Signing A Letter of Intent – Are You Prepared? Part 1 of 2

contract

In dealing with business owners, I find that many of them wait until the last minute before thinking about selling their business, either because they are too busy, or simply too attached. In my experience, it is never too early to understand what the process of selling your business involves.

We all understand the basic concept of negotiating leverage through our day-to-day interactions with others, and it is important to understand that when selling an attractive business, you also have leverage – but only to a point. When you sign a letter of intent (LOI), the balance of power in the negotiation shifts significantly over to the buyer’s side, who now can then take their time investigating the company and exercise their due diligence.

The longer they take, the more likely you are to become committed to selling your business. A savvy buyer knows this, and can drag out diligence for months in a bid to justify lowering their offer price or demanding better terms.

Left with little leverage and other suitors sidelined, you find yourself with an unattractive deal or the choice to walk.

If neither of these options sound attractive to you, you’ll want to prepare your business before you even decide to sell.  If you’re wondering just how you can do this, stay tuned to part 2 of this post next week for the answer!

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