in 2024 LOIs are still used by 90+% of business buyers to make an offer on a business.

But most people don’t know how to write a good one.

As an M&A lawyer, I’ve written or reviewed over 100 LOIs.

Here are 12 LOI basics you should know.

A thread 1/ LOIs are part-binding part non-binding

Many people think that LOIs are entirely non-binding.

That’s incorrect.

LOIs have both non-binding provisions (primarily centered around deal terms) & binding provisions (most importantly exclusivity and allocation of expenses).

Trillions of dollars of profitable boomer businesses are going up for sale.

Buying one is your best ticket out of the rat race.

But what if you don’t have enough money saved up?

No problem!

In this thread I will share 5 ways to buy a business with minimal cash down.

👇🧵 Example: lawn and sprinkler company

SDE almost $400K
Asking price $1.5M

PS, home services companies with a subscriber base of recurring revenue and a simple business model are fantastic.

Buying a business?
Delays will kill your deal.

With SBA funding, small details can lead to big delays.

After closing 60+ deals I"m sharing 7 details that are frequently missed.

Skip any & your deal WILL get delayed.

This thread could save you thousands of dollars.

👇🧵💰 1/ Tax clearance
Required for every asset purchase, a tax clearance certificate confirms that seller’s taxes are up to date and that you won’t be inheriting them.

Otherwise, even though you’re just buying the assets, laws says you WILL pay any outstanding taxes too.

Yesterday I posted about how to use $75K to buy a $1M business that can pay you $200K.

Lots of naysayers, and also lots of curious people.

So here's an actual deal that meets this criteria (currently on BizBuySell).

Let's talk about how we can buy it! Assuming we pay full price, here's how we might structure the funding:

• $850K SBA loan
• $100K seller note #1 (pays immediately)
• $50K seller note #2 (full standby for 2 years)
• $75K buyer's cash

Yes this = more than asking price but incl search costs and closing costs.

Never buy a business if the seller isn't willing to carry a seller note for part of the purchase.

Why?

Because seller notes are one of the most powerful tools to get a deal done and protect your interests.

Here are the benefits of a seller note:

A thread 👇 1/ Aligns your interests with the buyer

A seller note makes sure that the seller remains committed to the best interests of the business - after all, a portion of the purchase price is at stake!

This incentivizes smoother transitions, and following through with deliverables.

Most business buyers know that they should insist on a seller note when they buy a business.

But most don’t know how to negotiate them.

In this thread I’m sharing my best tips (from closing 40+ deals) to help you get the best terms on seller notes in your deals.

👇🧵 What we’ll cover:

1. Why
2. How
3. What (types)
4. Variables to negotiate
5. Red flags to stay away from

Buying a business to escape the rat race?

Bigger = better.

Like this roofing business in Florida that cashflows $1.2M+ @$4.8M price.

But how much $$ do you need to buy it?

In this thread I'll show you how to buy this business w/ $500K, $250K, or even as little as $75k. 1/ First, quick word on why to buy big

Bigger=more cashflow:

• More margin for your lifestyle

• Weather economic storms better

• Take on competitors

• Can hire senior management

Sold?

OK, let’s talk about how we can come up with the cash for a deal like this.

LLC or corporation ?

So many people get bad advice on this simple & very common question

In this thread I’m going to share the surprising answer that is (almost) always correct for both legal and tax considerations.

Ready? Here’s the quick answer:

Always form an LLC.

Except for a few rare exceptions including:

• Going to be raising traditional startup funding
• Plan to be listed on a stock exchange

LLC is 100% of the time the right choice.

Why? Read on.

Buying a business gives you virtually unlimited upside.

But it also gives you virtually unlimited downside.

Here are 7 ways to significantly hedge against your downside risk.

All while staying SBA compliant.

A 👇🧵 1/ Get solid financial due-diligence

I can't stress this enough.

Financial DD tells you:

• Does business earn what it says it does
• Is it worth what I think
• Are there any financial risks I need to know about

No financial DD like buying house w/ appraisal

If you love the idea of buying a business to escape the rat race and write your own ticket, but wonder how to find one,

Then this thread's for you.

After closing upwards of 40 SMB acquisition deals, I'm sharing everything I know about how to find a business to buy.

👇BIG🧵 1/ Here are my top 6 tactics for finding a business to buy:

- Listings
- Network
- Cold outreach
- Sell-side brokers
- Buy-side brokers
- Misc creative tactics (post ad, attend industry events, etc)

Read the rest of the thread for details incl pros/cons/limitations.

Yesterday, I posted about how to use $100K to buy a $1M-$1.5M business generating $250K-$350K in cashflow.

In this thread, I'm going to show how the numbers work using this actual example.

Yes, it requires risk, hard work & you may need to quit your 9-5.

But freedom... 1/ Pricing an offer

Offers for buying a small business are calculated using what's called a "multiple of Seller's Discretion Earnings (SDE)."

Usually, this is what brokers mean by "cashflow."

Multiples:

• 3-4x for most off-line businesses
• 4x+ for very attractive ones

Should you buy a business or start one from scratch?

Here's what you get when you buy a business:

1 - Established brand and reputation.
2 - Existing customer base.
3 - Proven products or services.
4 - Established suppliers and vendors.
5- Experienced employees.

Continued 👇 6 - Immediate cash flow.
7 - Existing systems and processes.
8 - Established marketing channels.
9 - Established relationships with local authorities and regulators.
10 - Established business licenses and permits.

Your deal team will make or break your business acquisition deal.

Give me 2 minutes and I’ll teach you 7 rules for building a winning deal team including:

* When to build it
* Who you need
* How to find them
* How to know if they’re any good
* Fees

👇🧵 Rule #1: Start early

• Don't wait until last minute
• Make lots of intro calls early on (but not so early you know what you're talking about)
• Once you find pros you like, let them know you'll be in touch when you're serious about a deal

Buying a business using SBA funding? Missing small details can have big consequences.

After closing 30+ deals, I’m sharing 7 details that I most frequently see missed.

Skip any of these and your deal WILL get delayed.

This thread could save you thousands of dollars.

👇🧵 1. Tax clearance certificate
Proof from the state that your acquisition target's taxes are paid up.

Required in every deal - even asset purchase deals.

States are always allowed to collect unpaid taxes from you even if all you purchased were the target's assets.

Wanna escape the rat race & build serious wealth?

Buy a plumbing, HVAC, or electrical business.

• Banks love them
• Recession-proof

But, your biggest hurdle is going to be licensing.

Here are 5 ways to overcome this hurdle without going to trade school yourself.

A 👇🧵 1/ Partner w/ licensee

Pros:

• Long-term solution
• Easy & straightforward

Cons:

• Finding licensee w/ right level of certification
• Negotiating ownership

Tips:

• Most states allow licensee to either be part-owner or an employee

There’s never been a better time to buy a business and build life-changing wealth for your family.

But you might be getting discouraged by some pretty big lies going around.

This thread highlights 5 of them - and uncovers the truth.

Hope it helps you in your search!

A 👇🧵 1/ LIE: you need lots of money

TRUTH:
You don't need lots of money to buy a business.

Here's a thread I wrote on how to do it with as little as $50K

https://twitter.com/lawyer4SMBs/status/1628028866425163782?s=20

Or, do it with even less:

• Seller financing
• Raise funds from investors (easier than you think)

100% seller financing + boring business = huge win.

But these deals can also be a huge time-wasting nightmare if done wrong.

In this thread, I will share a 10-step playbook for how to do a 100% seller financing deal right.

A 👇🧵 1/ Find an unsellable biz w/ upside

Don't waste your time trying to negotiate 100% seller financing on a brokered deal.

Seller will pay broker's fee & will have competing cash offers.

Instead, look off-market:

• Use your network
• Ask everyone
• Post an ad
• Cold call

Asset or stock purchase?

That's the question.

The answer can mean more to your bottom line than the price you pay.

In this thread, I’m going to share 10 things you absolutely must know about this critical decision.

You'll really want to watch #5. The IRS sure does!!

A🧵 1/ Asset purchases can reduce, BUT DOESN'T ELIMINATE, liability risk

Successor liability = legal doctrine exposing you to liability for things such as:

• Unpaid taxes
• Data breach
• Employment law issues
• Environmental cleanup
• Anything else a court finds fit

Letters of Intent, or LOIs, are used by 99% of business buyers to make an offer on a business.

But most people don’t know how to write a good one.

As an M&A lawyer, I’ve written or reviewed dozens upon dozens of LOIs.

Here are 12 LOI basics you should know.

A 👇🧵 1/ LOIs are part-binding part non-binding

Many people think that LOIs are entirely non-binding.

That’s incorrect.

LOIs have both non-binding provisions (primarily centered around deal terms) & binding provisions (most importantly exclusivity and allocation of expenses).

$50K in cash can buy you a brand-new Tesla 3.

Or can buy you some freedom.

Want to turn $50K cash into $100K+ a year in cashflow?

In this thread I’m going to share 3 very realistic ways you could do this (PS, none of them require a personal guarantee).

A 🧵 1/ Buy a SaaS business through Boopos

Boopos is a fantastic alternative to conventional lending when you want to buy a SaaS business.

- No fees
- Quick approval
- NO personal guarantee

Trillions of dollars of profitable boomer businesses are going up for sale.

Buying one is your best ticket out of the rat race.

But what if you don’t have enough $$ saved up?

No problem!

In this thread I will share 5 ways you can buy a business w/ minimal cash down.

👇🧵 First an example so we have something to work from.

Actual listing on BizBuySell

SDE almost $400K
Asking price $1.5M

SBA financing requires 10% or ~$150K down

Let’s see how we can get it done if we don’t have the $150K in savings.