Letter of Intent Template for Acquiring a Salon or Barbershop

Parties and Transaction Overview

Identifies the buyer entity (or individual), the seller, and the business being acquired. For salon and barbershop acquisitions, this section should specify whether the transaction is structured as an asset purchase or stock purchase — the vast majority of salon deals are structured as asset purchases, which protects the buyer from inheriting unknown liabilities including unreported payroll taxes, tip underreporting issues, or booth renter disputes.

💡 Sellers sometimes prefer a stock sale for tax reasons, but buyers should firmly push for an asset purchase in salon acquisitions. The cash-heavy nature of salon operations creates elevated risk of undisclosed liabilities — payroll tax gaps, misclassified booth renters, or unreported tip income — that an asset purchase structure protects against. If a seller insists on a stock sale, require a meaningful escrow holdback and thorough tax compliance review during due diligence.

Purchase Price and Valuation Basis

States the proposed purchase price, the valuation methodology used, and any adjustments that will be applied at closing. Salon valuations are typically expressed as a multiple of Seller's Discretionary Earnings (SDE) ranging from 2x to 3.5x depending on owner involvement, stylist stability, lease quality, and documented revenue. The LOI should clearly state how SDE was calculated and note any pending adjustments subject to due diligence findings.

💡 Never anchor a final purchase price to unverified SDE in a salon deal. Cash revenue in salons is notoriously difficult to verify — tip income, walk-in cash clients, and booth rent paid in cash are all common. Build explicit price adjustment triggers into the LOI tied to due diligence findings on revenue concentration and cash verification. A 10–15% price reduction for discovering that the top two stylists generate 40%+ of revenue is entirely reasonable and should be stated upfront.

Deal Structure and Payment Terms

Outlines how the purchase price will be funded — including SBA financing, seller note, buyer equity injection, and any earnout component. Salon acquisitions frequently use SBA 7(a) loans with a 10–20% buyer equity injection. Sellers are often asked to carry a note of 5–10% to demonstrate confidence in the business and satisfy lender requirements. Earnouts tied to stylist retention or post-close revenue are increasingly common in stylist-dependent businesses.

💡 Sellers often resist earnouts because they feel penalized for events outside their control after they exit. Frame earnout clauses narrowly — tie them specifically to stylist retention rather than broad revenue targets, since stylist attrition is the most direct risk in a salon acquisition. Buyers using SBA financing should note that lenders typically restrict seller note terms and may require the note to be on full standby for the first 24 months. Clarify this with your lender before presenting the LOI to avoid renegotiation later.

Included and Excluded Assets

Specifies exactly what is and is not included in the sale. In salon and barbershop acquisitions, this section is critically important because booth renters own their own equipment, stylists may own personal product inventory, and certain assets like personal vehicles or owner-used equipment are typically excluded. Booking software accounts, client databases, and social media handles must be explicitly included.

💡 Clarify booth renter equipment ownership before closing the LOI. In many salons, long-tenured booth renters have personally purchased their styling chairs, color stations, or tools over years of renting. Buyers who assume all equipment transfers to them can face conflict or even legal disputes post-closing. Require a detailed equipment inventory during due diligence that distinguishes business-owned from renter-owned assets, and list each category explicitly in the Asset Purchase Agreement.

Due Diligence Period and Access

Defines the length of the due diligence period, what records and access the buyer will receive, and how confidentiality will be maintained. Salon due diligence typically requires 30–60 days and must include access to POS system data, credit card processing statements, booth rental agreements, employment contracts, lease documents, and stylist scheduling records.

💡 POS system access is non-negotiable in a salon acquisition. Credit card receipts alone won't tell the full story — you need line-item service reports from the booking software to cross-reference revenue by stylist, service type, and payment method. If the seller claims significant cash revenue that isn't captured in POS data, treat it as a red flag rather than a reason to increase the purchase price. Also request tip reports from the POS system — consistent tip data across stylists is a reliable indicator of legitimate recurring clientele.

Lease Assignment and Landlord Approval

Addresses the critical requirement that the existing commercial lease be assignable to the buyer as a condition of closing. The salon's physical location is often its most valuable asset, and most leases require landlord consent for assignment. The LOI should make lease assignment a closing condition and define what happens if consent is not obtained.

💡 Lease assignment is where a surprising number of salon deals fall apart. Some landlords use the ownership change as an opportunity to renegotiate rent, demand a personal guarantee from the new owner, or simply decline to cooperate. Engage the landlord early and involve the seller as an advocate — landlords who have had a stable tenant for years often respond better to seller introductions than to cold outreach from a buyer's attorney. If the lease has fewer than 3 years remaining with no renewal option, reconsider your price or push the seller to secure an extension before going to market.

Employee and Booth Renter Transition

Outlines the buyer's and seller's obligations regarding staff communication, retention, and the transition of booth rental relationships. This section acknowledges the risk of stylist departure and defines what cooperation the seller will provide to retain key staff through the transition period.

💡 The transition period for a salon acquisition is make-or-break. If the selling owner is well-known in the community, an abrupt exit can trigger stylist departures and client attrition simultaneously. Negotiate a minimum 60–90 day transition with clear milestones — Week 1 staff introduction, Week 2 client communication via email and social media, Week 4 first check-in on booking trends. Tie a portion of the seller note to completion of transition obligations rather than just the closing date.

Exclusivity and No-Shop Period

Establishes a period during which the seller agrees not to solicit or entertain other offers for the business while the buyer completes due diligence. In salon acquisitions, a 45–60 day exclusivity period is standard and gives the buyer time to verify cash revenue, inspect the lease, and assess stylist stability without the risk of being outbid mid-process.

💡 Sellers occasionally resist long exclusivity windows, particularly if they've been approached by multiple buyers. If a seller pushes back on 60 days, consider offering a non-refundable good faith deposit of $5,000–$15,000 in exchange for the full exclusivity period. This demonstrates buyer seriousness and compensates the seller for removing the business from the market. Ensure the deposit is credited to the purchase price at closing and fully refundable only if the seller defaults on a material representation.

Conditions to Closing

Lists the specific conditions that must be satisfied before the transaction can close. In salon and barbershop acquisitions, standard closing conditions include landlord consent to lease assignment, SBA loan approval, satisfactory due diligence, execution of a definitive Asset Purchase Agreement, and confirmation that key stylists have agreed to remain post-closing.

💡 The stylist retention closing condition is often the most contentious term in a salon LOI. Sellers argue they cannot force independent stylists to commit, while buyers need some assurance before wiring funds. A practical middle ground: require written confirmation from stylists representing at least 60–70% of salon revenue that they intend to continue working at the location post-close. This is not an employment contract — just a non-binding letter of intent from the staff member — but it creates meaningful signal about transition risk.

Confidentiality

Establishes mutual obligations to keep the terms of the LOI and all due diligence materials confidential. In salon acquisitions, confidentiality is especially important because staff departures and client attrition can begin the moment employees learn the business is for sale.

💡 Confidentiality in a salon deal must be treated as a practical operational concern, not just a legal formality. Stylists talk — if word leaks that the salon is for sale, your most marketable employees may begin looking for alternative chairs at competing locations. Work with the seller to plan a deliberate, timed disclosure to staff that happens simultaneously across all team members, ideally on the day of or shortly after closing. Never allow piecemeal disclosure.

Non-Binding Nature and Governing Law

Clarifies which provisions are binding (typically exclusivity, confidentiality, and governing law) and which are non-binding (price, structure, and closing conditions), and specifies the state law that will govern the agreement.

💡 Even though the LOI is largely non-binding, courts have occasionally found implied obligations to negotiate in good faith based on LOI terms. Do not include language suggesting a 'deal is done' or that you are 'committed to closing.' Maintain flexibility on price and structure explicitly in the LOI, and ensure your attorney reviews the document before it is signed by either party.