The Exit Trap: Why Signing an LOI Without a Plan Can Cost You Millions
The Exit Trap: Why Signing an LOI Without a Plan Can Cost You Millions
If you’re a founder thinking about selling your business, read this twice.
One of the most common and costly misconceptions I see is this: founders treat the Letter of Intent (LOI) like the finish line. It feels like validation. You've built something valuable, and someone wants to buy it.
But here’s the hard truth.
For buyers, the LOI is not the end. It’s the beginning of a much more strategic game.
Once that LOI is signed, timelines stretch. Terms shift. And the pressure, subtly but surely, lands on you—the seller. In many cases, that’s exactly how the buyer wants it.
Here's the trap no one talks about:
Buyers aren’t just looking at your financials. They’re sizing up your leverage.
And the moment you enter diligence without a clear plan, you hand that leverage over. Whether you realize it or not.
According to research from the Exit Planning Institute, over 70% of business owners who sell regret the decision within a year.
Why? Because the process overwhelmed them. They weren't ready. And often, the final outcome didn’t align with what they thought they’d walk away with.
It’s not the offer that catches people off guard. It’s what happens after.
Diligence Doesn’t Win Deals. Preparation Does.
Due diligence is where most deals break down. Not because the business wasn’t worth buying, but because the seller wasn’t prepared.
This is the phase where every strength, weakness, and blind spot is scrutinized. And if your company isn’t buttoned up, documented, and structured in a way that builds confidence, the buyer will either:
- Renegotiate the price
- Adjust the terms
- Or walk away entirely
Deals rarely fall apart on Day One. They unravel slowly, often in silence, behind the scenes of spreadsheets and discovery calls.
That unraveling usually starts with a founder who didn’t plan for what came next.
What Most Founders Miss
An LOI is a non-binding handshake with big consequences. It signals your interest in selling and often comes with an exclusivity clause. That means you can’t talk to other buyers for a set period of time.
If you enter that window unprepared, you’ve given up your two most valuable assets:
- Optionality
- Negotiating Power
Without a plan, you lose the ability to drive the deal forward on your terms. You’re reacting instead of leading. And in M&A, reactivity is expensive.
The Real Work Happens Long Before the Offer
Ask yourself this:
If an offer landed in your inbox tomorrow, would you be ready?
Would your books be clean and buyer-ready?
Do you have documented processes?
Have you thought through your tax position?
What about your personal financial goals post-sale?
These are the questions that drive value. Not just sale price, but deal structure, tax outcomes, and your peace of mind after the ink is dry.
How We Help Business Owners Stay in Control
At Pinnacle Wealth Advisory, we help business owners prepare for the moments that matter, long before they happen.
Whether you're 12 months or 5 years away from selling, we guide you through:
- Valuation Planning – Understanding what drives value and how to increase it
- Tax Strategy – Structuring your exit to maximize after-tax proceeds
- Succession and Legacy – Ensuring your wealth works for your family and future
- Deal Readiness – Organizing your financials, operations, and exit plan so you're never caught off guard
We don’t just react to offers. We help you build a roadmap that keeps you in the driver’s seat, no matter who’s at the table.
Because in our experience, the best exits aren’t rushed. They are designed with clarity, foresight, and leverage intact.
Final Thought
The LOI isn’t the end. It’s the start of a high-stakes negotiation.
If you want to walk away with what your business is truly worth, the real work starts now—not when the offer arrives.
Let’s build a plan that protects what you’ve built.