Hey, it's Ben!
Yesterday I covered the foundation of a good LOI: how to structure the purchase price and why exclusivity matters.
Today, two more elements that first-time buyers often leave vague, and regret later. 👇
Spell out the assets, contracts, and people
Your LOI should set expectations for anything that affects cash flow after you take over:
- Client relationships — which are expected to transfer, and whether any might walk out the door with the seller.
- Supplier contracts — which carry over, and on what terms.
- Team members — who's staying, for how long, and at what compensation.
Agreeing on these early prevents last-minute surprises. A seller who waves it off with "we'll work that out later" may not be as committed to the deal as they sound.
Use performance-based terms to bridge a price gap
If you and the seller can't quite agree on price, a structured seller note can close the gap.
One approach is a note that's partially or fully forgivable if the business misses agreed benchmarks in the first year or two after closing. That does two things:
- It protects you if the business underperforms what the seller represented.
- It gives the seller a reason to support a clean transition instead of cashing out and disappearing.
This works best when the seller is genuinely confident in their numbers, because they're the ones most willing to tie terms to performance.
(Inside Acquisition Ace, members structure notes and earn-outs like these with people who've done it before. To see how our community can help you get your first deal across the line, book a call with our team here.)
The bigger picture
Any term you leave vague in the LOI becomes a conversation you have later, under more pressure, with less leverage, often after you've already spent real time and money.
Serious sellers engage with these terms. Sellers who stay vague on the key points may be hiding something you'd want to know before you commit.
Onward,
Ben Kelly
PS: Check out our latest YouTube video. We reveal how one entrepreneur built a multi-million-dollar pool company from scratch with no industry experience.
