IOI vs. LOI: What Each One Means

You listed your business, conversations are happening, and then a buyer sends you something called an IOI. Or maybe it's an LOI.

Both sound official. Both feel like progress. But they mean very different things about where you stand in a deal, and how seriously the buyer is committing.

We see both documents come through on Rejigg regularly. Here's what each one actually is, what it tells you about the buyer on the other side, and how to respond.

What Is an IOI?

An IOI (Indication of Interest) is a buyer's way of saying "I'm interested, and here's roughly what I'd pay." It's short, usually one to two pages, and deliberately vague on specifics. Think of it as a handshake before the real conversation starts.

A typical IOI includes a range for the purchase price (say, $2.5M to $3.2M), a general idea of how the buyer would structure the deal, and maybe a few conditions they want met before they go deeper. That's about it. No 30-page legal document, no binding commitments.

IOIs are non-binding. A buyer who sends one is under no obligation to follow through. They're testing the waters, signaling that they've looked at what's available and want to keep talking.

What Is an LOI?

An LOI (Letter of Intent) is a much bigger step. When a buyer sends an LOI, they're saying "I want to buy this business, and here are the specific terms I'm proposing." LOIs typically run three to eight pages and cover purchase price, deal structure, due diligence timeline, exclusivity periods, and closing conditions.

Most LOIs include a binding exclusivity clause. That means if you sign it, you're agreeing to stop talking to other buyers for a set period, usually 60 to 90 days, while this buyer does their due diligence. The rest of the terms are generally non-binding, but the exclusivity piece carries real weight.

An LOI is the document that moves you from "exploring" to "doing a deal."

Key Differences Between an IOI and an LOI

Level of detail. An IOI gives you a price range and general structure. An LOI gives you a specific price, earnout terms, seller financing expectations, a due diligence checklist, and a proposed timeline to close.

Binding vs. non-binding. IOIs are entirely non-binding. LOIs are mostly non-binding, except for a few clauses (exclusivity, confidentiality, and sometimes a breakup fee) that do carry legal weight.

Exclusivity. IOIs almost never ask for exclusivity.

LOIs almost always do. This is the single biggest practical difference. Once you sign an LOI with exclusivity, your other buyer conversations go on ice.

Where they show up in the process. IOIs come early, often after a buyer has reviewed your listing and maybe had one or two conversations. LOIs come later, after the buyer has seen enough financials and had enough conversations to commit to a specific number.

When to Expect an IOI

IOIs show up more often than most owners expect. On Rejigg, we see buyers send IOIs relatively early in conversations, sometimes before they've even had a call with the owner. This surprises a lot of sellers, who assume any written offer must be a serious commitment.

It usually isn't. An early IOI is more like a qualifying move. The buyer is trying to figure out if you're in the same ballpark on price before investing hours in due diligence. If you're thinking $5M and they're thinking $2M, both of you want to know that before spending weeks exchanging financials.

This is actually a good thing. A buyer who sends an IOI is being transparent about where they stand. You can track these conversations alongside all your other buyer interactions in your deal dashboard and see who's moving forward and who's just browsing.

What an IOI Tells You About Buyer Seriousness

An IOI tells you the buyer is interested enough to put a number on paper, but not interested enough to commit real time and money to due diligence yet. That's a meaningful signal, but it's a moderate one.

Here's what to look for. A serious buyer's IOI will reference specifics about your business. They'll mention your revenue range, your industry, maybe something from your listing that stood out. A generic IOI that could apply to any business of any size is closer to a form letter.

The price range matters too. A tight range ($2.8M to $3.1M) suggests the buyer has done some homework. A wide range ($2M to $5M) suggests they're fishing. Both are fine, but they tell you different things about how far along the buyer's thinking is.

What an LOI Tells You

An LOI tells you the buyer is ready to spend money. Due diligence costs real dollars. Between lawyers, accountants, and their own time, a buyer submitting an LOI is committing to spending $15,000 to $50,000 or more to evaluate your business. Nobody does that casually.

The specificity of the terms also tells you a lot. A buyer who has thought carefully about deal structure, who proposes a reasonable earnout tied to metrics that make sense for your industry, who has a realistic timeline, that buyer has probably done this before or has good advisors. A buyer whose LOI reads like a template downloaded from the internet might still be serious, but they'll probably need more hand-holding through the process.

How to Respond to an IOI

Don't overthink it. An IOI is the start of a negotiation, not the end of one.

If the price range is in your ballpark, say so. Tell the buyer you appreciate their interest and you'd like to set up a call to discuss further. You don't need to counter with your own number at this stage. You need to figure out if this buyer is someone you'd actually want to sell to.

If the price range is too low, you have two options. You can say "we're apart on price" and see if they come up, or you can share why you believe the business is worth more.

Sometimes buyers anchor low because they don't have enough information yet. If your business has strong recurring revenue or a growth trend that isn't obvious from the listing, this is a good time to share that context. Point them to the financials in your data room so they can see the full picture.

If the IOI is way off, a polite pass is fine. "Thanks for your interest, but we're too far apart on valuation" saves everyone time.

Can You Negotiate an IOI?

Absolutely. IOIs are designed to be a starting point. Nothing in them is binding, which means everything is negotiable. The price range, the structure, the conditions.

That said, don't negotiate an IOI like it's a final contract. The goal at this stage is to get aligned enough to move toward an LOI. If you and the buyer agree on a rough price range and deal structure, push for the LOI. That's where the real terms get hammered out.

One move we see experienced sellers make: when multiple buyers send IOIs around the same time, they use that to create healthy competition. You don't need to share specific numbers, but letting a buyer know that other parties are also exploring the business can accelerate their timeline. Rejigg's direct messaging makes it easy to manage these conversations in parallel without things getting tangled.

When to Push for an LOI

Push for an LOI once you and the buyer agree on three things: a rough purchase price, a general deal structure (all cash, seller financing, earnout, SBA loan, or some combination), and a timeline that works for both sides.

If a buyer keeps sending updated IOIs but won't commit to an LOI, that's worth paying attention to. Some buyers use IOIs as a way to lock in your attention without actually committing. They want to keep you warm while they evaluate other deals. A simple "we'd love to move forward, can you send us an LOI by [date]?" is a perfectly reasonable push.

If they can't hit that date, you know where you stand.

Red Flags in an IOI

No specifics about your business. If the IOI could have been sent to any company, the buyer probably sent it to several. Not necessarily a dealbreaker, but lower your expectations.

Unrealistic conditions. "Subject to the owner staying on for five years" or "subject to securing financing for 100% of the purchase price" are signs the buyer may not be ready.

Price range that doesn't match your [valuation](https://rejigg.com/articles/how-to-value-your-business-for-sale). A 50% gap between what you think the business is worth and what the buyer is offering usually means you're not the right match. That gap rarely closes.

Red Flags in an LOI

Extremely long exclusivity periods. 60 to 90 days is standard. 120 to 180 days means the buyer is either uncertain or trying to keep you off the market while they figure things out.

Vague due diligence scope. A serious LOI spells out what the buyer wants to review and how long it will take. "We will conduct customary due diligence" with no further detail is a yellow flag. What are they actually going to look at?

No deposit or breakup fee. In many deals, the LOI includes a good-faith deposit or a breakup fee that the buyer forfeits if they walk away without cause. If neither is mentioned, the buyer has very little skin in the game during the exclusivity period.

Terms that shift all the risk to you. Heavy earnout weighting, aggressive reps and warranties, or wide working capital adjustments can turn a good headline price into a much smaller actual payout. If the LOI reads like a wish list rather than a fair proposal, flag it early.

Understanding what buyers actually care about will help you evaluate whether their LOI terms reflect genuine concerns or aggressive negotiating.

The Bottom Line

IOIs and LOIs are both progress, but they represent very different levels of commitment. An IOI means "let's keep talking." An LOI means "let's do this deal." Knowing the difference helps you allocate your time to the buyers who are most likely to close.

On Rejigg, sellers list for free and manage the entire process, from first IOI through final LOI, with built-in tools for deal tracking, document sharing, and direct buyer communication. No broker fees, no middleman. If you're thinking about listing, start here.

Frequently Asked Questions

Is an IOI legally binding?

No. An IOI is entirely non-binding.

The buyer is expressing interest and proposing a price range, but neither side has any legal obligation to follow through. You can receive an IOI, decline it, counter it, or ignore it without any legal consequences. Think of it as a conversation starter with a number attached.

Can I accept multiple IOIs at the same time?

Yes, and you should consider it. Since IOIs are non-binding and carry no exclusivity, you can engage with as many buyers as you want simultaneously. This actually works in your favor because it gives you more data points on what buyers think your business is worth and creates natural competition among interested parties.

How long does it take to go from IOI to LOI?

Typically two to six weeks, depending on how quickly the buyer can review your financials and how aligned you are on price. Some buyers skip the IOI entirely and go straight to an LOI if they have enough information. Others send an IOI, spend a few weeks in preliminary due diligence, then follow up with formal terms.

Should I hire a lawyer before signing an LOI?

Yes. While most LOI terms are non-binding, the exclusivity clause is binding, and it takes you off the market for 60 to 90 days. A business attorney can review the LOI in an hour or two, flag anything unusual, and make sure you understand what you're agreeing to. This typically costs $500 to $1,500 and is well worth it.

What happens after I sign an LOI?

The buyer enters a formal due diligence period where they review your financials, contracts, customer relationships, employees, and operations in detail. You'll share documents through a secure data room and answer their questions directly. If due diligence goes well, both sides move to drafting a definitive purchase agreement and closing the deal.