What belongs in the LOI

A 6-step process for the six mandatory elements.

• 1: Price and structure State the total purchase price and how it will be paid: cash at close, seller note, earnout, equity rollover. Anchor to your implied EBITDA range, not the owner's reported number. Name the working capital mechanism so the seller understands (1)
• 2: Exclusivity period 30 to 45 days is standard. 45 to 60 days if there is financing involved or meaningful complexity. Include extension language that ties the ability to extend to seller cooperation and timely delivery of diligence materials. This prevents the (2)
• 3: Diligence scope Name the documents and access you will need. Tie the scope to decisions you actually need to make, not a generic checklist. A focused diligence scope signals that you are experienced and respectful of the seller's time. A 50-item catch-all (3)
• 4: Conditions precedent State the four standard conditions: satisfactory completion of diligence, no material adverse change to the business, internal approval, and financing if applicable. Tie each to a concrete example so the seller understands what you mean. 'S (4)
• 5: Transition and involvement Define what the seller will do post-close, for how long, and what they will be compensated. Weekly hours, specific responsibilities, payment if any, and the duration of the formal transition period. Do not leave this vague. It becomes a neg (5)
• 6: Binding versus non-binding clarity Be explicit about which sections are binding and which are not. Economics are non-binding. Exclusivity and confidentiality are binding. The seller should see this in plain language, not buried in legal boilerplate. (6)

• Price and structure transforms Exclusivity period: Step 1 naturally follows from the prior action.
• Exclusivity period transforms Diligence scope: Step 2 naturally follows from the prior action.
• Diligence scope transforms Conditions precedent: Step 3 naturally follows from the prior action.
• Conditions precedent transforms Transition and involvement: Step 4 naturally follows from the prior action.
• Transition and involvement transforms Binding versus non-binding clarity: Step 5 naturally follows from the prior action.

Decision gate for what does not belong in the loi. Proceed when: LOI terms are agreed and signed within seven days.

• Reconsider: Seller pushes back on key terms. Decide whether their concerns are addressable or the gap is too wide.
• Proceed: LOI terms are agreed and signed within seven days.
• Walk: Seller will not commit to exclusivity, or refuses a specific diligence timeline.
• Reconsider: Seller pushes back on key terms. Decide whether their concerns are addressable or the gap is too wide.