Letter of Intent Template for Acquiring a Kitchen & Bath Remodeling Business

1. Parties and Business Identification

Identifies the buyer entity, the seller, the legal name of the remodeling business, and its primary operating address. If the business operates under a DBA or holds a separate entity for its showroom, both should be named explicitly.

💡 Confirm early whether the transaction involves the operating entity, the real property lease, the showroom fixtures, or a combination. Some remodeling businesses hold their contractor license under the owner's personal name rather than the LLC — this is a critical issue to surface in the LOI phase because license transferability varies significantly by state and can materially affect deal structure and timeline.

2. Transaction Structure

Specifies whether the deal is structured as an asset purchase or a stock/equity purchase, and identifies the key assets being acquired. For most kitchen and bath remodeling acquisitions, asset purchases are preferred by buyers to avoid inheriting unknown warranty liabilities and litigation from prior completed projects.

💡 Sellers sometimes push for a stock sale to achieve capital gains treatment on the full purchase price. Buyers should resist this absent meaningful indemnification protections given the warranty and liability exposure inherent in a remodeling business. If a stock sale is ultimately agreed upon, representations and warranties insurance or a meaningful escrow holdback is strongly recommended. Also confirm explicitly that the Google Business Profile, online reviews, and social media accounts are included — these are often the most valuable marketing assets in the business.

3. Purchase Price and Valuation Basis

States the total proposed purchase price, the valuation methodology used to derive it, and the EBITDA figure or Seller's Discretionary Earnings (SDE) upon which the multiple is based. Kitchen and bath remodeling businesses in this segment typically transact at 3x–5.5x EBITDA depending on revenue quality, margin consistency, and owner dependency.

💡 Remodeling financials are frequently presented on a cash basis, which can overstate or understate true earnings depending on timing of deposits received and project completion. Push the seller to recast financials on a completed-contract or percentage-of-completion basis before agreeing to a final multiple. Also normalize for owner compensation — many owner-operators in this industry understate their own salary. Agree on the add-back methodology in the LOI to avoid disputes later.

4. Deal Structure and Payment Terms

Breaks down how the purchase price will be funded across components including buyer equity, SBA loan proceeds, seller note, and any earnout. Most remodeling acquisitions in this size range use SBA 7(a) financing, which limits the seller note to a standby position during the SBA loan term.

💡 SBA lenders will scrutinize earnout structures carefully — they cannot count an earnout as part of the seller's injection, and the seller note must typically be on full standby for 24 months. Work with an SBA-experienced lender early to confirm what structures are permissible. Sellers often resist earnouts because they feel they lose control post-close, but framing the earnout around objective metrics like backlog retention and subcontractor continuity — rather than subjective performance — increases the likelihood of acceptance.

5. Due Diligence Period and Access

Defines the length of the due diligence period, the categories of information Buyer will review, and the process for access to financial records, project files, subcontractors, and key employees.

💡 For remodeling businesses, work-in-progress accounting is often the most complex and highest-risk area of due diligence. Request a WIP schedule as of the LOI date and reconcile it against bank deposits and cash receipts. Overbilled deposits can represent significant hidden liabilities. Also prioritize early review of subcontractor certificates of insurance — uninsured subs are a common and serious issue in this industry that can affect both deal structure and future insurability of the business.

6. Exclusivity and No-Shop Period

Establishes that the seller will not market the business to other buyers or entertain competing offers during the due diligence period in exchange for the buyer's commitment to move forward in good faith.

💡 Sellers who are actively listed with a broker may push back on exclusivity or request a shorter window. A 45-day exclusivity with one 15-day mutual extension option is a reasonable compromise. Remind the seller that SBA lender approval timelines alone often require 30–45 days, making exclusivity practically necessary for any SBA-financed deal. If the seller refuses all exclusivity, that is a meaningful red flag about their commitment to the transaction.

7. Seller Transition and Non-Compete

Outlines the seller's obligations to transition client relationships, subcontractor introductions, and operational knowledge to the buyer, and defines the geographic and duration parameters of the post-closing non-compete agreement.

💡 Owner dependency is one of the most common value risks in remodeling acquisitions. The transition period and non-compete provisions in the LOI should be treated as non-negotiable minimums. A 90-day transition is a starting point — for businesses where the owner is the primary salesperson or holds the contractor license, 6 months is more appropriate. For SBA loans, the non-compete must generally cover the full loan term to satisfy lender requirements. If the seller pushes back on transition length, consider tying a portion of the earnout to successful completion of transition milestones.

8. Conditions to Closing

Lists the material conditions that must be satisfied before the transaction can close, including financing approval, license transferability confirmation, and resolution of any material due diligence findings.

💡 Contractor license transferability is a jurisdiction-specific issue that can delay or derail a remodeling acquisition. In some states, a qualifying individual must hold the license personally, meaning the buyer must pass a licensing exam before closing or operate under the seller's license temporarily. Confirm this early and build realistic timelines into the closing conditions. Showroom leases are another common closing condition that gets overlooked — confirm the landlord's consent requirements and whether a personal guarantee will be required from the buyer.

9. Confidentiality and Non-Solicitation

Ensures that all information exchanged during due diligence is kept confidential and that the buyer will not solicit the seller's employees, subcontractors, or clients during or after the due diligence process if the deal does not close.

💡 Remodeling business sellers are particularly sensitive about confidentiality because their subcontractors and designer referral partners may disengage if they learn the business is for sale. Stress to the seller that your due diligence process is designed to be discreet. Non-solicitation of subcontractors is especially important to include because a sophisticated buyer could theoretically identify and poach key trade partners — a risk sellers are acutely aware of in this industry.

10. Binding and Non-Binding Provisions

Clarifies which provisions of the LOI are legally binding and which are expressions of intent subject to a final purchase agreement, protecting both parties while preserving deal momentum.

💡 Making the exclusivity and confidentiality provisions binding while keeping the economic terms non-binding is standard practice and should not be controversial. If a seller or their broker objects to binding exclusivity, that is worth understanding before you invest significant due diligence resources. Some sellers will request that the LOI include a break-up fee if the buyer walks away without cause — this is uncommon in the lower middle market but worth being prepared to address.