Pre-LOI Intelligence
The 48-Hour Sanity Check
Most small business acquisitions fail during diligence. Use this interactive checklist to surface deal-killing red flags before you spend a dollar on lawyers or CPAs.
Diligence Progress
0 of 7 Items Verified
SDE Normalization Audit
Verify if "add-backs" are truly non-recurring or if they are essential operating costs.
Revenue Concentration
Does a single customer account for more than 15-20% of total revenue?
Working Capital Trends
Are accounts receivable aging or is inventory becoming obsolete?
Independent Diligence
Trust, but verify. This checklist is built from over 2,000 SMB deal audits to ensure you don't inherit a liability.
Why 48 Hours?
Most deals die after the LOI. By running this "Sanity Check" in the first 48 hours of diligence, you save thousands in legal fees and months of wasted time.
Read the GuideWhat you verify in 48 hours
Financial reality
Quick tie-outs of revenue to deposits, add-back credibility, seasonality, and working capital pressure points.
Transfer risk
Owner dependence, key-person exposure, license/permit transfer, and customer relationship fragility.
Legal & structural
Entity hygiene, contracts with assignment/consent landmines, liens, and contingent liabilities.
Customer durability
Concentration, churn patterns, prepaid/deferred revenue, and whether “recurring” is actually recurring.
When to run this sanity check
- Within 48 hours of getting a CIM or broker pack.
- Before paying for QoE or legal billable hours.
- When you need to kill weak deals fast and protect your time.
- When a seller is pushing for LOI without basic proof of claims.
FAQ
Is this the full diligence list?
No. It is the pre-LOI filter. It tells you whether the deal deserves full diligence spend.
Can I share this with a seller?
Yes. It often clarifies why you need specific documents early and speeds up responsive sellers.
Does it replace a QoE?
No. It prevents you from ordering QoE on deals that are already failing basic reality checks.
Foundation Intelligence
The Three Master Pillars
Every successful acquisition starts with these three fundamental concepts. Master the math and the risks before signing an LOI.
SDE Mathematics
Learn the formula for Seller’s Discretionary Earnings and how to normalize cash flow.
Due Diligence Red Flags
7 critical red flags that kill small business deals instantly during diligence.
Revenue Verification
How to verify business revenue without blindly trusting the seller’s P&L statements.