The BizBuySell Small Business Community

  • Get Expert Advice

  •  • Find Local Service Professionals

  •  • Share Your Experiences

Please correct me if I am wrong...

...but my understanding is that the steps leading to the closing on the purchase of a business should proceed as follows:
1) Letter of intent (non-binding)
2) Negotiation of signficant details leading to agreement in principal
3) Finalize Offer to Purchase
4) Due diligence
6) Renegotiation if neccessary
7) Closing

Is this not typical? I ask because two brokers I have worked with recently are saying I should:
1) Submit an LOI that is as detailed as an Offer to Purchase
2) Then proceed to Due Diligence
3) Then submit the actual Offer to Purchase
4) Then head to closing

So basically they are suggesting LOI / Due Diligence / Offer to Purchase / Closing.
My understanding is that it should be LOI / Offer to Purchase / Due Diligence / Closing.

Does it even matter?

No User Photo

Answer This Question

max 5000 characters

Web Reference (optional)

e.g., ""

Review Community Guidelines

Help keep our Community clean and on topic. The BizBuySell Community is a place where you can discuss your questions, concerns and knowledge with others you can trust. It is not OK to use this forum to solicit others for personal or financial gain, or to rant about personal issues. It's all in the guidelines.

Submit Your Answer
Answers (2)
No User Photo
The BAF Group LLC

I am in agreement with Julie: How do you make an intelligent decision to buy and a bona fide offer, without most of the pertinent information? In my view, the due diligence process verifies information you have been given and fills in a lot of detail, but it should not be the overwhelming act of discovery.

As for your list of procedures, you are on the right track. The only thought I would offer is that none of it is engraved in stone. Steps can be added or deleted, repeated and so forth, depending upon the quality of the data you are given and the information you turn up, during your investigations.

Mar 20, 2010
Julie A. Barnes, CPA
Small Business Exchange, Inc.
Travis County, TX

Hello James,

What matters is commonsense. Before a seller is willing to spend considerable time addressing due diligence issues, they should be assured that there is a viable offer. On the other hand, the buyer may be reluctant to proceed with a detailed offer until these issues are addressed.

I generally prefer that the preponderance of critical questions be answered before an offer can be contemplated: tax returns reconciled to books, a list of equipment, lease agreements, outstanding liabilities, and a tour of the premises, among others.

If, after receiving this information, a buyer still has outstanding issues, an offer may be made contingent upon their resolution.

It all boils down to mutual respect of the time and effort of the parties involved. Sellers do not want to entertain 'tire kickers' and buyers need a modicum of information to make a decision. As long as you bear this delicate balance in mind, the order of various steps is immaterial.

I hope this helps. For more advice about the process, please visit my blog:

Good Luck!
Julie A. Barnes, CPA
President, SBX, Inc.

Mar 20, 2010

Start a Discussion