The LOI Stage: Why Week 1 Separates Winners from Losers

Following up on my post earlier about speed in deal execution, let's start with where most buyers first lose competitive deals: the LOI stage. Here's what I see killing deals before they even get to due diligence: What's NOT working: 1. Taking 2-3 weeks to submit an LOI after seeing the CIM Sellers and brokers interpret this as "not that interested" or "can't make decisions" By Week 3, another buyer has already gone under LOI 2. "Let me think about it" after the first management call Thinking is good. Endless analysis is not. You're not committing to buy at LOI stage, you're committing to do diligence 3. Asking for 3-4 rounds of management calls before submitting Sellers get fatigued. Brokers get annoyed. One substantive call should be enough to submit an LOI if you're interested What IS working: 1. Submitting a clean LOI within 5-7 days of serious interest Shows you're organized and decisive Signals to broker you're a serious buyer 2. Having your "must-know" questions ready for the first seller call Don't ask everything. Ask the 10 things that matter. My clients typically ask: revenue trend explanation, top 3 customer details, why owner is selling, key employee situation, any skeletons 3. Making a decision: you're in or you're out You won't have perfect information at LOI stage. That's what DD is for. LOI should be based on "directionally attractive + no obvious red flags" The "Week 1 Framework" I give my clients: Day 1-2: Review CIM, run quick sanity checks Revenue trend (growing, flat, or declining?) Margins reasonable for the industry? Customer concentration acceptable (<60% in top 3)? Any obvious red flags? Day 3-4: First call with broker/seller Ask your top 10 questions Get feel for seller motivation and professionalism Confirm timeline and process Day 5-7: Submit LOI Clean structure Reasonable price (based on comps) 45-60 day DD timeline Standard contingencies (financing, DD, no material adverse change) When to walk away at this stage (don't waste time on an LOI): Revenue declining >20% YoY without clear explanation Top 3 customers = >60% of revenue with no contracts Owner completely checked out and has no financials Seller playing games with information or access The mindset shift: Old: "I need to be 95% certain before I submit an LOI" New: "I need to be 60% confident, then use DD to get to 95%" The LOI is not a commitment to close. It's a commitment to take a hard look. If you wait until you're certain, someone else will be closing the deal while you're still analyzing. Next in the series: Due diligence and how to move fast through DD without missing critical issues. I'll share the framework my clients use to get through DD in###-###-#### days instead of 90+. Questions on LOI strategy? Drop them below.