Letter of Intent Template for Buying a Pet Grooming Business

Buyer and Seller Identification

Identifies the legal parties to the transaction. The buyer is typically an individual owner-operator, an LLC formed for the acquisition, or a platform entity. The seller is usually the individual owner-operator or the legal entity that holds the business assets. Getting the entity structure right at the LOI stage avoids confusion during purchase agreement drafting.

💡 Confirm whether the seller operates as a sole proprietor, S-corp, or LLC, as this affects whether you are buying assets or equity. In most pet grooming acquisitions under $2M, buyers prefer an asset purchase to avoid inheriting unknown liabilities such as prior grooming incident claims or payroll tax issues. Clarify this preference in the LOI to avoid surprises during legal drafting.

Purchase Price and Valuation Basis

States the proposed total purchase price and the basis on which it was calculated. Pet grooming businesses in the lower middle market typically trade at 2.5x to 4.5x Seller's Discretionary Earnings (SDE). The LOI should reference the financial period used and note that the price is subject to adjustment following due diligence verification.

💡 Pet grooming sellers frequently add back personal vehicle expenses, personal cell phone costs, and owner compensation above market rate. Scrutinize every add-back. If the business relies heavily on the owner as the primary groomer, apply pressure on the multiple — a one-person operation commands closer to 2.5x while a business with three or more trained groomers and documented SOPs can justify 3.5x to 4.5x. Never accept SDE representations without a booking software export and bank statement reconciliation.

Deal Structure and Financing

Outlines how the purchase price will be funded, including the split between SBA financing, seller carry, and buyer equity. Most pet grooming acquisitions in the $300K–$2M revenue range are SBA 7(a) eligible, making lender-required deal structure conventions important to acknowledge early.

💡 SBA lenders will scrutinize cash receipts businesses carefully. If the grooming salon has historically accepted significant cash payments, the seller must demonstrate verifiable revenue through appointment records and deposit history. A seller who resists lender documentation requests is a red flag. Also confirm early whether the seller is willing to carry a note — some retiring owner-operators prefer all cash, which may warrant a slight purchase price discount of 5–10% in exchange for a clean close.

Allocation of Purchase Price

Provides a preliminary breakdown of how the total purchase price will be allocated among asset categories including equipment, client list and goodwill, covenant not to compete, and transition services. This has direct tax implications for both parties.

💡 Sellers generally prefer higher allocation to goodwill and client lists (capital gains treatment) while buyers prefer allocation to depreciable equipment and non-compete agreements (ordinary deduction). In pet grooming, equipment values are relatively modest — expect $15K to $60K in tangible assets for a typical salon — so goodwill and client list will represent the majority of value. Non-compete allocation is important and should be clearly separated from goodwill.

Earnout Provisions

Defines any contingent payment tied to post-close business performance, typically used when there is uncertainty about whether the client base and groomer staff will remain intact after ownership transfer. Earnouts are more common in owner-dependent grooming businesses where the seller is also the primary groomer.

💡 Earnouts in pet grooming are most appropriate when the owner is the primary relationship holder with the client base. Push for a short earnout window of 12–18 months maximum and tie the metric to gross revenue rather than net income, which Buyer controls post-close. Sellers should resist earnouts tied solely to metrics they cannot influence after handoff. Buyers should insist on audit rights over booking records during the earnout period.

Exclusivity and No-Shop Period

Grants the buyer an exclusive negotiating period during which the seller agrees not to solicit or entertain competing offers. This protects the buyer's investment in due diligence and legal costs.

💡 Sixty days is standard for pet grooming acquisitions with SBA financing, as lender underwriting alone can consume four to six weeks. Sellers should resist exclusivity periods beyond ninety days without milestones attached — for example, a requirement that Buyer submit a complete SBA loan application within the first thirty days. Buyers should use the exclusivity period to complete groomer interviews, review client booking records, and commission a lease review before committing to closing costs.

Due Diligence Access

Defines the scope and timeline of Buyer's access to business records, staff, premises, and systems during the due diligence period. Pet grooming acquisitions require access to booking software data, groomer personnel files, licensing records, and lease documents.

💡 The booking software export is non-negotiable for any serious pet grooming acquisition. Insist on a full export — not a summary — showing individual client records, visit dates, service types, and revenue per visit. This lets you identify client concentration risk, calculate true average ticket size, and estimate churn. If the seller cannot produce this data, treat it as a significant red flag regarding revenue quality. Also request Google review history and any documented animal safety incidents, even if informally logged.

Lease Assignment and Real Property Terms

Addresses the critical issue of whether the existing lease can be assigned to the Buyer or whether a new lease must be negotiated with the landlord. Location stability is one of the most important value drivers in a pet grooming acquisition.

💡 A month-to-month lease or a landlord who refuses to assign or extend will kill most SBA-financed deals — lenders require lease terms that extend at least through the loan repayment period. Raise this issue immediately after LOI signing. If the seller has not yet spoken to the landlord about the sale, do it together before due diligence progresses. Landlord personality and relationship with the current tenant can be as important as the written lease terms in lower middle market grooming acquisitions.

Groomer Retention and Non-Solicitation

Addresses the single greatest operational risk in pet grooming acquisitions — the departure of key groomers who hold client relationships. The LOI should set expectations for groomer retention agreements and non-solicitation covenants from the seller.

💡 Many grooming salon owners have never executed formal employment agreements with their groomers, making after-the-fact non-solicitation agreements legally weaker. Evaluate enforceability by state — some states such as California have near-total bans on employee non-competes. Where non-solicitation is unenforceable, substitute with meaningful retention bonuses funded from the purchase price and paid to key groomers at 6 and 12 months post-close. This is often more practical than legal remedies.

Transition and Training Period

Defines the seller's post-close obligations to introduce Buyer to clients, staff, and vendors, and to ensure continuity of grooming service quality during ownership transfer.

💡 In businesses where the owner is the primary groomer, the transition period is critical and should be longer — 90 days minimum. Sellers who want to retire immediately after close create real business continuity risk. Consider structuring a portion of seller compensation as a post-close consulting retainer contingent on active participation. Buyers should use the transition period to physically observe grooming workflow, meet the top 20 clients by revenue, and shadow the booking and check-in process.

Conditions to Closing

Lists the specific conditions that must be satisfied before either party is obligated to consummate the transaction. These protect both parties and provide clear exit points if material issues are discovered during due diligence.

💡 The material adverse change clause is especially important in pet grooming, where the departure of even one key groomer between LOI and Closing can trigger a 15–30% revenue decline. Define 'material adverse change' specifically — revenue drop, groomer departures, and loss of lease are all legitimate triggers. Buyers should also confirm that no animal safety incidents or complaints are pending or unresolved at the time of Closing.

Confidentiality

Binds both parties to keep the terms of the LOI and all due diligence materials confidential, protecting the seller's staff and client relationships during the sale process.

💡 Confidentiality is extremely sensitive in pet grooming because client and groomer loyalty is personal. If staff learn the business is for sale before the deal is finalized, groomers may preemptively explore other employment and clients may become anxious about service continuity. Sellers should limit disclosure to the absolute minimum number of advisors and insist that Buyer's lender sign a confidentiality agreement before receiving any client records or groomer personnel files.

Non-Binding Nature and Governing Law

Clarifies which provisions of the LOI are legally binding and which are expressions of intent, and establishes the jurisdiction governing any disputes.

💡 Always clarify in writing which sections are binding. Exclusivity and confidentiality should always be binding. Purchase price and deal structure terms are non-binding but still set expectations that are difficult to walk back without goodwill damage. Sellers should be cautious about treating the LOI as a done deal — experienced buyers regularly use due diligence to renegotiate price downward, particularly in businesses with undocumented cash revenue or undisclosed groomer turnover history.