What every founder needs to know before signing away their leverage

I’ll never forget the call I got from a founder last year.

“Thank you for sending over the LOI!” he said, practically shouting. “I love the number. Can you believe it? We did it!”

I could hear the relief in his voice, the same relief I’ve heard from numerous founders over the years. After 23 years of building his wire harness company, he finally had validation. A buyer who saw the value. A headline number that felt like the finish line.

But here’s what I had to tell him, and what I wish every founder understood: that LOI wasn’t his finish line. It was his starting gun.

For most founders, selling a business represents the single most significant financial event of their lives. Years of grinding, sleepless nights, and personal sacrifice all collapse into one transaction. It’s only natural to focus on the number that appears in the headline.

But after guiding many owners through the sale process, I can tell you this: valuation is only half the story. The other half, the part that determines what you walk away with, comes down to structure. And while an LOI is technically non-binding, the framework you establish there dictates how the rest of the deal unfolds. If critical elements of structure aren’t addressed up front, you’ll lose leverage trying to negotiate them later.

That’s the trap. Once you sign, exclusivity kicks in. The clock starts on due diligence. Your leverage evaporates. And suddenly, you’re no longer negotiating from a position of strength; you’re defending what you thought you had already won.

This is where buyers quietly shift the deal in their favor. The buy-side team is already working behind the scenes on areas most founders barely glance at: working capital adjustments; broad reps and warranties that create personal exposure; indemnification terms that can keep you on the hook for years; escrow and holdbacks that tie up a portion of your proceeds; and earnouts that sound appealing in theory but rarely deliver in practice. Buyers negotiate these terms every day. You’ll negotiate them once in your lifetime. That imbalance is real and costly if you go in unprepared.

Consider two nearly identical companies that were sold to private equity in the same year. Both had similar revenue, sticky customers, and strong EBITDA margins. On paper, both deals looked like wins. Yet today their realities couldn’t be more different.

The first founder structured his deal to take most of his chips off the table. He rolled a small piece, exited cleanly, and is now spending three months in Europe with his family, free to decide what’s next.

The second founder rolled over 25% of his equity and stayed on as CEO. His upside could be bigger, but he’s tied to a new board, facing pressure to double revenue, and working harder than ever. Both sold, but only one secured the future he actually wanted.

The question every founder must ask before they even see an LOI is this: What does success look like for me personally? Do you want to cash out and buy freedom? Or roll forward for a bigger payday down the road? Neither answer is wrong. But not knowing the answer before you sign, that’s where founders get trapped.

This is exactly why we created HarnessPoint, our exit-readiness program at Blue Valley Capital. Over a period of six to nine months, we help owners build the foundation that gives them leverage: clean, buyer-ready financials, operations that run smoothly without constant founder involvement, defensible customer relationships and contracts, and updated certifications that buyers expect. More importantly, we help founders align deal structure with their personal goals, so when the LOI arrives, they negotiate from strength, not desperation.

Our advantage is simple: we specialize exclusively in the wire harness and cable assembly industry. We understand the valuation drivers that matter most, we anticipate the tough questions before they’re asked, and we connect sellers with buyers who truly value what they’ve built. We’ve seen every type of outcome in this industry: founders who walked away wealthy and free, others who got locked into structures that didn’t match their goals, and some who left money on the table because they didn’t understand the game they were playing. Our job isn’t to tell you which path to take; it’s to ensure you understand the trade-offs before making decisions that can’t be undone.

The founder I mentioned earlier ultimately secured four competing offers. But the real success wasn’t just in the higher bid. It was in his clarity. He understood the structure, the trade-offs, and exactly what outcome aligned with the life he wanted after the sale. That’s the power of going to market prepared.

At Blue Valley Capital, we help founders achieve their goals through exit readiness and sell-side advisory services. Because the LOI isn’t the finish line, it’s the starting gun for the most important negotiations of your entrepreneurial life. And when those negotiations begin, you deserve an advisor who knows how to turn buyer interest into seller leverage.