A study by the International Business Brokers Association found that 53% of signed letters of intent in small-business transactions do not result in a closed deal. The letter of intent — the document that says the buyer is serious, that a price has been provisionally agreed, that both sides are ready to move forward — is less reliable than a coin flip.

The period between signed LOI and closing typically spans 60 to 120 days. This is the due diligence window. And this is where deals go to die.

The letter of intent is not a purchase agreement. It is a statement of intention — a commitment to negotiate in good faith, usually with an exclusivity period that prevents the seller from entertaining other offers. The price, the structure, and the terms are all provisional. Everything is subject to what the buyer discovers during due diligence.

Sellers treat the LOI as a finish line. It is not. It is the starting gate for the most stressful, invasive, and uncertain phase of the entire process. The buyer now has legal access to every corner of the business — financial records, employee files, customer contracts, intellectual property, legal history, tax filings. They will use that access thoroughly.

What follows is a 90-day audit that will surface every weakness the seller hoped no one would notice.

Financial discrepancies account for the largest share of post-LOI failures. Not outright fraud — that is relatively rare. More commonly, the buyer's accountant discovers that adjusted earnings are lower than represented, that add-backs are questionable, or that revenue trends look different when examined monthly rather than annually.

A business that reports $4 million in annual revenue with steady growth looks different when the buyer sees that $1.2 million of that revenue came from a single project in Q3 that will not recur. The headline number was accurate. The sustainability was not.

Customer concentration is the second killer. Buyers tolerate some concentration. They will not tolerate discovering during due diligence that one client represents 40% of revenue when the seller's broker described the base as "diversified." The misrepresentation — even if unintentional — destroys trust. And once trust is gone, the deal rarely recovers.

Legal and regulatory issues are the third. Pending litigation, unresolved tax obligations, environmental liabilities, employee classification disputes — any of these can appear during due diligence and either kill the deal or dramatically reprice it.

Culture and team concerns are the fourth. The buyer interviews the management team and discovers that two of three key managers are planning to leave within the year. Or that the company culture is entirely dependent on the founder's personality and will not survive the transition. These are softer signals, but experienced buyers weigh them heavily.

The fifth is financing failure. The buyer's lender reviews the deal, reviews the business, and decides the risk is too high. This is particularly common in SBA-financed acquisitions, where the lender applies their own underwriting criteria independently of the buyer's enthusiasm.

The most effective protection is preparation. Every document the buyer will request during due diligence should be organized, reviewed, and available before the LOI is signed. Financial statements should be CPA-prepared and reconciled. Customer concentration should be disclosed upfront, not discovered. Legal issues should be surfaced and addressed — or at minimum, disclosed — before the buyer stumbles across them.

Transparency is counterintuitive for sellers. The instinct is to present the best version of the business and hope the weaknesses don't come up. They always come up. And when they come up as surprises, they cause more damage than they would have as disclosures.

The seller who says, during initial negotiations, "Our top client represents 28% of revenue, and here's our plan to diversify over the next 18 months" keeps the buyer engaged. The seller whose top-client concentration is discovered during due diligence — after a broker described the revenue as balanced — loses the buyer's confidence entirely.

Deal velocity also matters. The longer the due diligence period extends, the more likely the deal is to fail. External events intervene. The buyer gets cold feet. Market conditions shift. A competitor makes a move. Maintaining momentum through the 90-day window requires active management — weekly calls with the buyer, rapid response to document requests, and proactive communication about anything that might become an issue.

The LOI is not the end of the process. It is the beginning of the most critical phase. The founders who treat it that way are the ones who make it to closing.