No matter what business you are in you must make offers. The more offers you make the more money you make. Simple isn’t it? Any business genius will tell you this as I just did. Whether you are selling widgets on the internet or buying a multi million dollar company you have to make a lot of offers. The interesting question arises when you ask, well what is an offer, or more importantly how do you make an offer?
An offer can be as simple as a piece of paper handed to your customer asking him/her to buy your product for X amount of money. If you offer is good, people will buy. If your offer is bad, you might have hand over a lot of pieces of paper to make any money.
So what does this have to do with buying businesses? Your letter of intent is your offer in the LBO business. The letter of intent is the first opportunity the seller has to really judge you – your style, your business acumen and your ability to communicate. Thus the offer has to be not only attractive, but professional and well written as well.
It is easy to go overboard with this. I have seen letter of intent that span 10 or more pages, with legalese and tons of terms and conditions. Does this impress anyone? Maybe but it misses the point. The seller will cut through the fluff to get to the offer. The excess verbiage may well turn off many sellers. When you write a letter of intent ask yourself if this would be and attractive offer if you were in the seller’s shoes. If you wouldn’t take this offer then what makes you think the seller would?
Save yourself some time and aggravation. Do not put together an inadequate offer. Even if you don’t offer much cash on the deal, add other bonuses such as perks, payouts and even ownership. You don’t have to pay up front and these items will go a long way to satisfying the seller’s (or customer’s) needs.
