Mistakes I Made When Buying a Business: Part 3
When most first-time buyers think about buying a business, they focus on the purchase price.
I did too.
But one of the biggest mistakes I made during my acquisition journey was not understanding how critical deal structure is—especially at the Letter of Intent (LOI) stage.
Price matters.
But structure is often what makes a deal possible—or impossible.
What an LOI Really Does (and What It Doesn’t)
An LOI is not a final contract. It’s a roadmap.
It outlines:
how the deal is expected to work
who is taking on which risks
how money will flow
what assumptions both sides are making
Once an LOI is signed, momentum kicks in. Expectations are set. Walking things back later becomes painful, awkward, and sometimes deal-ending.
That’s where I went wrong.
The Mistake: Treating the LOI Like a Placeholder
Early on, I treated the LOI as something informal—almost a formality.
My thinking was:
“We’ll figure the details out in diligence.”
But by not thinking deeply about structure at the LOI stage, I unintentionally:
locked myself into unfavorable terms
missed opportunities to de-risk the deal
signaled inexperience to sellers and brokers
created friction later when I tried to renegotiate
By the time diligence uncovered issues (as it always does), the framework of the deal was already set.
Deal Structure Matters More Than Price
Two deals with the same purchase price can have wildly different outcomes for a buyer.
Structure determines:
how much cash you need upfront
how much risk you carry
how performance is measured
what happens if things don’t go as planned
Key structural elements include:
seller financing
earnouts
working capital adjustments
holdbacks and escrows
non-competes and transition support
Ignoring these at the LOI stage puts you on your back foot.
Sellers Expect Sophistication at the LOI Stage
By the time you submit an LOI, sellers expect you to:
understand your financing constraints
know what risk you’re willing to take
have thought through operational realities
present a structure that makes sense for both sides
When your LOI is vague or overly simplistic, it signals that you haven’t done the work—or worse, that you may struggle to close.
That can cost you the deal.
What I Do Differently Now
Now, I approach the LOI as a strategic document, not a placeholder.
Before submitting one, I make sure:
the structure reflects what I can actually execute
risk is shared appropriately with the seller
financing assumptions are realistic
diligence findings won’t force a major reset later
The LOI sets the tone. When it’s thoughtful, the rest of the process becomes smoother, faster, and far less adversarial.
Want to Avoid This Mistake?
Most buyers focus on finding deals.
The best buyers focus on structuring them well.
At Team Rise Consulting, I help buyers:
understand common deal structures
design LOIs that reflect real-world constraints
negotiate risk intelligently
avoid painful renegotiations later
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A great deal isn’t just about price.
It’s about structure—and getting it right from the start.