# How to sell a business: the deal

> How to sell a business, step by step: the letter of intent, checking the buyer, six weeks of due diligence and an earn-out, on GarageDesk's sale. Ends with the final case of the course.

- Course: [From Idea to Profitable Product: Building Without Investors](https://productovi.com/courses/bootstrapped-product.md)
- Module: Without heroics, and for sale
- Lesson 30/30, ~38 min
- Source: https://productovi.com/courses/bootstrapped-product/the-deal

## Before signing a letter of intent

**Alex Tutor:** One more advising session at GarageDesk, maybe the most important one: how to sell a business without losing it in the fine print. A document has arrived.

**Oscar:** Axle sent a letter of intent. Two pages. Price, payments, dates. Nina wants to sign it tonight.

**Alex Tutor:** Not tonight. A **letter of intent** is mostly non-binding, but not entirely. Look for the clause that stops you talking to other buyers for a few months, and for confidentiality. Those usually do bind you.

![A founder is about to sign a short document while a lawyer places a hand on the page, pointing to one clause marked with a small padlock.](https://productovi.com/courses/bootstrapped-product/inline/the-deal-illustration-2.webp)

**Nina:** Found it: ninety days of exclusivity.

**Alex Tutor:** This is the moment for a lawyer, not later. Axle has lawyers; you need one who has read deals like this before.

**Oscar:** Laura. She did the contracts for the distributor Nina used to work for. She's reading it this week.

> **Exercise:** At what point should GarageDesk's founders bring in a lawyer?

**Alex Tutor:** Nina still thinks a two-page letter can't hurt. Check her reasoning.

> **Exercise:** **True or false:** a letter of intent is non-binding, so signing Axle's tonight commits GarageDesk's founders to nothing.

## Check the buyer too

**Alex Tutor:** Axle will check you for six weeks. Check them too. Who have they bought before, and what happened to those products?

**Oscar:** Two companies. I called both founders. One says the product still runs and the team stayed. The other says Axle folded it into their own software within a year.

**Nina:** We also asked Axle directly. GarageDesk stays a separate product for at least two years, with a link to their parts catalog, and shop prices don't change in the first year. Laura wants all of that in the contract.

**Alex Tutor:** Axle's promises sound good. How should the founders hold on to them?

> **Exercise:** Axle says GarageDesk stays a separate product for two years and shop prices don't change in the first year. What should the founders do with that?

## Due diligence: six weeks of checks

**Alex Tutor:** Now **due diligence**: the buyer checks that everything you claimed is true. Customer list, payments, contracts, the code. Keep running the business while it happens; a dip in MRR during the checks costs you.

**Nina:** They want the full list of car owners' phone numbers.

**Alex Tutor:** Those are your shops' customers, not yours to hand over before the sale. Give counts and anonymized samples, read-only. Full data moves only at closing, under the contract.

![An analyst reaches for a stack of customer cards; the founder keeps her palm on the stack and hands him a summary card with blurred silhouettes.](https://productovi.com/courses/bootstrapped-product/inline/the-deal-illustration-3.webp)

*Counts and anonymised samples prove the base is real without exposing anyone.*

**Oscar:** And Laura found a problem: Ethan's contract doesn't say that the code he writes belongs to GarageDesk.

**Alex Tutor:** Common and fixable: a signed assignment of rights, done this week. Found late, that kind of gap can stop a deal.

**Alex Tutor:** Six weeks of checks are coming. What should be ready before they start?

> **Exercise:** What should GarageDesk's founders do to prepare for due diligence? Choose all that apply.

> **Exercise:** Match each thing Axle checks with what GarageDesk should provide.

## Negotiating the earn-out

**Alex Tutor:** The two million on top is an **earn-out**: paid only if MRR reaches 200,000 within a year after closing. By then Axle runs the company, and you don't control the budget, the prices or the team.

**Nina:** Laura's advice: ask for more at closing and a target we can actually reach. Axle agreed: five million at closing, one million if MRR reaches 190,000 within twelve months.

**Oscar:** And in January our 60 shops still at 600 a month move to 750. That alone takes MRR from 165,000 to 174,000.

![The deal runs from a letter of intent with binding exclusivity, through six weeks of due diligence, to 5 million UAH at closing and 1 million more only if MRR reaches 190,000.](https://productovi.com/courses/bootstrapped-product/diagrams/m8-l4-deal-steps.png)

*Only the closing payment is certain.*

> **Exercise:** After the January price step GarageDesk's MRR is 174,000 UAH. By what percentage must it grow to reach the earn-out target of 190,000 UAH? Round to one decimal.

## Treat the earn-out as a bonus

**Sofia:** Five plus one is still six. Did they gain anything?

**Alex Tutor:** A lot. Weigh the uncertain part by how likely you think it is. The founders gave the old target about a 50% chance and the new one about 80%. Those are their own estimates, not facts.

![A solid cake sits on a plate while one extra slice floats above it inside a soap bubble.](https://productovi.com/courses/bootstrapped-product/inline/the-deal-illustration-4.webp)

*Weigh the uncertain part by its chance, and decide as if it never comes.*

$$
\text{expected value} = \text{paid at closing} + p \times \text{earn-out}
$$

*p is the founders' own estimate of the chance the earn-out target is reached. The safest habit is to decide whether the closing payment alone is acceptable.*

**Oscar:** The old offer: 4 + 0.5 × 2 = 5 million. Let me do the new one.

> **Exercise:** The final offer is 5,000,000 UAH at closing plus a 1,000,000 UAH earn-out that the founders think has about an 80% chance. What is its expected value, in UAH?

**Alex Tutor:** Now the question that matters most: how good is the certain part on its own?

> **Exercise:** GarageDesk's ARR in October is 1,980,000 UAH. What multiple of ARR is the certain 5,000,000 UAH paid at closing? Round to one decimal.

## Handing over customer data, carefully

**Nina:** Axle's analyst asked again for the phone numbers, “just to check the database is real”. I need to answer today without sounding like we're hiding something.

**Alex Tutor:** Be helpful and firm: offer another way to verify the same thing, and say when the full data moves.

> **Exercise:** Write Nina's reply to Axle's analyst (3–4 sentences), who asks for the full list of car owners' phone numbers during due diligence, “just to check the database is real”. The numbers belong to the shops' customers, and the sale hasn't closed yet.

## Final case: ClinicSlot's offer

**Alex Tutor:** The GarageDesk deal closes in January. Nina stays twelve months, Oscar six. Their story ends here, and yours starts. One more case, and it uses the whole course.

**Sofia:** ClinicSlot again?

**Alex Tutor:** Hannah and Leo got an offer too. Theirs is less generous than it looks.

> **Exercise:** Advise Hannah and Leo on the offer (250–400 words).

> **Key ideas**
>
> - A **letter of intent** is mostly non-binding, but exclusivity and confidentiality usually bind: bring in a lawyer before signing it.
> - Check the buyer too: talk to founders it bought before and get its plans for your product in writing.
> - In **due diligence**, prove every claim, fix gaps early (code rights, separate accounts) and share sensitive data step by step; customers' personal data moves only at closing.
> - An **earn-out** depends on results you no longer control. Push for more at closing and a reachable target: 5,000,000 + 1,000,000 at MRR ≥ 190,000, a 9.2% rise from 174,000.
> - Expected value = closing + p × earn-out: 5,000,000 + 0.8 × 1,000,000 = **5,800,000**. Decide whether the closing payment alone is acceptable.

**Alex Tutor:** From a notebook at a Vinnytsia repair shop to a signed deal: every step was a decision made with their own numbers. That's the whole method. Use it on your own idea.

- Previous lesson: [How much is the business worth?](https://productovi.com/courses/bootstrapped-product/what-the-business-is-worth.md)

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