Structure your offer with confidence — a field-ready LOI framework built for the specific deal dynamics, labor risks, and valuation variables of tile and stone installation businesses in the $1M–$5M revenue range.
Acquiring a tile and stone installation business requires an LOI that addresses far more than purchase price. These businesses carry real transferability risk — owner-dependent contractor relationships, informal estimating processes, and labor rosters that can walk out the door when a sale is announced. A well-crafted LOI protects the buyer during due diligence, signals seriousness to the seller, and locks in deal structure before attorneys engage. This guide walks through each section of a tile contractor LOI, provides example language, and highlights the negotiation points that matter most in this industry — from earnouts tied to GC relationship retention to employment conditions for key crew leads and foremen.
Find Tile & Stone Installation Businesses to AcquireIdentification of Parties and Business
Clearly identify the buyer entity, the seller, and the business being acquired. For tile and stone contractors, specify whether the acquisition target is the operating entity, its assets, or both, and note the legal name under which contractor licenses are held.
Example Language
This Letter of Intent is entered into as of [Date] between [Buyer Name or Buyer Entity], a [state] [LLC/Corporation] ('Buyer'), and [Seller Legal Name] ('Seller'), with respect to the proposed acquisition of substantially all of the assets of [Business Legal Name], a [state] [LLC/sole proprietorship] operating under the trade name '[DBA Name]' ('Company'), a tile and stone installation contractor headquartered in [City, State].
💡 Confirm whether the contractor license is held by the business entity or personally by the owner — this is common in tile and stone trades and can affect deal structure. If the license is personal, the LOI should include a condition requiring the seller to assist in obtaining a new license or qualifying the buyer's designated licensee holder before close.
Proposed Transaction Structure
Specify whether the deal is structured as an asset purchase or stock purchase, and identify the key asset categories. Asset purchases are strongly preferred in tile contractor acquisitions to avoid assuming unknown liabilities, including open workers comp claims, mechanic's liens, or subcontractor disputes.
Example Language
Buyer proposes to acquire substantially all of the assets of the Company, including but not limited to: all equipment, vehicles, and tools used in tile and stone installation operations; customer lists and preferred vendor agreements with general contractors and developers; the Company's trade name and any associated goodwill; all signed project contracts and backlog commitments; and any transferable contractor licenses, bonds, or manufacturer-authorized installer certifications. The proposed transaction is structured as an asset purchase. Excluded assets shall include cash, accounts receivable generated prior to closing, and any personal property of Seller not used in business operations.
💡 Sellers often prefer stock sales for tax simplicity, but buyers in tile contractor acquisitions should resist this unless a full environmental and liability review is complete. Open workers comp claims and subcontractor liens are common in this trade and attach to the entity in a stock deal. Negotiate hard for asset structure; if the seller insists on stock, price in a liability reserve.
Purchase Price and Consideration
State the proposed total purchase price, the basis for valuation, and how consideration will be allocated across cash at closing, seller note, and any earnout component. Tile and stone businesses typically trade at 2.5x–4.5x EBITDA, with the multiple driven by customer diversification, crew stability, and backlog quality.
Example Language
Buyer proposes a total purchase price of $[X], representing approximately [X.Xx] times the Company's trailing twelve-month adjusted EBITDA of $[Y], as presented in the Company's financial statements and verified during due diligence. Consideration shall be structured as follows: (i) $[A] in cash at closing, funded through an SBA 7(a) loan; (ii) a Seller note of $[B] bearing [6–8]% interest, payable over [5–7] years, subordinated to the SBA lender; and (iii) an earnout of up to $[C] payable over [12–18] months post-closing, subject to the retention terms described herein. Total consideration at close shall be no less than $[A + B].
💡 Tile contractor valuations are highly sensitive to customer concentration. If two or three GCs represent more than 50% of revenue, push the multiple toward the lower end of the range (2.5x–3.0x) and shift more consideration into the earnout. Sellers will resist this framing — anchor the conversation in risk transfer, not insult. Be prepared to support your multiple with comparable transaction data.
Earnout Structure
Define the earnout mechanics, including the performance metric, measurement period, payment timing, and any customer-specific triggers. In tile and stone acquisitions, earnouts are most effective when tied to revenue retention from named GC accounts or EBITDA performance over the first 12–18 months post-close.
Example Language
The earnout component of up to $[C] shall be calculated as follows: Buyer shall pay Seller [X]% of the earnout for each full percentage point of trailing revenue retained from the following named customer accounts during the [12/18]-month period following the closing date: [List of top 3–5 GC or developer accounts by name and trailing revenue contribution]. Full earnout shall be payable if aggregate revenue from named accounts equals or exceeds [85–90]% of their trailing twelve-month contribution. Pro-rata payment shall apply for retention between [70–85]%. No earnout shall be payable if retention falls below [70]%. Seller's active cooperation in transitioning relationships, including joint customer meetings and written introductions, is a condition of earnout eligibility.
💡 Sellers will push back on named-account triggers, arguing that revenue loss is outside their control post-sale. Counter by limiting the earnout measurement to accounts where the seller personally manages the relationship and offer a higher base purchase price in exchange for a tighter earnout trigger. Always include a clause requiring seller cooperation — without it, a disengaged seller can passively undermine relationship transitions and then claim the earnout was sabotaged.
Due Diligence Period and Access
Define the due diligence period, the scope of access the buyer will receive, and any conditions for extending the period. For tile and stone contractors, due diligence should specifically cover job costing records, crew labor classifications, backlog contracts, and workers compensation history.
Example Language
Buyer shall have [45–60] calendar days from the execution of this Letter of Intent to conduct comprehensive due diligence ('Due Diligence Period'). During this period, Seller shall provide Buyer with full access to: (i) three years of financial statements, tax returns, and job costing records; (ii) all signed project contracts, change orders, and backlog documentation with deposit status and estimated gross margins; (iii) employee and subcontractor records including W-2 vs. 1099 classification, workers compensation claims history, and any outstanding labor disputes; (iv) all contractor licenses, bonds, certificates of insurance, and manufacturer-authorized installer credentials; (v) equipment and vehicle titles, maintenance logs, and any deferred repair obligations; and (vi) customer revenue reports by account for the trailing 36 months. Buyer may extend the Due Diligence Period by [15] days with written notice if outstanding items remain unresolved.
💡 Sellers of tile businesses often resist sharing individual job costing data, citing competitive sensitivity. Explain that job-level margin analysis is essential for normalizing EBITDA — a business running 30% gross margins on commercial jobs and 18% on residential looks very different depending on the mix. An NDA is already in place at this stage; use it as the basis for demanding full access. Flag any missing workers comp claims history as a deal-stopper until resolved.
Exclusivity and No-Shop Period
Establish an exclusivity period during which the seller agrees not to solicit or entertain competing offers. For tile contractor deals, 45–60 days of exclusivity aligned with the due diligence period is standard.
Example Language
In consideration of Buyer's commitment of time and resources to due diligence and transaction structuring, Seller agrees that for a period of [45–60] days following execution of this Letter of Intent ('Exclusivity Period'), Seller shall not, directly or indirectly, solicit, encourage, entertain, or enter into negotiations with any other party regarding the sale of the Company or its assets. Seller shall promptly notify Buyer if any unsolicited approach is received during the Exclusivity Period. Buyer may extend the Exclusivity Period by mutual written agreement if due diligence remains ongoing.
💡 Some tile business sellers resist hard exclusivity, particularly if they have been approached by multiple buyers. If the seller pushes back, offer a shorter initial exclusivity window (30 days) with an automatic extension upon receipt of a signed purchase agreement term sheet. Never waive exclusivity entirely — tile contractor deals can take months to close, and a competing offer mid-diligence puts buyers in a costly negotiating position.
Key Employee and Crew Retention Conditions
Identify any crew leads, foremen, or project managers whose continued employment is a condition of closing. This is one of the most critical provisions in any tile or stone installation acquisition, as skilled crew leads are often irreplaceable in the short term.
Example Language
As a condition of Buyer's obligation to close, the following individuals ('Key Employees') must have executed employment agreements acceptable to Buyer prior to or simultaneously with the closing of the transaction: [Name], Lead Tile Setter / Crew Foreman; [Name], Project Manager / Estimator. Employment agreements shall include a minimum [12–24] month term, compensation no less favorable than current levels, and a retention bonus of $[X] payable [6–12] months post-close contingent on continued employment. Seller agrees not to disclose the pending transaction to any employee prior to Buyer's written consent.
💡 This clause is often where tile business deals stall. Sellers fear that tipping off crew leads will trigger departures before the sale closes. Structure the retention bonus as a shared cost between buyer and seller (e.g., 50/50) to align incentives. If a critical crew lead is unwilling to commit, reassess the purchase price — a tile business without its lead setter is a materially different asset than the one being priced.
Conditions to Closing
List the material conditions that must be satisfied before the buyer is obligated to close. In tile and stone acquisitions, conditions should include SBA loan approval, license transferability, key employee agreements, clean lien search, and satisfactory resolution of any open workers comp or litigation matters.
Example Language
Buyer's obligation to consummate the transactions contemplated herein is subject to satisfaction of the following conditions prior to closing: (i) completion of due diligence to Buyer's reasonable satisfaction; (ii) execution of a definitive Asset Purchase Agreement in form and substance acceptable to both parties; (iii) receipt of SBA 7(a) loan approval and commitment letter from Buyer's lender; (iv) execution of employment agreements by all Key Employees identified herein; (v) confirmation that all state contractor licenses, bonds, and certificates of insurance are current, valid, and transferable or re-issuable to Buyer or Buyer's designated entity; (vi) a clean UCC, lien, and judgment search against the Company and its assets; (vii) resolution or written disclosure of all open workers compensation claims, subcontractor disputes, and mechanic's liens; and (viii) execution of a Seller transition and consulting agreement for a minimum period of [12–24] months post-close.
💡 Sellers sometimes push to remove the SBA loan approval condition, arguing it introduces closing risk. Acknowledge this concern but hold the condition — SBA financing is standard for tile contractor acquisitions and lenders will conduct their own independent review of the business. Offer a specific SBA commitment deadline (e.g., 30 days from signed purchase agreement) to demonstrate urgency. The workers comp and lien conditions are non-negotiable.
Seller Transition and Consulting Arrangement
Outline the seller's post-close involvement, including duration, compensation, and scope. For tile and stone businesses where the owner holds key GC relationships and institutional estimating knowledge, a structured transition is essential to preserve business value.
Example Language
Seller agrees to provide transition consulting services to Buyer for a period of [12–24] months following the closing date ('Transition Period'). During the Transition Period, Seller shall: (i) introduce Buyer or Buyer's designated representative to all active general contractor, developer, and direct client accounts; (ii) assist in transitioning project management and estimating responsibilities to Buyer's designated personnel; (iii) make themselves available for a minimum of [20] hours per week for the first [6] months, reducing to [10] hours per week thereafter; and (iv) refrain from soliciting or accepting competing tile and stone installation work within [50] miles of the Company's primary service area for a period of [3] years post-close. Transition consulting compensation shall be $[X] per month, credited against the Seller note if applicable.
💡 Sellers in this trade often underestimate how embedded they are in the business. A 12-month transition is the minimum for any tile contractor where the owner managed estimating or held direct contractor relationships. Push for 18–24 months if the seller is the primary estimator or if the top three GC accounts were built on a personal relationship with the seller. Non-competes should be geographic and time-limited to be enforceable — 3 years within the primary service geography is standard and defensible.
Confidentiality and Non-Disclosure
Confirm that existing NDA terms remain in effect and extend confidentiality obligations to cover LOI negotiations, due diligence materials, and employee and customer information disclosed during the process.
Example Language
The parties acknowledge that a Mutual Non-Disclosure Agreement ('NDA') dated [Date] remains in full force and effect and governs the handling of all confidential information exchanged in connection with this transaction. All financial records, customer lists, employee information, job costing data, and operational documentation disclosed during due diligence shall be treated as Confidential Information under the NDA. Neither party shall disclose the existence of this Letter of Intent or the terms hereof to any third party, including employees, subcontractors, or customers of the Company, without the prior written consent of the other party, except as required by applicable law or SBA lender requirements.
💡 Employee confidentiality is particularly sensitive in tile and stone businesses. A crew lead or foreman who hears about a pending sale through the grapevine may start fielding calls from competitors or exploring independent contracting. Work with the seller to develop a communication plan for employees that is timed for shortly before or at closing, and include a mutual agreement on that timing in the LOI.
Non-Binding Nature and Binding Provisions
Clarify which provisions of the LOI are binding and which are non-binding, as is standard in M&A letters of intent. Binding provisions typically include exclusivity, confidentiality, and governing law.
Example Language
This Letter of Intent is intended to summarize the current understanding of the parties and does not constitute a binding agreement with respect to the proposed transaction, except that the following provisions shall be binding upon the parties: (i) Section [X] (Exclusivity and No-Shop Period); (ii) Section [X] (Confidentiality and Non-Disclosure); and (iii) this Section [X] (Non-Binding Nature and Binding Provisions). The parties acknowledge that a binding obligation to consummate the proposed transaction shall arise only upon execution of a definitive Asset Purchase Agreement. Either party may terminate discussions at any time prior to execution of a definitive agreement without liability, except for breach of the binding provisions herein.
💡 Some sellers, particularly owner-operators who have never sold a business before, mistake the LOI for a binding purchase agreement. Take time to walk the seller through this section clearly — experienced brokers handling tile contractor deals will often do this on your behalf, but in direct deals you may need to explain it yourself. Make clear that the earnout, purchase price, and all commercial terms remain subject to due diligence findings and definitive documentation.
Purchase Price Multiple and EBITDA Normalization
Tile and stone contractor EBITDA figures often require significant normalization — owner salary, personal vehicle expenses, family payroll, and discretionary spending are frequently embedded in financials. Negotiate the purchase price multiple against a clearly defined, agreed-upon adjusted EBITDA figure that both parties have reviewed before the LOI is signed. At 2.5x–4.5x EBITDA, a $50K difference in normalized EBITDA can move the purchase price by $125K–$225K.
Earnout Triggers and Named Account Retention
Whether the earnout is tied to total revenue, EBITDA, or named-account retention will significantly affect how achievable it is for the seller and how protective it is for the buyer. Named-account earnouts offer the best protection against customer concentration risk but require clean trailing revenue data by customer — insist on this during due diligence before finalizing earnout terms.
Seller Note Terms and Subordination
SBA lenders will require any seller note to be on full standby for the first 24 months of the loan and subordinated to SBA debt for the life of the loan. Sellers unfamiliar with SBA deals are often surprised by this. Negotiate the seller note interest rate (typically 6–8%), term (5–7 years), and standby period upfront to avoid surprises at the SBA commitment stage.
Key Employee Retention Bonus Allocation
Both buyer and seller have an interest in retaining skilled tile setters, crew leads, and project managers post-sale, but neither wants to bear the full cost. Negotiate a shared retention bonus pool — typically $10K–$30K per key employee — with costs split 50/50 between buyer and seller. This aligns incentives and signals to key crew that both parties are invested in a smooth transition.
License and Bond Transferability Timeline
Contractor license transferability varies significantly by state. In some states, the license is personal to the qualifying individual and cannot be transferred — requiring the buyer to obtain a new license or designate a new qualifier. This can take 30–90 days and may affect the closing timeline. Negotiate a closing condition with a clear deadline and a mechanism (such as a management agreement) for the buyer to operate the business lawfully during any licensing gap.
Backlog Assignment and Deposit Handling
Signed project contracts and customer deposits represent real economic value in a tile and stone acquisition — and real liability if jobs are not completed to specification. Negotiate whether the buyer assumes all backlog contracts at closing, which contracts are excluded, and how customer deposits held by the seller are transferred or credited to the buyer at close. Insist on a full backlog schedule with signed contracts, deposit amounts, and estimated gross margins as a due diligence deliverable.
Non-Compete Geography and Duration
A tile contractor's non-compete must be geographically specific to be enforceable and commercially meaningful. Negotiate a radius tied to the Company's actual service area (typically 25–75 miles depending on market density), a duration of 3–5 years, and carve-outs only for activities clearly outside the tile and stone installation trade. Overly broad non-competes are frequently struck down by courts — a well-drafted, narrowly tailored restriction protects the buyer far better.
Find Tile & Stone Installation Businesses to Acquire
Enough information to write a strong LOI on day one — free to join.
A tile contractor LOI typically includes a proposed purchase price based on 2.5x–4.5x adjusted EBITDA, a transaction structure (almost always an asset purchase to avoid assuming open workers comp claims or subcontractor liens), an earnout component tied to GC account retention, a 45–60 day due diligence period, key employee retention conditions for crew leads and foremen, and a 12–24 month seller transition arrangement. The LOI is mostly non-binding — it signals intent and locks in exclusivity while the definitive Asset Purchase Agreement is negotiated.
Purchase price is based on a multiple of the business's adjusted EBITDA — typically between 2.5x and 4.5x for tile and stone contractors in the $1M–$5M revenue range. The multiple is driven by customer diversification (higher if revenue is spread across 10+ GCs and homeowners; lower if two customers represent 50%+ of revenue), crew stability (experienced W-2 crew leads command higher multiples than 1099-only subcontractor rosters), documented processes, and backlog quality. EBITDA must be normalized to remove owner compensation above market rate, personal expenses, and one-time items before applying the multiple.
Asset purchase is strongly preferred for tile and stone installation acquisitions. Stock purchases transfer all liabilities of the entity — including open workers compensation claims, subcontractor disputes, unpaid payroll taxes, and mechanic's liens — which are common and sometimes undisclosed in this trade. An asset purchase allows the buyer to select which assets and contracts to assume and exclude known or unknown liabilities. If a seller insists on a stock sale for tax reasons, price in a meaningful liability reserve and obtain comprehensive representations and warranties insurance.
When one or two general contractors account for more than 30–40% of revenue, a named-account earnout is the most effective risk mitigation tool. Structure 15–25% of the total purchase price as an earnout payable over 12–18 months post-close, triggered by revenue retention from those specific accounts. Full earnout pays at 85–90% retention; pro-rata payment applies between 70–85%; no payment below 70%. Include a seller cooperation clause requiring active participation in customer transition meetings as a condition of earnout eligibility — this protects the buyer if the seller becomes disengaged after receiving the bulk of their proceeds at closing.
A minimum of 12 months is standard, but 18–24 months is strongly recommended when the seller holds the primary contractor relationships or functions as the lead estimator. The first 6 months should involve intensive transition — joint customer meetings, joint job walks, and daily operational handoff. The following 6–18 months typically shift to part-time consulting availability. Seller transition should be formalized in a consulting agreement with defined hours, compensation (often $3,000–$8,000 per month), and a geographic non-compete tied to the business's service area.
The five most important due diligence areas in tile contractor acquisitions are: (1) customer concentration — obtain trailing 36-month revenue by customer and verify the status of any preferred vendor or MSA agreements with top GC accounts; (2) labor classification — confirm whether the workforce is W-2 employees or 1099 subcontractors and review workers compensation claims history directly with the insurer; (3) backlog quality — review all signed contracts, deposit status, scheduled start dates, and estimated gross margins by job; (4) contractor licensing — verify that all state licenses, bonds, and certificates of insurance are current and determine whether they are personally held or entity-held; and (5) equipment condition — inspect all vehicles, tile saws, mixing equipment, and lifting tools for deferred maintenance and replacement needs that could affect post-close cash flow.
Yes — tile and stone installation businesses are excellent candidates for SBA 7(a) financing. These businesses are typically asset-light (making them goodwill-heavy acquisitions that SBA lenders are comfortable with), generate consistent operating cash flow, and have long operating histories. A typical SBA-financed tile contractor deal involves 80–90% SBA loan proceeds, 5–10% seller note (on full standby for the first 24 months per SBA rules), and 10–15% buyer equity injection. The SBA will conduct its own independent business valuation and review financial statements, so clean financials and a clear add-back schedule are essential.
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