Letter of Intent Template for Acquiring a Locksmith & Key Cutting Business

Buyer and Seller Identification

Identifies the legal parties to the transaction, including buyer entity structure and seller's business legal name, DBA, and state of incorporation or registration. For locksmith businesses, it is important to identify whether the seller holds licenses personally or through the business entity, as this affects transferability.

💡 Confirm early whether the state locksmith license is held by the individual owner or by the business entity. If the license is personal to the seller, the LOI should include an explicit contingency for the buyer obtaining a new license or qualifying a current technician as the license holder prior to or concurrent with closing. Some states require the buyer to apply for a new license 60–90 days before close, which affects deal timelines significantly.

Purchase Price and Valuation Basis

States the proposed total purchase price, the valuation methodology used, and how the price relates to the business's seller's discretionary earnings (SDE). Locksmith businesses in the lower middle market typically trade at 2.5x–4.5x SDE depending on revenue mix, contract quality, and owner independence.

💡 Push for a lower multiple — closer to 2.5x–3.0x SDE — if more than 60% of revenue comes from one-time emergency residential calls with no contracted recurring accounts. A business with documented property management contracts or HOA agreements warrants a multiple at the higher end of the range. Always tie the stated SDE to verified figures from tax returns and bank statements, not seller-prepared add-back schedules alone.

Deal Structure and Payment Terms

Describes how the purchase price will be funded, including the equity injection, SBA loan proceeds, and seller note. Most locksmith acquisitions in this size range are financed through SBA 7(a) loans with a subordinated seller note serving as part of the equity injection.

💡 SBA lenders will require the seller note to be on full standby for 24 months post-close in most cases. Negotiate the seller note amount carefully — a larger seller note signals seller confidence in the business's continuity but also gives the buyer leverage if representations prove inaccurate. If the seller resists a seller note entirely, treat that as a due diligence flag regarding their confidence in post-close performance.

Asset vs. Entity Purchase

Specifies whether the buyer is acquiring the business assets or the legal entity (stock or membership interest purchase). Virtually all locksmith business acquisitions in this size range are structured as asset purchases to avoid inheriting unknown liabilities, prior licensing violations, or employee disputes.

💡 Always confirm that Google My Business profiles, phone numbers, and the business domain can be transferred as part of the asset purchase — these are critical for maintaining emergency call volume post-acquisition. Request a full equipment schedule with serial numbers and acquisition dates early in the process so you can assess replacement cost before committing to a final price.

Earnout Provision for Commercial Contracts

Structures an earnout payment tied to the retention of recurring commercial accounts, property management contracts, or HOA service agreements post-closing. This is especially important in locksmith acquisitions where commercial contract revenue drives the premium multiple but may not survive a change of ownership.

💡 Request a complete list of all commercial accounts with contract terms, renewal dates, and annual revenue before signing the LOI. Identify which accounts are personally tied to the seller versus those with formal written agreements assigned to the business entity. Accounts without written contracts are high-risk for earnout purposes and should be excluded from the earnout exhibit or discounted significantly in the earnout calculation.

Exclusivity and No-Shop Period

Establishes a period during which the seller agrees not to market the business, solicit other offers, or engage with competing buyers. This protects the buyer's investment of time and due diligence costs.

💡 60 days is the standard minimum for locksmith acquisitions given the additional time required for licensing verification, equipment appraisal, and SBA lender approval. Request 90 days if the state licensing process is complex or if a new license application must be filed during due diligence. Sellers may push for a break-up fee if exclusivity extends beyond 60 days — this is reasonable and demonstrates buyer commitment.

Due Diligence Scope and Timeline

Outlines the specific due diligence areas the buyer intends to investigate, the timeline for completion, and the seller's obligations to provide access to records, equipment, staff, and customers.

💡 Do not skip the background check review step. Given the sensitive nature of locksmith work — technicians have access to customers' homes, businesses, and vehicle keys — any employee with an undisclosed criminal record creates both legal liability and reputational risk for the buyer post-close. Request copies of all background check reports conducted at hiring and verify they are current. This is also a key SBA lender requirement.

Key Employee and Technician Retention

Addresses the retention of licensed technicians post-acquisition, which is critical in the locksmith industry where skilled tradespeople are difficult to recruit and replace.

💡 If the business has only one or two licensed technicians beyond the owner, losing even one during the transition could materially impair operations and trigger a price adjustment clause. Consider negotiating a retention bonus pool — funded jointly by buyer and seller from closing proceeds — to be paid to key technicians at the 6-month post-close anniversary conditional on continued employment.

Seller Transition and Non-Compete

Specifies the length and scope of the seller's post-closing transition support and the geographic and time-bound non-compete and non-solicitation agreement.

💡 The geographic scope of the non-compete should reflect the actual service area of the business, not just the physical address. Many locksmith businesses serve a radius of 25–50 miles from their dispatch location. A 3-year non-compete is the SBA minimum; push for 5 years in markets where the seller is well-known and has strong personal relationships with property managers or commercial accounts.

Contingencies and Conditions to Closing

Lists the specific conditions that must be satisfied before the buyer is obligated to close, protecting the buyer if critical due diligence findings cannot be resolved.

💡 The licensing contingency is the single most important deal-specific protection in a locksmith LOI and is often overlooked by general M&A practitioners unfamiliar with this trade. Confirm with the state licensing authority — before LOI signing if possible — exactly what the license transfer or reapplication process requires and how long it takes. Some states require a new owner to pass a written exam or complete a background check that can take 30–60 days.