Indication of interest vs. letter of intent
When you sell a business, two documents do most of the early heavy lifting: the indication of interest and the letter of intent. They sound similar and they get confused constantly, but they sit at different points in the deal and they do very different jobs. Knowing which is which protects your price and your leverage.
What an indication of interest (IOI) is
An indication of interest, almost always shortened to IOI, is the first real piece of paper a serious buyer puts in front of you. It comes after they've seen high-level information about your company but before they've dug into the details. It says, in effect: we like this, we want to keep going, and here's roughly what we think it's worth.
The defining feature of an IOI is that it gives a value range rather than a single number. A buyer might write something like a range from one figure to a higher one, expressed as an enterprise value or a multiple of earnings. They're not committing to a precise price yet, because they haven't seen enough to. The range tells you where their head is and gives both sides room to move once the real numbers come out.
An IOI is non-binding. Outside of a confidentiality clause and maybe a line about negotiating in good faith, nothing in it forces a buyer to follow through, and nothing forces you to accept. It's a signal, a strong one, but a signal. A good IOI also sketches the broad outline of a deal: how the buyer would likely structure it, whether they want you to stay on, what they're assuming about your team and your customers, and roughly how fast they'd want to move.
What a letter of intent (LOI) is
A letter of intent, or LOI, comes later and it's a different animal. By the time a buyer sends an LOI, they've usually reviewed your IOI-stage information, had a few conversations, and decided you're the one they want. So the LOI drops the range and names a firm price, along with the specific terms behind it: the structure, what's cash at close versus held back or tied to an earnout, the conditions to closing, and the timeline.
The piece that changes everything is exclusivity. Most LOIs ask you to agree to a no-shop period, meaning you stop talking to other buyers for a set number of weeks while this one runs diligence. That's a fair ask from the buyer's side, since they're about to spend real money and time verifying your business. But it's also the moment your leverage shifts. Once you sign and go exclusive, you've taken yourself off the market and you're negotiating with one party. For a deeper walk-through of that document, see our guide to the letter of intent in a business sale.
IOI vs. LOI at a glance
| Indication of interest (IOI) | Letter of intent (LOI) | |
|---|---|---|
| When it shows up | Early, after high-level review | Later, after the buyer has chosen you |
| Price | A value range | A firm number |
| Detail | Broad shape of a deal | Specific terms and structure |
| Exclusivity | None | Usually a no-shop period |
| Binding? | No (except confidentiality) | Mostly non-binding terms, binding exclusivity |
| How many you hold | Several at once | Typically one |
A simplified comparison for general information, not legal advice. Have counsel review any document before you sign it.
Where each one fits in the deal
Picture the sale as a funnel. Early on, an advisor packages your business and reaches out to a set of qualified buyers under confidentiality. The ones who like what they see come back with IOIs. This is the wide part of the funnel, where you want options, and where you might be holding two, three, or more indications at the same time. Each one is a buyer raising a hand and telling you a range.
From there you narrow. You compare the IOIs, talk to the buyers, and pick the one or two worth advancing. The serious one eventually sends an LOI, you negotiate the firm terms, and then you sign and go exclusive. That signature moves you from the wide part of the funnel to the narrow part: one buyer, detailed diligence, and the march toward closing. Getting the order right matters, which is part of the broader work of finding the right buyer for your business rather than just the first one.
What to look at in each
When you read an IOI, the range gets all the attention, but it isn't the whole story. A high range with a vague structure and no clear funding source can be worth less than a tighter range from a buyer who's clearly done this before. Look at who the buyer is and how they'd pay, how much of the price is cash at close versus tied to your performance after the sale, what they assume about you staying on, and whether they actually have the money ready. A range you can't trust is just a number on a page.
When you read an LOI, the firm price is only the start. Read the exclusivity period and ask whether it's reasonable. Read how the purchase price is split between cash, holdbacks, and any earnout, because two deals at the same headline number can pay out very differently. Read the conditions to closing and the assumptions about working capital. This is the document that sets the terms you'll live with through diligence, so it pays to slow down here, even though it feels like the finish line.
Why collecting multiple IOIs gives you leverage
Here's the part owners often miss. Because IOIs are non-binding and carry no exclusivity, you can hold several at once. That's not a technicality. It's where most of your negotiating power lives.
Think about the alternative. If you take the first buyer who calls and go straight toward their LOI, you have no idea whether their number is good. You have nothing to compare it to. You end up negotiating against yourself, hoping you're not leaving money on the table. Now picture three IOIs sitting on your desk. You can see the spread between them. You know what the market actually thinks. And you can go back to a buyer and say another party values this higher, which moves price and terms in your direction without you having to bluff.
Competition is the single most reliable way to protect your price, and the IOI stage is where you build it. By the time you're at the LOI and exclusivity, that competitive pressure is mostly gone, so the leverage you create early is the leverage you carry into the final deal. Running that kind of process is exactly what a good advisor does, and it's a big reason working with the right kind of advisor tends to pay for itself.
How ProCloser fits in
Getting to multiple IOIs isn't something most owners can pull off alone. It takes a confidential outreach process, a buyer list, and someone who knows how to read the offers and push the terms. That's the work an M&A advisor does, and it's the work selling your business the right way depends on.
ProCloser matches you with vetted M&A advisory firms that run real processes, including no-retainer, success-only options where the firm gets paid when your deal closes. It's free to sellers and confidential. Tell us about your business and we'll line you up with advisors who can take you from first conversation to multiple IOIs to a signed deal. When you're ready, get matched.
IOI vs. LOI FAQ
What is an indication of interest (IOI)?
An indication of interest is an early, non-binding letter from a prospective buyer that says they want to pursue your business and gives a rough value range instead of a single firm price. It usually lands after a buyer has reviewed high-level information but before deep diligence. It signals serious interest and lays out the broad shape of a deal: the range, the likely structure, and the buyer's intentions on your team and timing.
How is an IOI different from a letter of intent (LOI)?
An IOI is earlier, vaguer, and quotes a value range. An LOI is later, specific, and quotes a firm price with detailed terms. The biggest practical difference is exclusivity: an LOI almost always asks you to stop talking to other buyers for a set period, while an IOI does not. You can hold several IOIs at once, but you typically sign one LOI and commit to that buyer through diligence and closing.
Is an indication of interest binding?
Generally no. An IOI is non-binding except for a few housekeeping clauses, usually confidentiality and sometimes a line about negotiating in good faith. The value range it quotes is an estimate, not a promise, and it can move once the buyer sees your full numbers in diligence. Treat it as a strong signal of intent, not a contract to buy at a fixed price.
Why do multiple IOIs matter when selling a business?
Because IOIs carry no exclusivity, you can collect several at the same time and compare them side by side. That competition gives you a real read on what the market thinks your business is worth, and it gives you leverage to push terms before you commit to anyone. With one offer in hand you're negotiating against yourself. With three, the buyers are competing for you.
Should I sign the first LOI I receive?
Not automatically. Signing an LOI usually means agreeing to exclusivity, which takes you off the market while one buyer runs diligence. Before you sign, it helps to know whether other buyers would offer more or better terms. That's the case for running a process and gathering several IOIs first, then signing the LOI that gives you the best mix of price, structure, and certainty of close. Get matched with an advisor who can run that process for you.
Turn interest into a real deal.
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Tania leads ProCloser's network of vetted M&A advisory firms and works with business owners every week on valuation, fit, and getting matched to the right advisor to sell. Get matched free.