I recently had a client come to me to help with a second attempt at a practice purchase. “What happened with the first attempt?” I asked. The young dentist told me about a deal in which the broker had the buyer sign an LOI up front, assuring them that because it’s legally non-binding, they could adjust the sale price and terms down the road during due diligence.
Huge mistake.
The practice, it turned out, was aggressively overpriced, and not enough time had been given for thorough due diligence. The bank got nervous about the sale price, the buyer tried to renegotiate, and the seller got offended and angry, and pulled out of the deal.
For many buyers, the Letter of Intent (LOI) feels like a speed bump on the way to the “real” work of buying a dental practice. It’s often described as non-binding, informal, or just a way to get the deal moving.
That framing is misleading.
While the LOI may not be legally binding in most cases, it is structurally and psychologically binding. It sets expectations, defines timelines and sale price, and quietly determines how the rest of the transaction unfolds.
At its core, the LOI is a written outline of the deal you intend to pursue. It typically includes price, structure (asset vs. stock), timing, financing assumptions, transition terms, and major contingencies like due diligence and financing approval. Once both parties agree to these terms, everything downstream is built on them.
This is why the LOI matters so much.
Sellers anchor to it. Brokers reference it. Attorneys draft around it. By the time the purchase agreement is written, walking back major LOI terms is difficult without reopening trust issues or risking the deal altogether.
One of the most common buyer mistakes is treating the LOI as a placeholder. Buyers rush through it to “lock up” the practice, assuming they’ll renegotiate later if something changes. In reality, renegotiation after an LOI often feels adversarial, even when it’s justified.
A strong LOI balances clarity with flexibility. It should be specific enough to set real expectations, but not so rigid that it boxes you into assumptions you haven’t validated yet. For example, purchase price should be tied to reasonable diligence outcomes. Transition terms should reflect what you think you’ll need, not what sounds polite.
Another mistake buyers make is copying LOIs from friends or online templates without understanding the implications. Small details—like how working capital is handled, how long exclusivity lasts, or what happens if financing falls through—can materially affect your risk.
The LOI is also where buyer discipline shows up. Sellers take prepared buyers more seriously. A thoughtful LOI signals that you’ve done your homework, understand the transaction, and aren’t likely to waste time.
Finally, remember this: the LOI is often the only chance you have to set the tone of the deal. Cooperative LOIs tend to lead to cooperative transactions. Vague or aggressive LOIs tend to create friction later.
The goal isn’t to “win” the LOI. The goal is to create a framework for a deal that still makes sense once you know more.
Treat the LOI accordingly.
