Letter of Intent (LOI) Explained for Florida Business Sellers

If you are selling a business in Florida, the letter of intent — commonly called an LOI — is the document that transforms a buyer's interest into a real transaction. It comes before the purchase agreement, before due diligence, and before attorneys get deep into the details. For many sellers, it is also the most misunderstood document in the entire sale process.

At CBH Business Group, we have guided business owners through dozens of LOI negotiations across Florida, from St. Cloud and Orlando to Tampa and Miami. What we see repeatedly is that sellers who understand the LOI upfront protect their valuation and their timeline. Sellers who sign without scrutiny often give up leverage they never get back.

This guide explains exactly what an LOI contains, which terms are negotiable, and what Florida business owners should watch out for before putting pen to paper.

What Is a Letter of Intent in a Business Sale?

A letter of intent is a formal document from a buyer that outlines the key terms under which they propose to purchase your business. Think of it as a term sheet — it captures the headline deal structure before both sides invest weeks of time and tens of thousands of dollars in a formal purchase agreement and due diligence.

LOIs typically include:

• Purchase price — the total offered and how it breaks down (cash at close, seller note, earnout)
• Deal structure — asset sale versus stock sale, which has significant tax implications for Florida sellers
• Exclusivity period — usually 30–90 days during which you agree not to solicit other buyers
• Due diligence timeline — how long the buyer has to inspect your books, operations, and legal standing
• Working capital target — the baseline cash and receivables expected at closing
• Contingencies — financing, regulatory approval, key employee retention, and more
• Deposit or good faith payment — sometimes required, often not
• Transition period — how long the seller stays on after closing and at what compensation

Understanding these components gives you the ability to negotiate from strength rather than react from confusion once you are already locked into an exclusivity period.

Which Parts of the LOI Are Actually Binding?

This is where many sellers get tripped up. Most LOIs are explicitly labeled "non-binding" — but that label does not apply to every clause inside the document. Typically, the following sections are legally binding even in a non-binding LOI:

• Exclusivity (no-shop clause) — you agree to stop marketing the business and not negotiate with other buyers during the exclusivity window
• Confidentiality — both parties are bound to protect sensitive information shared during due diligence
• Expense responsibilities — who pays for legal, accounting, and QofE costs during the deal process
• Governing law — usually specifies which state's laws govern disputes (Florida sellers should confirm this is Florida)

The purchase price and deal terms are generally non-binding — meaning the buyer can renegotiate after due diligence. But once you sign an exclusivity clause, you cannot take other meetings or accept competing offers during that window. This is why exclusivity length and carve-outs matter enormously.

At CBH, we routinely push back on exclusivity windows longer than 45 days for businesses under $10M in revenue. A 90-day lock-up gives a buyer ample time to retrade the price after surfacing diligence issues. Shorter windows, or exclusivity tied to milestone benchmarks, protect the seller's position.

How Purchase Price Is Structured in a Florida LOI

Florida M&A deals in the $2M–$20M range rarely come in as all-cash offers at close. Understanding how the price is structured — and what each component means to your actual net proceeds — is one of the most important exercises a seller can do before accepting an LOI.

Component	What It Is	Typical Range (FL Lower-Middle Market)	Risk to Seller
Cash at Close	Wire transferred on closing day	60–85% of deal value	Low — you receive it immediately
Seller Note	Buyer pays remainder over 3–5 years with interest	10–25% of deal value	Medium — contingent on buyer performance post-close
Earnout	Future payments tied to hitting revenue or EBITDA targets	5–20% of deal value	High — depends on business performance under new ownership
Rollover Equity	Seller retains a minority stake in the combined entity	Varies — common in PE roll-ups	Medium — tied to buyer's future exit

When a buyer presents a headline number of, say, $5M, the actual cash you walk away with at closing could be $3M to $4.25M depending on the structure. Always model the net proceeds scenario, not just the headline figure. A CBH advisor runs this analysis for every deal we represent before we recommend signing an LOI.

Key Terms to Negotiate Before Signing

The LOI is your best opportunity to lock in protections before leverage shifts to the buyer during due diligence. Here are the most important terms Florida sellers should negotiate:

Working capital peg: Most LOIs specify that the business must be delivered with a "normal" level of working capital at closing. If the peg is set too high, the buyer can claw back part of the purchase price post-close. Get this number defined clearly — ideally as a trailing 12-month average — before you sign.

Seller note security: If the LOI includes a seller note, negotiate collateral. A first or second lien on business assets means that if the buyer defaults post-close, you have legal recourse to recover the note balance.

Earnout definitions: Earnouts are the most litigated component of M&A transactions. Before you agree to one, define exactly how the metric is calculated, who controls the accounting, and what restrictions apply to the buyer's ability to expense their way below the target threshold.

Non-compete scope: LOIs often include or reference a non-compete agreement. Florida enforces non-competes in the context of business sales, and courts here tend to uphold them if the duration and geography are reasonable. Know what you are agreeing to — especially if you plan to stay in the industry.

Representations and warranties cap: While this is usually finalized in the purchase agreement, the LOI may reference indemnification limits. Push for a reasonable cap (often 10–20% of deal value) and a survival period no longer than 18–24 months.

Asset Sale vs. Stock Sale: A Decision the LOI Locks In

The LOI will specify whether the transaction is structured as an asset sale or a stock sale. For most Florida small business sales under $10M, buyers strongly prefer asset sales — they get a step-up in basis, and they avoid inheriting unknown liabilities. Sellers often prefer stock sales for tax reasons, since the entire gain may be taxed at long-term capital gains rates rather than a mix of ordinary income and capital gains.

If a buyer proposes an asset sale and you accept it in the LOI without pushback, you have effectively conceded the tax structure for the entire deal. Some sellers accept a lower headline price in exchange for a stock sale structure because the after-tax proceeds are higher. This math is worth running with your CPA before you respond to any LOI.

CBH works alongside your tax advisor to model both structures side by side so you can evaluate offers on an apples-to-apples after-tax basis. Florida has no state income tax, which already provides an advantage — but federal capital gains treatment, depreciation recapture, and installment sale elections still require careful planning. Learn more on our resources page or speak with our team.

What Happens After the LOI Is Signed

Once both parties execute the LOI, the exclusivity clock starts and due diligence begins. The buyer will request three to five years of financials, tax returns, customer and vendor contracts, employee records, equipment lists, and a host of other documents. In many cases, they will also engage a quality of earnings (QofE) firm to verify your EBITDA and identify any add-back adjustments that may be challenged.

This phase typically runs 30–60 days for businesses under $10M. During that window, buyers sometimes attempt to retrade — lowering the offer price based on diligence findings. A well-prepared seller who worked with an advisor before going to market is far less vulnerable to this tactic because the issues have already been identified and addressed or disclosed upfront.

After diligence, the purchase agreement is drafted — usually by the buyer's attorney — and negotiated over one to three weeks. Closing follows, during which title transfers and funds are wired. The total time from signed LOI to close typically runs 60–120 days in the Florida lower-middle market.

Why the LOI Is Not a Formality

We see sellers make the same mistake repeatedly: they treat the LOI as a handshake that simply moves the deal forward. In reality, every term you accept in the LOI becomes your baseline for the rest of the transaction. Buyers rarely offer better terms in the purchase agreement than what was already agreed in the LOI — and they frequently try to walk back concessions during diligence.

The time to fight for your interests is at the LOI stage, when you still have leverage and when the buyer is motivated to get the deal under exclusivity. After you sign, your negotiating position weakens by design.

CBH Business Group negotiates LOIs on behalf of Florida business owners every week. We know where buyers push, where they have room to move, and what market-standard terms look like for businesses across industries — from home services and healthcare to construction, professional services, and B2B companies.

If you have received an LOI or are preparing to go to market, we would be glad to review your situation. Use our free valuation calculator to get a baseline on what your business might be worth, or contact us directly to schedule a confidential conversation. You can also explore our full guide to selling a business in Florida or visit our business valuation page for more context on how buyers determine price.

CBH Business Group is based in St. Cloud, FL and serves business owners throughout Central Florida and the state. Call us at (407) 908-3845 — no sales pitch, just a straight conversation about what your deal could look like.