped by factors that may not be visible to outside readers.
Key Takeaways
A Letter of Intent represents a serious step in the business sale process, but not a final outcome. It establishes direction, surfaces assumptions, and opens a period of scrutiny and negotiation.
Interpreting an LOI with caution, context, and professional input can help founders maintain perspective while navigating a complex transition.
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