15 Apr You’re Ready to Sell and Under LOI – Now What?
On the path to being acquired, Amazon sellers know that getting an LOI is an exciting step in the process. An LOI, or letter of intent, is sent to a seller from a buyer who has agreed on the terms of a business sale. The LOI formalizes the process by delineating terms and conditions of the purchase agreement. While this gets you closer to the finish line, it’s not a time to sit back and wait; it’s an opportunity to make strategic moves to build up your company and exit on the highest note possible.
“You can make a lot of money or leave a lot of money on the table during that 45-day period between LOI and close. It’s an opportunity to approach the negotiation from a position of strength as well as set yourself up for a successful earn-out,” said Yardline CEO Ari Horowitz recently on the Amazing Exits podcast, a show that focuses how Amazon entrepreneurs can successfully grow their business and achieve their ideal exit.
As a serial entrepreneur, Ari has founded, acquired, invested in and taken public dozens of companies throughout his career. We have captured Ari’s best tips for what you should be doing between LOI and close to make sure you are maximizing your potential returns.
Take advantage of special financing rates.
It may seem counterintuitive but being under LOI is the best time to consider growth capital. If you know how to deploy capital strategically, it can really make a huge difference in the money that goes into your bank account. With the ability to inject new capital into strategic investments like inventory and marketing during due diligence, sellers can better position themselves for a deal that’s structured the best way possible. This can also help get any new launches over the finish and selling prior to close! This is another way to maximize your post close earnings.
Hit the gas on advertising and marketing.
What short-term investments can you make to drum up added growth ahead of your close? Is there a timely opportunity to implement a sale on your goods, such as Cyber Monday? Influencers to engage? This is the moment when you should be doing everything you can to maximize revenue and putting yourself in an advantageous situation when it is time to close. If your advertising usually sees returns in the following month this is a great opportunity to amplify your post-deal earn out.
Have stock on hand, always.
Make sure you have enough stock on hand for the first 90 days post-acquisition. If you blow through all your inventory and you haven’t thought ahead, your buyer will have to sit on his or her hands for 90 days as they ramp up inventory again. If seasonality is a significant factor of your business – for example, if you’ve stocked out during the holidays — you should double down on inventory to be equipped for the season, and then adequately stocked for the post-holiday period. The day you get acquired, your company is flush with inventory and can really step on the gas.
Similarly, if you have taken on capital to make investments in advertising and marketing efforts, you can assume that will translate to amplification in sales. Make sure your estimation of needed stock is in line with these campaigns, too.
Come to the table with record-breaking revenue.
Ultimately, reporting record-breaking growth as you approach final negotiations puts you in a position of maximum strength. Once you have an LOI in hand you should be doing everything in your power to skyrocket revenues so you can get the most advantageous terms for your close. It’s important to note that it’s not uncommon for acquirers to continue ask probing business questions throughout the due diligence process and right up to closing day. Being able to show up with good news to offset any bad news should make closing the deal go much more smoothly.
Get pre-qualified today.
If the idea of pursuing a lucrative exit and removing any risks that might get in the way, it may be a great time to check out what Yardline can do for you. We can advance unrestricted capital up to $1,000,000 for inventory, marketing or generally any other business purpose. And, once you’re funded, our team of Seller Success Managers can offer ways you can continue to optimize and grow your business, right up until you’re ready to sell.
For more insights into making the most out of a potential exit, check out the full Amazing Exits podcast here!