If you’re selling your business, you’ll likely encounter two documents from buyers before a deal closes: an Indication of Interest (IOI) and a Letter of Intent (LOI).

They sound similar, and people sometimes use the terms interchangeably. They shouldn’t — because they serve very different purposes and carry very different weight.

Understanding the difference between an IOI and an LOI helps you know where you stand in the process, what’s being asked of you, and how to respond strategically at each stage.

What Is an IOI?

An Indication of Interest is an early-stage, non-binding document that a buyer submits after reviewing your blind teaser or initial marketing materials — but usually before they’ve seen detailed financials. It’s the buyer’s way of saying: we’re interested, here’s roughly what we’re thinking, and we’d like to learn more.

A typical IOI includes:

• A preliminary valuation range (not a specific price — usually expressed as a range, like $2M–$2.5M)
• Proposed deal structure at a high level (cash, financing mix, potential earnout)
• The buyer’s background and qualifications — who they are, their experience, and how they’d finance the deal
• High-level timeline for due diligence and closing
• Any conditions or information requests before the buyer would be willing to submit a formal LOI

Critically, an IOI does not include exclusivity. The seller can — and should — continue conversations with other interested parties after receiving IOIs. In fact, the whole point of collecting IOIs in a structured process is to compare multiple buyers and select the strongest before moving to the LOI stage.

What Is an LOI?

A Letter of Intent is a more detailed, more serious proposal that typically comes after the buyer has reviewed the CIM (Confidential Information Memorandum) and had initial conversations with the seller. It’s the document that moves the deal from exploration to execution. For a full breakdown of what’s in an LOI, see our guide on what a letter of intent is and what it covers.

The key differences from an IOI:

• Specific purchase price (not a range — a defined number, though it may include contingent components)
• Detailed deal structure including payment terms, financing, seller note, earnout specifics
• Exclusivity period (this is the big one — signing an LOI typically takes the business off the market for 45–90 days)
• Due diligence scope and timeline with specific expectations
• Binding provisions for exclusivity, confidentiality, and expense allocation

IOI vs. LOI: Side-by-Side

IOILOIStageEarly (pre-CIM or early CIM review)Later (post-CIM, post-meetings)PriceRangeSpecific numberStructureHigh-levelDetailed termsExclusivityNoYes (binding)Binding?Fully non-bindingMostly non-binding, some bindingPurposeCompare multiple buyersSelect one buyer, start diligenceSeller obligationNone — keep talking to othersStop marketing the business

When Do IOIs and LOIs Show Up in the Process?

In a well-run sale process, the sequence typically looks like this:

1. Marketing begins. Your advisor distributes a blind teaser to qualified buyers and begins outreach.
2. NDAs signed. Interested buyers sign non-disclosure agreements and receive the CIM.
3. IOIs submitted. After reviewing the CIM, interested buyers submit IOIs. Your advisor collects and compares them.
4. Short list selected. You and your advisor select 2–3 of the strongest IOIs and invite those buyers for management meetings or further discussion.
5. LOI submitted. After meetings and follow-up, the most serious buyer submits an LOI with specific terms.
6. LOI negotiated and signed. You negotiate the terms, sign, and enter exclusivity. Due diligence begins.

Not every deal follows this exact sequence. In smaller transactions, some buyers skip the IOI entirely and go straight to an LOI after reviewing the CIM. That’s fine — but if you’re running a competitive process with multiple buyers, the IOI stage gives you leverage to drive the best outcome.

Why the Distinction Matters for Sellers

The biggest mistake sellers make with IOIs and LOIs is treating them the same. An IOI is a conversation starter. An LOI is a commitment to a process. Confusing the two leads to two common errors:

Granting exclusivity too early. If a buyer asks for exclusivity at the IOI stage, push back. You haven’t seen enough yet, and you’re giving up your strongest negotiating position — competition — for nothing in return.

Not taking IOIs seriously enough. The IOI is your opportunity to shape the field. Ask clarifying questions, request more detail on financing, and use the IOI stage to understand each buyer’s real level of interest and capability. A strong IOI process makes the LOI negotiation easier.

The Bottom Line

The IOI gets you started. The LOI gets you committed. Both matter, but they’re not interchangeable. Understanding where you are in the process — and what each document means — gives you the clarity to negotiate from strength. For the complete picture on selling, see our guide to selling a business.

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