# The Letter of Intent: What to Put in Writing Before the Lawyers Start

> What belongs in a dental practice LOI: price mechanics, what's included, the seller's transition role, contingencies, and the mistakes that sink deals early.

- Author: Ryan Smith, DDS
- Published: 2026-05-19
- Category: Practice Acquisitions & Transitions
- Canonical: https://ryansmithdds.com/dental-practice-letter-of-intent

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> **Key takeaways**
> - A letter of intent is not a purchase agreement. It's a cheap way to find out whether you and the seller actually agree on the deal before either of you pays a lawyer to draft one.
> - Price is not one number. Write down how you got to it, because "percentage of collections" and "multiple of EBITDA" can point to very different figures, and the LOI is where that gets settled.
> - The seller's transition role and a non-compete belong in the LOI in principle, with the fine print (enforceability, radius, duration under your state's law) left to your attorney.
> - The most expensive mistakes at this stage aren't legal ones. They're emotional: signing exclusivity before diligence access is confirmed, and not writing down who eats a redo that shows up six months after closing.

I have signed more letters of intent than I can accurately count, on both sides of the table. The good ones are boring. They read like a checklist two reasonable people agreed to before anyone billed an hour. The bad ones are vague on purpose, usually because one side wants room to change the deal later, and they cost real money to unwind.

This is what I put in an LOI, what I leave for my attorney and CPA, and where I've watched deals go sideways at exactly this stage.

## What a letter of intent actually does

A letter of intent is not a purchase agreement. It is a filter.

Its job is to get you and the seller to agree, in writing, on the shape of the deal before either of you pays for the expensive parts: full diligence, a drafted purchase agreement, a lender's underwriting. Most of an LOI is intentionally non-binding. A handful of clauses, usually confidentiality and exclusivity, are written to actually bind you. Your attorney needs to tell you which is which; do not assume.

What the LOI buys you is cheap disagreement. If you and the seller can't agree on price, transition length, or what's included while it's still a two-page document, you were never going to agree on it in a 40-page purchase agreement either. Better to find that out now than after you've spent five figures on diligence.

*Where the LOI sits in the deal. Two pages, mostly non-binding, then counsel takes over.*

## The price, and how you got there

Don't just write a number. Write down the mechanics that produced it.

Dental practices generally get valued one of two ways: a percentage of trailing annual collections, or a multiple of adjusted EBITDA (earnings after normalizing out the seller's personal expenses and after accounting for what it costs to replace the owner's own production with an associate). These two methods can land in very different places on the same practice, and I've written about how that math actually works in [how dental practices are actually valued](/dental-practice-valuation-methods). You can run your own numbers against both methods with the [practice valuation calculator](/tools/practice-valuation) before you ever draft an LOI.

The reason this matters at the LOI stage: **a practice collecting a million dollars a year is not automatically worth buying at a premium multiple.** I've seen plenty of million-dollar practices that were just breaking even once you looked past collections to real cash flow. If the price in your LOI was reached off collections alone, without ever asking what the practice actually earns, you're negotiating from the wrong number. I go into this in more detail in [the red flags I watch for when buying](/buying-a-dental-practice-red-flags): an overvalued price built on a bad valuation method is red flag number one, and it starts right here, at the LOI.

Write the price into the LOI along with the method: "$X, based on a Y% of trailing twelve-month collections of $Z" or "$X, based on an N× multiple of adjusted EBITDA of $Z." That sentence forces both sides to agree on the inputs, not just the output, and it gives your diligence team a number to go verify instead of a number to simply accept.

## What's included: and what isn't

Price without scope is a trap. Two practices can sell for the same number and be completely different deals depending on what's actually inside that price.

Settle these in the LOI:

| Item | Typically included | Worth confirming in writing |
| --- | --- | --- |
| Equipment and instruments | Yes, per an attached list | Age, working condition, anything leased vs. owned |
| Real property (if owned) | Usually separate from the practice sale | Purchase or lease, and on what terms |
| Existing lease | Assigned to buyer | Term remaining, renewal options, personal guarantees |
| Accounts receivable | Usually excluded, seller collects it | Who chases it, and for how long |
| Cash on hand | Usually excluded | n/a |
| Supplies and inventory | Sometimes included, sometimes trued up at closing | A count method both sides agree to |

None of this is exotic. It's just easy to skip when everyone is excited about the headline number. Write it down anyway.

## The seller's transition: role, hours, pay

I want the seller's transition period in the LOI in plain terms, even though the fine print gets drafted later: how many weeks or months, what they're actually doing during that time (seeing their own patients, sitting in as a consultant, introducing you to referral sources), and whether they're paid a salary, a per diem, or nothing at all.

Vagueness here is one of the more common ways an LOI causes a fight later. The seller assumes a few friendly weeks of "helping out." The buyer assumes six months of active clinical coverage while the buyer ramps up. Neither side said the quiet part out loud until it's a problem.

I also want to know, in principle, who is financially responsible for redo work on the seller's own major cases (implants, ortho, large cosmetic work) for a defined period after closing, typically two to three years. Almost every practice I have purchased has had a problem case surface after the ink was dry. Get the principle into the LOI; get the actual contract language into the purchase agreement.

## A non-compete in principle, and other things to leave to counsel

You want the seller not competing with you nearby for some period of years. Put that intent in the LOI (a radius, a duration, the general idea), and then stop.

Non-compete enforceability varies enormously by state, and some states restrict or void them outright in certain circumstances. Whether your specific radius and term will actually hold up is a question for your attorney, not a number you and the seller pick because it sounded reasonable over coffee.

The same goes for a short list of other items that belong in the purchase agreement, drafted by people who do this for a living:

- Asset purchase vs. stock purchase, and what that means for what liabilities transfer to you
- Purchase price allocation across goodwill, equipment, and the non-compete, each taxed differently, and worth getting right before you sign anything binding, as I've written about in [the mistakes I see dentists make when selling](/mistakes-selling-dental-practice)
- Representations, warranties, and indemnification language
- The specific mechanics of financing contingencies and how they interact with your lender's timeline

This is where your attorney and CPA earn their fee. Let them.

## Contingencies, exclusivity, and the clock

Two contingencies protect you: financing and diligence. Your LOI should say plainly that the deal is contingent on you securing financing on acceptable terms and on diligence confirming what you were told. If either one fails to check out, you can walk. I go through how lenders actually evaluate a practice, and the debt-to-collections math that determines how much you can borrow, in [how dentists actually finance a practice purchase](/financing-a-dental-practice-purchase).

Exclusivity protects the seller from you shopping their practice around while you tie up their time, and it protects you from the seller taking a better offer mid-diligence. Both are reasonable. The problem is a vague exclusivity period: "60 days" with no anchor to anything. Tie it to a target closing date and a diligence timeline you actually believe you can hit, not an optimistic one.

I have watched buyers sign exclusivity before confirming they'd actually have access to the financials they needed to do real diligence. That's backwards. Confirm access first. Sign exclusivity second.

## The LOI checklist

Before you sign, make sure your letter of intent (as a starting structure to adapt with your own counsel, not a template to copy verbatim) states:

1. **Price, and the method used to reach it**: percentage of collections, EBITDA multiple, or both, with the underlying numbers named.
2. **What's included and excluded**: equipment, real property, the lease, receivables, cash, inventory.
3. **The seller's transition period**: length, role, and compensation, spelled out in plain language.
4. **Responsibility for redos** on the seller's major case types, for a defined period post-closing.
5. **A non-compete in principle**: radius and duration, with enforceability left to counsel.
6. **Financing and diligence contingencies**, with real walk-away rights if either fails.
7. **An exclusivity period tied to a target closing date**, not left open-ended.
8. **A confirmed diligence timeline**: you should already know you'll get the documents you need before you sign anything that takes you off the market for other opportunities.

A letter of intent that nails these down is doing its job: it tells you, cheaply, whether you and the seller actually have a deal, before either of you pays to find out the expensive way. For the fuller sequence, from finding a practice through closing and the first weeks after, read [the topic hub on buying, building, and partnering](/topics/acquisitions-and-transitions).