Submitting an LOI is much more than checking a box in your search experience. It’s the first step that puts you on the road to potentially closing on an acquisition. As a result, there are several strategic considerations to keep in mind to maximize your chances of having the seller countersign it and establishing a new relationship with the seller on a positive footing.

Keep these nuances in mind before submitting your first LOI:

Level of detail: Some buyers prefer shorter LOIs (~2–3 pages) to avoid overwhelming unsophisticated or first-time sellers and to preserve flexibility during diligence. Others advocate for longer LOIs (~5–10 pages) to minimize future surprises and lock in key economic terms early. There is no universal answer as the decision depends on the seller’s sophistication, deal size, and risk profile, but we generally think that shorter LOIs are favorable in most SMB deals.

Use of legal counsel: While you don’t necessarily want to pay a lawyer to draft every LOI you submit, it is wise to consult legal counsel on your first few deals to develop a strong working template. LOIs should strike a balance between clarity and brevity, and poorly worded documents can create unnecessary disputes down the line.

Expiration dates and seller response times: Setting an expiration date on the LOI can help prevent offers from lingering indefinitely (and we know time is money when you’re self-funding your search), but buyers should realistically understand that a hard deadline is unlikely to rush the seller. Most sellers will take their time, regardless of your deadlines, as it’s widely understood that sellers have more negotiating power than buyers. With that said, submitting an open-ended offer can signal your indecision or invite backchannel negotiations with other buyers. We think that setting a reasonable expiration date can encourage the seller to move along with their consideration, as long as you’re not too aggressive or pushy in requiring it to be signed by the deadline.

Submitting while undecided: We tend to think that submitting an LOI, even if you are not fully committed, is a better alternative than never sending one. It’s expected that you won’t have all the details up front, and your findings during due diligence may cause you to change your mind—that’s okay. With that said, you don’t want your reputation to be the buyer who sends out frivolous offers with no intention of buying any business. Ultimately, an LOI gives you access to deeper diligence, but you should be careful not to use it speculatively.

Negotiation dynamics: You should expect that specific terms—particularly related to seller financing, working capital, and transition involvement—will be negotiated post-LOI. It is important to determine which terms are critical and which can be used as concessions. Inexperienced buyers often overemphasize the LOI as a binding document when, in practice, it serves as a conversation starter.

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