How to Write a Letter of Intent to Buy an Online Business

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The Letter of Intent — LOI — is the document that converts a conversation into a deal. It's the moment when interest becomes commitment, when both sides agree on the broad terms before investing weeks in due diligence and legal fees. Writing a good LOI is not complicated, but writing a bad one — one that's missing key terms, ambiguous on price, or that signals inexperience to the seller — can kill a deal before due diligence even begins.

This guide covers what an LOI is, what it must include, what's typically negotiable, the critical binding versus non-binding distinction, and a real LOI template you can adapt and use immediately.

What an LOI Actually Is

A Letter of Intent is a non-binding document (with a few binding exceptions) that outlines the key terms of a proposed acquisition. It signals serious intent, gives both parties a shared understanding of the deal structure, and kicks off the due diligence period. It is not the purchase agreement — that comes later, drafted by attorneys, with full legal force.

The LOI serves three practical purposes. First, it locks up the deal — most LOIs include an exclusivity clause that prevents the seller from talking to other buyers for 30-60 days while you complete diligence. Second, it establishes the terms both parties are working toward, reducing the chance of misaligned expectations surfacing late in the process. Third, it signals that you're a serious, prepared buyer — sellers and brokers judge you on the quality of your LOI as much as on the number it contains.

Most online business LOIs are 1-3 pages. They don't need to be dense legal documents. The goal is clarity, not length. A crisp, professional LOI that covers all the key terms is more effective than a 15-page document full of hedging language.

Binding vs. Non-Binding: The Critical Distinction

The most important concept in LOI drafting is the binding versus non-binding distinction. Most of an LOI is intentionally non-binding — it expresses intent, not obligation. If due diligence reveals something disqualifying, a non-binding LOI lets you walk away without legal consequences.

However, several clauses in a standard LOI are typically binding even when the rest of the document is not:

Exclusivity (or "no-shop"). This clause commits the seller to stop marketing the business and not engage with other buyers for the duration of the due diligence period. This is binding on the seller. Without it, the seller can accept a better offer from someone else while you're spending time and money on diligence.

Confidentiality. Both parties agree not to disclose deal terms, financial information shared during diligence, or the fact that a transaction is being considered. This protects the seller from employees and competitors learning the business is for sale. It's binding on both parties.

Expenses. Each party pays their own legal and advisory fees unless otherwise specified. This is typically included as a binding clause to prevent disputes about who owes what if the deal doesn't close.

Everything else in a standard LOI — the purchase price, the deal structure, the transition terms, the timeline — is typically non-binding. It represents the current agreed intent, but either party can walk away without legal liability if the deal doesn't proceed to a signed purchase agreement.

What Every Online Business LOI Must Include

Identification of the parties. Full legal names of buyer and seller. If you're buying through an entity (LLC, corporation), use the entity name even if it hasn't been formed yet ("or entity to be designated by buyer").

Business description and what's being acquired. Name of the business, the URL or primary identifier, and a brief description of what assets are included — domain, content, email lists, social accounts, intellectual property, customer relationships, software code, inventory (if applicable).

Purchase price. The headline number and how it was calculated. "Purchase price of $350,000, representing approximately 30x trailing twelve-month Seller Discretionary Earnings of $11,667/month." Being explicit about the calculation anchors both parties to the same understanding of what the price is based on.

Payment structure. All cash at close, seller financing (amount, rate, term), earnout provisions, or SBA financing. If any portion is contingent on future performance, describe the mechanism clearly.

Inventory treatment (for ecommerce/FBA). Whether inventory is included in the purchase price or priced separately at cost. If separately, state the method for valuation (physical count at close, based on seller's books, etc.).

Due diligence period. How many days from LOI signing to close (typically 30-60 days for online businesses). What access the buyer gets during this period — financial records, analytics platforms, customer lists, advertising accounts.

Exclusivity period. Matches the due diligence period. The seller agrees not to market the business or entertain other offers while the buyer completes diligence.

Transition period. How many hours per week the seller will be available post-close, for how long, and what the compensation arrangement is (typically included in the purchase price for 30-90 days of standard transition support).

Closing conditions. What must happen for the deal to close — satisfactory due diligence, financing secured, purchase agreement signed. Don't over-specify here; the purchase agreement will handle detailed conditions.

Expiration date. The LOI should expire if not signed within 3-5 business days. This creates appropriate urgency and prevents sellers from using your LOI as a negotiating tool with other buyers indefinitely.

LOI Template for Online Business Acquisitions

Common LOI Mistakes That Hurt Deals

Being vague on price calculation. "Offering $300,000" tells the seller nothing about how you arrived at the number. "Offering $300,000, representing 28x trailing twelve-month SDE of $10,714/month" shows your work and anchors both parties to the same baseline. If your due diligence later reveals the SDE is actually $9,500/month, you have a documented basis for renegotiation.

Omitting the exclusivity clause. Without exclusivity, the seller can continue talking to other buyers while you spend time and money on due diligence. Always include a 30-60 day exclusivity period. Sellers who refuse exclusivity entirely are a red flag — they either have another active offer or they're not serious about your deal.

Over-specifying conditions. An LOI with 15 conditions precedent reads as a list of exit ramps rather than a commitment to close. Keep conditions to the essentials: satisfactory diligence, signed purchase agreement, and financing secured if applicable. The purchase agreement is where detailed conditions belong.

Setting a price before seeing verified financials. Some buyers submit LOIs based on the listing's stated revenue before any independent verification. This creates renegotiation risk — if due diligence reveals the real numbers are lower, you have to re-trade, which damages the relationship. Better: submit an initial expression of interest, get basic verification, then submit the formal LOI at a price you'll hold.