A letter of intent, or LOI, is the document that turns a casual conversation about buying an online business into a real deal. It is usually non-binding, but it sets the price, the structure, and the rules for the weeks of due diligence that follow. A good LOI protects both sides: the buyer gets time to verify the business, and the seller gets a serious buyer who has put their intentions in writing.

The first section of any LOI covers the commercial terms. It states the purchase price, how it will be paid, and what is included in the sale: the domain, website, content, customer list, email list, social accounts, and any software or licences. It should also say whether inventory is included and how it will be valued at closing. If part of the price depends on future performance, known as an earn-out, the LOI must spell out the targets, the measurement period, and how the earn-out is calculated.

Exclusivity is the clause buyers care about most. It stops the seller from shopping the business to other buyers while you run due diligence, usually for 30 to 60 days. In return, the seller will expect a confidentiality agreement and a clear timetable, so the exclusivity period has a firm end date. The LOI should also say who pays for what: typically each side pays its own legal and accounting costs, while the buyer pays for any third-party due diligence services.

Conditions and timelines are what keep a deal moving. The LOI should list the conditions that must be met before closing, such as satisfactory due diligence, financing approval, and the transfer of key accounts. It should set dates for each stage: when diligence ends, when the purchase agreement is signed, and when the money changes hands. Without dates, deals drift, and a drifting deal is a deal that usually dies.

Most of an LOI is non-binding, but a few parts usually are binding: confidentiality, exclusivity, and the agreement on who pays costs if the deal falls through. These binding sections protect both sides while the non-binding price and terms are still being tested. Make sure the document clearly says which sections are binding and which are not, because a badly drafted LOI can accidentally create obligations neither side intended.

The most common LOI mistake is agreeing a price before diligence. A price agreed on the seller's numbers alone leaves no room to renegotiate when the real figures turn out lower. Build in a price-adjustment mechanism, or state that the price is subject to verification of the trailing twelve months of profit. Another mistake is skipping the transition plan: the LOI should promise a handover period, usually 30 to 90 days, where the seller trains you and introduces you to suppliers and key customers. Finally, get a lawyer to review the LOI before you sign, even on a small deal. It is cheaper than fixing a bad agreement later.

A breakup fee is worth discussing on larger deals. If the seller walks away after you have spent time and money on due diligence, a small fee can compensate you for the wasted effort, and it also tests how serious the seller is. Not every seller will agree to one, and on small deals it is often not worth the negotiation, but the conversation itself is useful: a seller who refuses any commitment may be shopping your offer against other buyers. The LOI should also state clearly that either side can walk away if diligence uncovers a material problem, so neither party is trapped in a deal that no longer makes sense.