Why Pre-LOI Planning is the Most Underrated Exit Strategy Move for Founders
Why Pre-LOI Planning is the Most Underrated Exit Strategy Move for Founders
A founder I know once said, “The day I got the offer was the day I realized I had already lost.”
On paper, his company was thriving. The buyer’s Letter of Intent looked promising. But buried in the LOI were terms that locked him into exclusivity, limited his leverage, and left millions in potential value on the table.
The mistake wasn’t signing the LOI. The mistake was waiting until then to plan.
The Illusion of Leverage
Most founders think the deal starts with the LOI. In reality, the LOI is when your leverage ends. Once it is signed, the buyer controls diligence, sets the pace, and shapes the terms. You are now reacting instead of directing.
Before the LOI, you still have options. You can optimize ownership structures, reduce tax drag, plan for liquidity events, and align the deal with estate or gifting goals. That work strengthens your position and protects wealth that might otherwise slip away.
Cleaning House Before the Buyer Arrives
Another blind spot for founders is assuming their financial house is in order. Outdated cap tables, unclear equity agreements, and murky cash distributions create red flags for buyers.
Pre-LOI planning addresses these issues. It creates clean equity alignment, tightens governance, and separates personal from operating cash. The cleaner the books, the stronger the negotiating position.
Protecting Life After the Deal
A sale is not just about the check you cash. It is about what comes after. Without careful planning, founders often find themselves wealthy on paper but unprepared for taxes, liquidity management, or legacy decisions.
Pre-LOI work allows you to map scenarios, forecast after-tax proceeds, and stress test how the sale will affect your long-term vision. The goal is to protect not just the transaction, but the life that follows it.
Pulling It Together
The Letter of Intent is not the beginning of your exit. It is the checkpoint where your leverage disappears. The real power is in the planning you do before it ever arrives.
That is why I encourage founders to begin preparing two to three years in advance. At Pinnacle Wealth Advisory, I help business owners model different exit paths, reduce tax friction, and align liquidity with the life they want to live after the deal.
The earlier you start, the more options you have, and the fewer regrets you carry.
If you are even considering a sale in the next few years, the time to prepare is now.