From LOI to close: the business sale process, step by step.

The whole path, on one page.

Here is the entire sale, start to finish, as a single flow. Print it, or keep it open in a tab while your advisors talk. Every stage after the LOI is a place where the agreed number can survive intact or leak. The percentages are illustrative, meant to show the shape of survivorship, not to predict your deal.

Two things to notice before we go deeper. First, the LOI sits in the middle, not at the end — signing it is the start of the hard part, not the finish. Second, the dashed box marks confirmatory diligence, the stage where a buyer goes looking for the gap between what you said and what is true. Keep both in mind; they explain most of what follows.

The front half: teaser, NDA, calls, IOI.

The front half of a deal is about marketing the business to a pool of possible buyers and narrowing that pool to one. It is the part your broker or M&A advisor runs, and it is the part where a strong, consistent public presence quietly earns you a better starting position. Here is what happens, stage by stage.

Stage 1 — The teaser (weeks 1–2)

The teaser, sometimes called a “blind profile,” is a one- or two-page anonymous summary of your business. It names the industry, the region in broad strokes, the revenue and earnings band, and the reason for sale. It does not name you. The point is to attract interest without tipping off your customers, staff, or competitors that you are for sale. Your broker blasts it to a list of qualified buyers — individuals, search funds, family offices, private-equity groups, and strategic acquirers in adjacent industries.

How long: the teaser goes out in the first week or two after you engage an advisor and finish the confidential information memorandum (the CIM, the longer document buyers get after signing the NDA). Where it goes wrong: a teaser that oversells — “regional market leader” on a business that reads online like a one-van operation — sets an expectation the rest of the process cannot meet. The gap gets discovered later, and discovered gaps become re-trades.

Stage 2 — The NDA (rolling)

A buyer who wants more signs a non-disclosure agreement. In exchange they receive the CIM and your identity. From this moment your name is in the market, in a small and controlled way. Serious buyers treat the NDA seriously; tire-kickers sign anything. Your advisor’s job is to tell the difference and to control how much flows out at each step.

How long: NDAs trickle in over two to six weeks as the teaser circulates. Where it goes wrong: rarely fatal here, but this is the first moment a buyer forms an impression of your business as a real, findable company. The first thing many of them do after signing the NDA is type your name into Google. What loads is your live website, your reviews, and — for the thorough ones — the archived history of your site. If that public face contradicts the polished CIM they just read, skepticism sets in before the first call.

Stage 3 — Buyer calls and management meetings (weeks 3–8)

Interested buyers get a call, then usually a management meeting, in person or by video. They ask about customer concentration, owner dependence, staff, growth, and the reason you are selling. They are testing whether the story in the CIM holds up when a human tells it live. Good buyers are not hostile here. They are calibrating: is this a business with genuine independent equity, or a job that pays the owner well?

How long: a few weeks, sometimes running in parallel across several buyers. Where it goes wrong: owner-dependence signals. If every answer routes back to “I handle that personally,” the buyer starts pricing in the risk that the business walks out the door when you do.

Stage 4 — The IOI (weeks 6–10)

An indication of interest is a short, non-binding letter in which a buyer proposes a valuation range and outlines rough terms. If the LOI is a proposal, the IOI is a proposal to make a proposal. Not every process has a formal IOI stage; smaller deals often jump from calls straight to an LOI. When multiple buyers are interested, this is where your advisor runs a competitive process, using the range in one IOI to sharpen the next. Competition among buyers is the single biggest lever on your final number, and it only exists while you have more than one live buyer.

How long: IOIs come in over a couple of weeks after management meetings. Where it goes wrong: a thin buyer pool. If only one buyer makes it this far, you have lost your leverage before the LOI is even drafted.

The LOI: what it is, and what it isn’t.

The letter of intent is the document most owners remember signing, because it feels like the deal. It sets out the headline price, the structure (how much cash at close, how much financed or contingent), the assets included, the exclusivity period, and a target close date. Champagne sometimes gets opened. It probably shouldn’t, yet.

Here is the thing owners most need to understand: the LOI is mostly non-binding. A few clauses bind — usually the exclusivity/no-shop and the confidentiality provisions. The price does not bind. The LOI is the buyer saying, in writing, “based on what I know so far, I intend to pay roughly this, subject to confirming it’s all true.” The phrase that matters is subject to confirming it’s all true. That confirmation is the entire back half of the deal, and it is where the number defends itself or bleeds.

What a well-negotiated LOI does for the seller is buy structure and speed: a defined exclusivity window that isn’t open-ended, a purchase price mechanism that is clear rather than vague, and a close date that keeps the buyer moving. What a loose LOI does is leave the door open to a slow bleed — a long, undefined diligence period during which the buyer chips at the number one finding at a time.

Two structural terms in the LOI deserve a hard look before you sign, because they quietly determine how much of the headline number you actually receive:

Neither structure is wrong. Earnouts, seller notes, and holdbacks are normal and often necessary to bridge a gap between what you want and what the buyer will pay in cash. But the headline number and the cash-at-close number are different animals, and the LOI is where the difference gets set. This is exactly the point at which a transaction attorney and a CPA earn their fee. Do not sign an LOI on the strength of the big number alone.

Exclusivity and the no-shop clock.

When you sign the LOI, you almost always grant the buyer exclusivity — a “no-shop” period, commonly 30 to 90 days, during which you agree not to talk to other buyers. This is the buyer’s reasonable protection: they are about to spend real money on lawyers, accountants, and diligence, and they don’t want you shopping their offer around while they do it.

It is also the moment your leverage flips. Up to the LOI, you had a competitive process and multiple live buyers. The instant you sign the no-shop, you have one buyer and a clock. The other buyers cool off. If this deal falls apart in week eight of a 90-day exclusivity, you are not back where you started — you are re-entering a market that now knows your last deal broke, which is a weaker position than never having gone under LOI at all.

This asymmetry is why re-trades happen during exclusivity and not before. A buyer who wants to pay less knows exactly how the leverage sits. Some buyers — a minority, but a real one — sign an ambitious LOI specifically to win exclusivity, then use the diligence period to grind the number down, betting that a tired seller with cooled-off alternatives will take the haircut rather than start over. The defense is not paranoia. The defense is a clean diligence file that gives an honest buyer nothing to grind on and a bad-faith buyer nothing to point at.

Where it goes wrong: an exclusivity period with no defined end, or one that auto-renews on the buyer’s say-so. Your advisor should fight for a hard outside date, so a buyer who is slow-walking diligence to wear you down runs out of clock instead of you running out of patience.

Confirmatory diligence: where the price gets tested.

This is the stage that decides whether the LOI number survives. Confirmatory diligence is the buyer’s deep verification of everything you claimed. Their accountants run a quality-of-earnings analysis on your financials. Their lawyers examine your contracts, leases, licenses, and litigation history. They check customer concentration, employee agreements, tax filings, and insurance. And — this is the part sellers underestimate — they go back and re-read your public presence against the CIM.

The financial diligence gets the most attention, and rightly so. If a quality-of-earnings review finds that a chunk of your reported earnings was really the owner’s personal expenses run through the business, or that a large customer left after the CIM was written, the number moves. That is a legitimate re-trade, and there is no brand fix for a real earnings problem. Your defense there is clean books and honest add-backs, prepared before you list, ideally with a sell-side quality-of-earnings report in hand so there are no surprises.

But a large share of re-trades are not about the financials at all. They are about consistency — whether the story hangs together across every source a diligent buyer checks. And the cheapest, most public source of inconsistency is the one owners forget they control.

Think of it plainly. In diligence, the buyer holds two documents up to the light: the story you told, and the evidence a stranger can find on the open internet. When those two agree, diligence becomes a search for confirmation and the deal moves toward close on its original terms. When they disagree, diligence becomes a search for the catch, and the number starts to slide. You get to decide which of those two searches the buyer runs — but you decide it before you go to market, when you still have the leverage and the time to make the public record match the truth.

How long: confirmatory diligence typically runs 30 to 75 days inside the exclusivity window. Where it goes wrong: everywhere. This is the single most dangerous stretch of the deal, which is why it gets its own numbered list further down.

The definitive agreement: APA, SPA, and the fine print.

While diligence runs, the lawyers draft the definitive agreement — the binding contract that replaces the non-binding LOI. Which document you sign depends on how the deal is structured:

• Asset Purchase Agreement (APA): the buyer buys specific assets and assumes specific liabilities, leaving the legal entity behind with the seller. Most small-business deals are asset sales, because buyers prefer not to inherit unknown liabilities. This structure has tax consequences for you, which is a CPA conversation, not a guess.
• Stock Purchase Agreement (SPA): the buyer buys the ownership of the company itself, inheriting everything — assets, contracts, and liabilities known and unknown. More common in larger or regulated deals where transferring the entity is cleaner than transferring every asset one by one.

The definitive agreement is long, and the length is where the money hides. The LOI was two pages of intent; the APA or SPA is fifty pages of exactly what happens if something turns out to be untrue. The clauses that matter most to a seller are the representations and warranties, the indemnification provisions, the escrow/holdback terms, and the working-capital adjustment. Each is defined in the glossary below, but the shape of the risk is this: the more you promise (reps and warranties), and the longer and larger the money the buyer can claw back if a promise proves false (indemnification, holdback), the more of your headline price is really at risk for months or years after close.

This is not a document to negotiate alone, and it is not a document to skim. A transaction attorney who does deals of your size for a living will know which terms are market-standard and which are a buyer overreaching. The difference between a market escrow and an aggressive one can be six figures of your money tied up for an extra year.

How long: drafting and negotiating the definitive agreement runs in parallel with late diligence, often two to six weeks of back-and-forth. Where it goes wrong: a seller who negotiated hard on price and then rubber-stamps the reps, indemnities, and escrow can give back at the signing table everything they won at the LOI.

Escrow, close, and the money mechanics.

Once the definitive agreement is signed and the closing conditions are met, the deal closes. Here is what actually moves.

The escrow account

A neutral third party — an escrow agent, often a title company, bank, or specialist escrow firm — holds the money and the documents until every condition is satisfied, then releases them simultaneously. This protects both sides: you don’t hand over the business before the money is confirmed, and the buyer doesn’t wire the money before the business is legally theirs. Separately, a portion of your proceeds — the holdback — usually stays in escrow after close, for a set period, as the buyer’s security if a representation turns out to be false. A common holdback is 5–15% of the price held for 12–24 months.

The working-capital true-up

Most deals set a target level of working capital (roughly, receivables plus inventory minus payables) that the business must have on the day it changes hands — the “peg.” At close, the actual working capital is measured and compared to the peg. If you delivered more, the buyer pays you the difference; if less, the price is adjusted down. This true-up is normal and fair in principle, but it is a common quiet re-trade if the peg was set carelessly. Know your number before close.

The close itself

Closing is largely a signing-and-wiring event. Documents get executed, funds get released from escrow, the cash portion lands in your account, and any seller note and earnout terms begin their life. Ownership transfers. It can feel anticlimactic after months of work — a flurry of signatures and a wire confirmation.

How long: from signed agreement to funded close is often days to a couple of weeks. Where it goes wrong: the working-capital true-up and a last-minute financing hiccup on the buyer’s side. Confirm the buyer’s funding is real, not aspirational, well before you rely on the close date.

The transition period nobody plans for.

The deal is not truly over at close. Almost every small-business sale includes a transition period in which you help the new owner take the reins — introducing key customers, transferring vendor relationships, training staff, and being on call for the questions only you can answer. This is often 30 to 90 days of full or part-time involvement, sometimes formalized as a consulting agreement, sometimes as a longer transition-services arrangement.

Two parts of your deal structure make this period matter more than owners expect. If you took a seller note, the buyer’s ability to pay you back depends on the business continuing to succeed under new ownership — so a clean handoff protects your own remaining money. If you have an earnout, your last chunk of price depends on the business hitting targets during a period when you may no longer be in control of the decisions that drive them. That tension — you’re on the hook for results you no longer command — is exactly why earnout terms need to be negotiated with unusual care, and why the metrics they hinge on should be ones that can’t be quietly starved by the new owner.

A business that was built to run without the owner — documented processes, a real team, a brand and market position that belong to the company rather than to you personally — transitions cleanly and pays out its notes and earnouts. A business that was the owner has a rocky transition, and rocky transitions are where seller notes go bad and earnouts quietly miss.

Where deals actually die.

Deals rarely die from one dramatic event. They die from an accumulation of findings that erode the buyer’s confidence until the number no longer makes sense to them, or until the seller loses patience with the grind. Here, in rough order of how often they show up after the LOI, are the ways a signed deal goes sideways.

1. The quality-of-earnings surprise. Diligence finds that reported earnings were softer than the CIM claimed — owner expenses run through the business, one-time revenue treated as recurring, a lost customer not yet reflected. The number moves, legitimately. Defense: clean books and a sell-side quality-of-earnings report before you list.
2. The consistency gap. The website, reviews, archived pages, and LinkedIn tell a different story than the CIM. Closed locations still listed. A stale team page. A copyright footer frozen years back. Each mismatch feeds the “the memo was dressed up” read and licenses a re-trade. Defense: make the public record match reality before going to market.
3. Owner dependence. Diligence confirms the business is really the owner. Buyers price the risk that customers and know-how leave with you, and either discount the number or load it into an earnout. Defense: document processes and build a visible team well before listing.
4. Customer concentration. One or two customers are a large share of revenue, and the buyer fears losing them post-close. Defense: diversify early, and be ready to speak honestly to the stickiness of the concentrated relationships.
5. The working-capital fight. The peg was set loosely, the true-up comes in against the seller, and the price adjusts down at the wire. Defense: model your normal working capital and negotiate the peg deliberately.
6. Reps, warranties, and escrow overreach. The seller wins on price, then concedes an aggressive holdback and broad indemnities, tying up money for years. Defense: a transaction attorney who knows what is market for your deal size.
7. Financing falls through. The buyer’s lender gets cold feet, or an SBA loan stalls. The close date slips or evaporates. Defense: verify funding is committed, not hoped-for, before you rely on the buyer.
8. Seller fatigue. Four months in, exclusivity has cooled the other buyers, and a tired seller accepts a haircut rather than start over. Defense: a hard exclusivity deadline and a clean file that keeps diligence short.
9. A genuine skeleton. Undisclosed litigation, a lease problem, an environmental or licensing issue surfaces. Sometimes fatal, sometimes just a price adjustment. Defense: run your own diligence on yourself first, so nothing surprises you.
10. Both sides simply drift. No single villain — momentum stalls, advisors get slow, the buyer’s attention wanders to a shinier deal. Defense: a tight timeline in the LOI and an advisor who keeps the process moving.

Notice how many of these are preventable before you ever go to market, and how many trace back to a gap between the story and the evidence. The financial ones need clean books and a CPA. The structural ones need a transaction attorney. And the consistency ones — the ones where your own public presence contradicts your own memo — need the least specialized work of all. They just need someone to make the public record of your business tell the same true story your CIM does, before a buyer is holding the two up to the light.

The terms that blindside owners.

These are the deal terms that most often catch first-time sellers off guard, because they change how much of the headline price you actually keep and when you get it. This is a plain-English glossary, not legal advice — the definitions are directional, and how each one applies to your deal is a conversation for your attorney and CPA.

The honest summary.

The sale is a corridor, not a moment. The LOI is the midpoint, and the number in it is a hypothesis the buyer spends the back half of the deal testing. Most of what erodes that number after the LOI is not bad luck — it is surprise, and the most preventable surprises come from a gap between the story you told and the evidence a diligent buyer can find. The financial gaps are the CPA’s to close. The legal terms are the attorney’s. And the gap between your CIM and your own public presence is the one that is cheapest to close, entirely within your control, and best closed months before you ever list.

Read your own website, reviews, and archived pages the way a buyer will read them in diligence: side by side with the story you plan to sell. Where they disagree, fix the website to match the truth — before the buyer is holding both up to the light and there’s no leverage left to explain the difference.