A buyer likes your business, the numbers have held up to a first look, and a letter of intent arrives. Most owners read it the way they would read a handshake: the price is there, the word "non-binding" sits near the top, and it feels like the hard part is over. It is closer to the opposite. The LOI is the last document you negotiate while other buyers are still in the picture. Whatever you leave vague in it, you will settle later with far less room to push.
1. Non-binding does not mean free
Most of an LOI is non-binding. Either side can walk away, and the price can still move. But almost every LOI carries a few binding clauses, and the one that matters most to a seller is exclusivity, often called a no-shop. When you sign, you agree to stop marketing the business and stop talking to other buyers for a set period. That is the real cost of signing. The buyer gives up nothing comparable. They remain free to look at other companies while yours sits off the market.
2. Your leverage changes the day you sign
Before the LOI, the buyer is competing, even if only against the possibility of another buyer. After it, they are the only one in the room, and they know it. They will spend the exclusivity period in diligence, and anything they find, or think they find, becomes a reason to revisit terms. Anyone who has bought a business knows how this feels from the other side: once the other bidders are gone, the conversation gets easier for the buyer and harder for the seller. That is why the time to be particular is before you sign, not after.
3. The price is only one line
An LOI that names a price and little else is an invitation to argue about everything else later. The terms that decide what you actually take home belong in writing now: how much is cash at closing, how much is a seller note and on what terms, whether any part depends on future performance, and whether the deal is an asset sale or a stock sale. On a smaller business, two more items often matter as much as the headline: what happens to inventory, and how cash, receivables, and working capital are handled. "Price includes a normal level of inventory" means very little until someone defines normal, and the buyer will be happy to define it for you later.
4. Settle your role after closing while the buyer still needs a yes
The buyer will want you to stay through a transition, and most will ask for a non-compete. Both are reasonable requests. Both are also easier to settle on fair terms while the buyer still wants your signature. How long is the transition, how many hours a week, and is it paid? How long does the non-compete run, and how wide is the territory? Owners who leave these to the purchase agreement often find the first draft asks for more than they expected, at a point when walking away feels much more expensive.
5. Keep exclusivity short and tied to progress
Exclusivity on smaller deals often runs somewhere around 60 to 90 days. Longer is not automatically wrong, but a long no-shop with no milestones lets a slow buyer hold your business off the market while they make up their mind. Ask what the buyer will do inside that window: when the diligence requests arrive, when a lender commitment is expected if there is financing, when a draft purchase agreement shows up. If those dates pass without good reason, you should be free to talk to others again. Then keep running the business at full effort through the whole period. A soft month during exclusivity hands the buyer a ready reason to reopen the price.
The takeaway
A letter of intent is mostly non-binding, but signing it costs you the one thing that kept the buyer sharp: the chance that someone else might buy. Treat it as the last real negotiation, not a formality. Get the structure, the inventory and working-capital terms, your transition role, and a short, conditional exclusivity period on paper before you sign, and compare more than one letter whenever you can.
